Brands without value: will your brand survive?
The American food maker Kraft Heinz dropped 27 per cent on the stock market last week. In just one day, as much as 15 billion euros in market value evaporated. Especially the brands in the group are under pressure, as it turns out. In recent days, the CEOs of leading consumer brands companies Nivea and AB InBev also sounded the alarm. Globally, no less than 77 percent of the brands have become meaningless on the consumer's side, according to a recent study by Havas Media. Brands need to innovate and connect with customers in order to survive.
According to an official announcement, Kraft Heinz writes off many 'intangible assets', especially when it comes to the brand names of the Kraft cheese brand and the meat processor Oscar Mayer. This seems to be an implicit recognition that the rapidly changing consumer preferences have affected some of the group's iconic brands. The share prices of other food companies were also hit. Investors fear that these companies will also conclude that their brands have been valued too optimistically, putting them in operational jeopardy.
In a reaction to the editorial staff of Belgian daily paper “De Tijd” last week, I wrote that many food companies have been paying too much attention to profits (‘bottom line’) and too little to sales in recent years (‘top line’): "By saving on the costs, the profit is rising, but that only works in the short term. In the longer term, they will only bottom out their brands."
The big problem for companies like Kraft Heinz is that private label brands of supermarkets are becoming more popular all over the world. In some categories they have assumed the largest share of the pie already. From Lidl to Amazon, they all sell products that are cheaper but absolutely not inferior to the popular brands in terms of quality. For example, supermarkets' private label brands represented no less than 35.5% of the total value in the Belgian retail market in 2018 (not including fruit and vegetables). "Only with innovation and investments can the brands remain relevant," is my analysis.
It is an analysis that is now shared by the CEOs of Nivea and AB InBev. Stefan De Loecker from Beiersdorf, the group behind Nivea, recognized in ’De Tijd’ this week that consumer brands are going through turbulent times and consequently voiced his concern about the future of mass brands. He stated that Beiersdorf will respond more powerfully and qualitatively to rapidly changing consumer needs and will focus more on niche brands. Carlos Brito of AB InBev recently expressed a similar opinion in an interview with Belgian daily ‘De Standaard’ . "The days that just one brand (such as Stella Artois, Jupiler or Budsweiser) was dominant, are over," he analyzes. That is why he also wants to focus more on new specific needs of customers in the form of special beers at 'premium' prices, in order to create value.
In my book "The survival paradox: change vs stability at Apple, and any immortal company" , I investigate how brands can survive in these disruptive times. They need to adapt more quickly to new consumer needs and create 'value' for their customers in four ways. They have to offer new tangible benefits through innovation (say USPs), they have to make an emotional connection (through authentic and creative advertising), they have to optimize the user experience (from the store to the internet) and they also have to build on a purpose ( for example around the climate or obesity). Only brands that fulfill these four conditions will survive.