Successful companies may become giants, with large catalogs of products, but they frequently rely heavily on just one brand for a major chunk of their sales and profits; just consider iconic brands such as Coke, Marlboro cigarettes or the iPhone -- market leaders in their sectors, mass produced at an unprecedented scale, they are the hearts of their respective empires.
The biggest such sellers also make the nation's most profitable products, often using their brand power to command a premium price, and always using it to sell in vast volume. They are well managed and well marketed, and it shows. It's factors like those that win them spots on lists of the world's most valuable brands produced by consultancies like Interbrand and BrandZ.
Interestingly, the profitability of individual products is among the most difficult data to glean from the financial information released by many of America's public companies. Businesses guard product profitability numbers like any other trade secret -- but with the data that is out there, the figures can be estimated. 24/7 Wall Street has done just that, and come up with this list of America's 7 most profitable products.
Garmin is a navigation device company, focusing on GPS technology. By far, the most profitable of the company's five divisions on a dollar basis (though other divisions have better margins) is the automotive/mobile group, which makes and sells Garmin's GPS units. This segment accounted for 55% of the company's sales in 2012 -- $221 million in operating profit on $1.5 billion in revenue.
Much of the segment's success was due to Garmin's nüvi product line, which accounted for 43% of the company's total revenue in 2012. Garmin is by far the largest participant in the GPS market, with over a 50% market share, according to Consumer Reports.
Folgers is owned by the J.M. Smucker Company, which reported sales of $5.5 billion in 2012. Of those sales, $2.3 billion came from coffee. The company's U.S. retail coffee unit, of which Folger's is the top-selling brand, reported an operating margin of 23.6%, which is down from 27.8% in 2011 and 28.5% in 2010. We estimate that Folgers has an operating margin of at least that. The brand is the market leader for instant coffee in the U.S., commanding an 11.8% market share as of 2012. However, this is down from 13.2% in 2011. J.M. Smucker cut the price of coffee by 6% in 2012, which will affect the bottom line for both its Folgers brand and Dunkin' Donuts-licensed coffee.
That high profitability is even more impressive given that it was earned in a highly competitive market niche, vying against brands like Maxwell House and Starbucks.
The Mead Johnson Nutrition Company primarily sells infant formula and nutritional products for children, and formula accounted for 59% of its total sales in 2012. The vast majority of that came from Enfamil, one of the best-selling infant formula brands in the U.S. The product comes in several varieties designed for babies with different types of feeding problems, intolerances and nutritional needs.
According to Crain's Chicago Business, Mead Johnson had the second largest market share in infant formula as of mid-2012: 15.1%. The company was also the leader in the rapidly growing Chinese formula market. The company's operating margin in fiscal 2012 was 22.3%. We estimate Enfamil has a margin of at least 24%, thanks to the higher retail prices it can command due to its strong brand, as well as lower production costs due to economies of scale.
Coca-Cola and Diet Coke were the two most popular sodas in the world as of 2011, Diet Coke having recently surpassed Pepsi to become the second-most popular soft drink in the U.S. Overall, trademark Coca-Cola products accounted for approximately 48% of all case sales of finished products sold by the company in fiscal 2012.
Given that Coke's finished products unit, which includes the Coca-Cola brand, accounted for 62% of total revenue for the company, Coca-Cola trademark drinks accounted for roughly 30% of the company's total revenue. Overall, the Coca-Cola Company reported 2012 sales of $48 billion and an operating profit of 22.4%. We estimate that the tremendous sales of the company's flagship brand push its operating margin to 25%. BrandZ reports that Coke is the world's sixth most valuable brand name, with an estimated value of $74.3 billion.
Monster Beverage Corporation had net sales of roughly $2.1 billion in fiscal 2012, with an operating income of $551 million. According to market research company Symphony IRI, in the 52 weeks ending February 24, Monster-branded energy drinks accounted for 37.2% of the market, just behind rival Red Bull. In that period, the company sold approximately 1.2 billion cans of its Monster-branded products, including almost 776 million cans of its original Monster beverage. Because Monster-branded drinks accounted for 92.3% of total company revenue, we have treated the company's 26.7% operating margin as a proxy for the energy beverage.
However, business isn't entirely a fairy tale at Monster. The company has recently faced criticism and legal troubles, including a wrongful death suit and a Food and Drug Administration report that linked several deaths to Monster Energy beverages.
Marlboro cigarettes are sold by Altria Group in the U.S., and elsewhere by Philip Morris International -- which Altria spun off roughly five years ago. Marlboro branded cigarettes have made both companies extremely profitable. Altria's sales of smokeable products totaled roughly $22.8 billion in its most recent full year. That figure accounted for 90% of total company revenues, and 85% of units sold were Marlboros. Altria's smokeable products unit has an operating profit of 28%. Because Marlboro is the company's strongest and best-selling brand, it is 24/7's estimate that costs to produce those cigarettes are lower than the company's discount cigarette lines. As a result, we estimate that Marlboro has an operating margin of at least 30%. BrandZ calculates that Marlboro is the world's seventh most valuable brand at $73.6 billion.
The iPhone is by far the most successful product Apple sells. Of the company's $156.5 billion in 2012 worldwide sales, $80.5 billion came from iPhones. Apple sold more than 125 million units last year, a 73% increase over 2011. In contrast, Apple sold 58.3 million iPads that year, generating just $32.4 billion in gross revenue. Each iPhone is far more profitable than each iPad, the company's second best-selling product. According to documents released as a result of the patent lawsuit between Apple and Samsung, Apple's gross margins on the iPhone were between 49% and 58% from April 2010 to April 2012, nearly double those of the iPad. This is partly because wireless carriers subsidize the iPhone heavily -- an average of $425 apiece, according to a recent Stifel Nicholaus analysis. Based on the available data, we calculate the iPhone's profit margin is 40% -- even higher than Apple's overall 35.3% margin.
Methodology: Based on data provided by Capital IQ, 24/7 Wall St. reviewed the S&P 500 companies that produce consumer products. We only considered corporations that have a single product save as the company's flagship brand, or where the product represented the largest single contributor of revenue. To account for the opaque nature of product profitability, 24/7 Wall St. only considered products of publicly traded companies that disclosed significant details about their operations. We excluded companies with an operating margin of less than 15%, as well as companies that did not break out revenue by division or product. In order to estimate product operating margin, in the cases when the product's margin or revenue was not provided, we used the company or division's operating margin as a proxy. If is was clear that the brand power of the product and high volume of sales allows the company to sell the product at a premium, we awarded the product a higher operating profit. Market share valued listed are worldwide, unless otherwise noted. We treated company products of the same type and brand as one. For example, for our purposes, Coca-Cola includes Coca-Cola, Diet Coke, and Cherry Coke.