5 Brands That Soared in 2012
Companies connect us to their products through branding. And companies spend a great deal of money making their brands stand out. But does the money these companies spend to achieve top-of-mind status translate into shareholder profits?
For five global brands, the answer is yes. Let's take a look at which companies had blockbuster years thanks, in part, to their strong brands. Then we'll examine why these companies had such an awesome 2012.
Consultancy firm Interbrand publishes an annual survey granting top honors to the best global brands. As you can see, five great brands boosted their respective company stock prices substantially in 2012.
Change in Brand Value From 2011
Sources: Interbrand, Yahoo! Finance.
All five of these companies' shareholder returns year to date have been fantastic. Each stock remarkably outperformed the S&P 500 and Nasdaq indexes, which returned 11% and 13%, respectively, during the same period.
Apple and Amazon.com were two of the largest gainers of brand value in 2012, gaining 129% and 46%, respectively. Both companies have clinched spots on the Interbrand list since its 2001 inception. Diageo's Johnnie Walker brand and eBay each gained 12%. And even though Anheuser-Busch InBev's Budweiser brand lost 3% of brand value in 2012, it has gained 11% since the list's inception.
Why these brands soared
Brands like Amazon.com and eBay evoke convenience. Where else do you have millions of items of merchandise at your fingertips? Big-box retailers are trying to keep up with e-tailers, but are struggling to do so. To gain a competitive edge in the ultra-cutthroat e-tailing space, companies are turning to same-day delivery. In fact, eBay has hired 50 San Francisco-area couriers to buy and deliver products to customers within one hour of an online order. But the economics of same-day delivery presents a challenge for these companies.
Apple's iDevices aren't just phones, music players, and laptops -- they're digital lifestyle solutions. Apple continued its trend of great stock performance this year, aided by its iPhone 5 release. During its first weekend, Apple sold 5 million iPhone 5s. Despite its botched Maps debacle, patent litigation battles with HTC and Samsung, and a rocky fourth quarter, the recent iPhone 5 release in China might help the company finish the year even stronger.
Branding is critically important for alcoholic beverages companies, and Diageo has enjoyed incredible success with its Johnnie Walker whiskey. Addressing a global thirst for whiskey and staggering emerging market growth, Diageo will invest $1.5 billion in scotch whiskey production over the next several years. The world's largest whiskey distiller enjoyed 50% net sales growth in its scotch brands over the past five years, with scotch representing 23% of the company's net sales last year. Diageo has its sights set on Beam , specifically its Jim Beam whiskey. An acquisition like this would play beautifully into Diageo's strengths -- marketing great brands and leveraging its global distribution infrastructure.
Even though Budweiser's brand value declined, AB InBev stock has returned an extremely impressive 42% so far this year. Since its 2008 buyout of Anheuser-Busch, AB InBev leadership has dramatically slashed costs, vastly increased margins, and returned a lot of value to shareholders. And growing beer consumption, especially in emerging economies, may help AB InBev in the years to come. But in its cost-slashing process, the company has received criticism for cutting corners and compromising product quality.
Do blockbuster brands always equal big returns?
Never invest in a company solely based on one piece of information. Sure, company performance can be aided by a strong brand. But in the absence of other successful company attributes, like a strong competitive advantage and good leadership, it will only get you so far.
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The article 5 Brands That Soared in 2012 originally appeared on Fool.com.Fool contributor Nicole Seghetti owns shares of Apple. The Motley Fool owns shares of Apple and Amazon.com. Motley Fool newsletter services recommend Apple, Amazon.com, Beam, Diageo plc (ADR), and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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