JEREMY SAMPSON: Where is SA’s brand buying power?
It is no coincidence that the location of a country’s top brands coincides with the areas where there is the most growth, jobs and investment
So why is Gauteng the economic powerhouse of SA, you ask? One answer is that it is home to 62% of the country’s most valuable brands.
We know the strength of a country’s economy can be measured by the strength of its brands: the companies that own these brands not only generate above-average income, they create jobs, need suppliers, require top professional advice, assist the local communities, pay their way generally, and act as ambassadors for the country. Brands are important not just for the nation but for the geographic areas in which they "live".
Consider that Apple is American, most of its production is in China, but all its marketing material clearly states it is "Proudly Californian". Look at the "FAANGs" (Facebook, Apple, Amazon, Netflix, Google) on the US west coast. Visit the area and it is arguably the most prosperous in the whole world.
The purpose of a brand is to attract customers, build loyalty, attract the best talent, motivate staff and make money — a reason that brand-owning companies invariably outperform many indexes.
Now look at the reverse. For a century, all the major US automotive companies were in Detroit, dominating the world stage. Today the emergence of major competitors led by German and Japanese producers has led to Detroit being left behind. It is now one of the most depressed areas in the US. It’s no coincidence that Detroit was one of the cities recently aggressively bidding for the right to host Amazon’s new distribution hub.
Some countries, of which China and India are two, realise that they lack home-grown brands, so have adopted a policy of investing in or buying global brands: for example, China’s Lenovo has bought IBM’s laptop division, and India’s Tata has bought Jaguar Land Rover.
Looking at SA, we can see why Gauteng is such a powerhouse. Of the Brand Finance Top 50 SA Brands, 62% are in Gauteng, 30% in the Western Cape and 8% are in KwaZulu-Natal. The Eastern Cape at least has the presence of major automotive industry brands but the rest of the country lacks economic muscle, relying largely on mining, agriculture and tourism. Nine of SA’s top 10 major brands are in Gauteng, with telecom companies and banks dominating.
Some countries have adopted a policy of investing in or buying global brands
Think of MTN: it is now in 23 countries in Africa and the Middle East, and has a market capitalisation of R170bn (R44.2bn of which is assigned to its brands).
But as Brand Finance founder David Haigh puts it, many companies miss "huge opportunities to effectively make use of what are often their most important assets". Monitoring of brand performance is sporadic and frequently lacks financial rigour. Rather, it is heavily reliant on qualitative measures, poorly understood by nonmarketers. Marketing teams struggle to communicate the value of their work and boards underestimate the significance of brands.
Sceptical finance teams, unconvinced by what they perceive as marketing mumbo jumbo, may fail to agree to necessary investments.
The result can be a slow but steady downward spiral.
Put another way, monitoring brand assets should be a priority, measuring the return on marketing investment.
Further questions must be asked: is the brand being leveraged to full effect and is it maintaining relevance – something Detroit’s motor industry failed to plan for.
Typically, companies from the fast-moving consumer goods sector have marketing teams dedicated to their major brands, yet they often ignore the corporate brand. That is changing, even if it is slow.
So it’s worth remembering that investing in highly branded companies has, historically, achieved stock market returns almost double the average for the S&P500 as a whole.
In SA, the potential is there, but we need to do more to grow, invest in and recognise our brands.
• Sampson is director of Brand Finance Africa