Top brands announced
The IPKat has been taking a look at the Interbrand/BusinessWeek 100 Top Brands for 2006. The methodology for selecting the 100 Top Brands is as follows:
Top five brands are Coca-Cola, Microsoft,IBM, GE and Intel. KFC is at number 60 despite - or perhaps because of - the Avian flu scare (the highest fatal-if-used product, Marlboro, is down to number 12). Avon is in at number 60 even though, the publishers enigmatically comment, "Avon ladies have been struggling". Followers of Greek mythology will be disappointed to note that Hermes, the winged messenger of the gods, comes limping along in 81st place. Number 95 in the list is Italian jeweller Bulgari, thanks to big-spending customer Madonna, it seems.
"Interbrand takes lots of ingredients into account when ranking the world's most valuable brands. To even qualify for the list, each brand must derive about a third of its earnings outside its home country, be recognizable outside of its base of customers, and have publicly available marketing and financial data. One or more of those criteria eliminate such heavyweights as Visa, Wal-Mart, Mars, and CNN. Interbrand doesn't rank parent companies, which explains why Procter & Gamble doesn't show up. And airlines are not ranked because it's too hard to separate their brands' impact on sales from factors such as routes and schedules.
BusinessWeek chose Interbrand's methodology because it evaluates brands much the way analysts value other assets: on the basis of how much they're likely to earn in the future. The projected profits are then discounted to a present value, taking into account the likelihood that those earnings will actually materialize.
The first step is figuring out what percentage of a company's revenues can be credited to a brand. (The brand may be almost the entire company, as with McDonald's Corp., or just a portion, as it is for Marlboro.) Based on reports from analysts at J.P. Morgan Chase, Citigroup, and Morgan Stanley, Interbrand projects five years of earnings and sales for the brand. It then deducts operating costs, taxes, and a charge for the capital employed to arrive at the intangible earnings. The company strips out intangibles such as patents and management strength to assess what portion of those earnings can be attributed to the brand.
Finally, the brand's strength is assessed to determine the risk profile of those earnings forecasts. Considerations include market leadership, stability, and global reach—or the ability to cross both geographic and cultural borders. That generates a discount rate, which is applied to brand earnings to get a net present value. BusinessWeek and Interbrand believe this figure comes closest to representing a brand's true economic worth".
The IPKat is trying hard to whip up some enthusiasm for this once novel but now somewhat jaded exercise, but is failing miserably - perhaps because the nearest thing to a cat in this year's list is Caterpillar...