Although branding strategies and discussions are a common thing in the food and beverage industry today, these are often conducted at a product or department level, but rarely a company board or executive level, according to business strategy expert Marc Makrid.
Makrid, who is Managing Director of business strategy consultancy Marc Makrid & Associates as well as the previous Director of Marketing for South Australian Brewing and Deputy Managing Director of Dairyvale Foods, told the audience at the recent virtually-held Food South Australia Summit that brand and reputational strategies ought to be wrapped around a company’s core business strategy.
“[A company’s] reputational value is what gives an F&B brand value way past any accountant’s version of value in multiples of Earnings Before Interest and Taxes (EBIT). It’s when people pay a premium for a brand over and above what the numbers tell,” he said.
“Food companies should be focusing here in order to build this premium value, which is worth over and above any multiples of EBIT.”
He argued that food and beverage companies are amongst those with the highest potential to build strong brand reputations that 'make consumers insist on your company by name', and that international numbers support this too.
“Based on numbers from leading valuation company Interbrand, 14 of the top 100 brands in the world are F&B brands,” said Makrid.
“The total value of these brands is US$235.4bn, or 11% of all 100 brands’ consolidated value - That level of representation says to me that the F&B sector has a real opportunity to drive reputational value.”
The leading F&B global brand listed was Coca-Cola at ninth place (US$63bn). Other listings within the Top 50 were Pepsi at 24th place (US$20bn), Budweiser at 32nd (US$16bn), and Nescafe at 38th place (US$13bn).
Across all categories, the leading brand at the top spot was Apple (US$234bn), but food and beverage brands beat out luxury brand Prada at the 100th spot (US$4.8bn).
"Some of you may say that's because these are big brands, but we're just small brands - how can we do that? Well, remember that all big brands were small brands at some stage – you have that potential too, you've just got to grow that potential, and do it deliberately," said Makrid.
"Importantly, a McKinsey study has also revealed that in B2C markets, the reputational value of a brand represents some 53% of total company value, whereas in B2B this was 30%.
"These are very significant numbers, further supporting the argument that growing brand reputation should be one of the most important discussions to be had at top board and executive level – there is simply no other asset in organisation with this proportionality."
Building a strong company brand
According to Makrid, there are various internal and external drivers that companies need to look at when building a brand ranging from commitment to authenticity - but two of the most important are differentiation and relevance.
Differentiation here refers to the degree to which consumers perceive the brand to have a position distinctive from its competitors, whereas relevance is how well the brand fits with consumer needs, desires and other decision-making criteria across all the relevant demographics and geographies it is in.
“There are many times that I’ve been brought in to consult for a product that was sufficiently differentiated but not relevant to the market it was in - and you wouldn’t believe the amount of investment that gets wasted in not thinking these factors through enough,” he said.
“There’s an absolute financial correlation between making sure these two dynamics are truly at play in your organisation [leading to] reputational and brand value. Basically, if these two factors are being effectively implemented, you can be very confident that there will be a correlation with improved profitability and brand value in the future.”
Making it happen
Branding does exist as a common strategy in the F&B industry today, but is most often treated as a marketing issue instead of being wrapped around overall business strategy as Makrid is recommending.
“Think of it this way - If for example NPD and innovation were a core part of your business strategy, would it change the sort of recruitment you bring into the company? Would you be looking at more third-party relationships with universities or other parties that focus on research relevant to your food product and engaging them more to accelerate your own NPD and innovation?” he said.
“Through that lens, it has become more of a HR issue [affecting things all the way down to the people in your organisation], and not just one for marketing – the same applies for brand and reputational strategy.”
One example cited was that of Frito-Lay in the United Kingdom, which ‘stumbled upon’ a market-changing operational decision to develop equipment to save water in its production processes some years back.
The decision to bring in said water-saving equipment coincided at the time with a rising sustainability trend – and when the company made this decision known and associated with its brand, its market share was lifted by 7% within six months.
“[Frito-Lay] stumbled upon [this reputational uplift], but the advice here is for all firms to not stumble on it but instead make it a deliberate brand strategy,” said Makrid.
“If Frito-Lay had been thinking of their ‘operational decision’ through a brand lens at the time, they would have identified and leveraged this opportunity a lot sooner than they did.
“So just do it - If innovation is to be the core of your brand strategy, then get each department to think of what they are doing that is innovative, what steps are undermining this and should be stopped, and what other activities can be driven harder.
“They know better than you, so get them involved, and that’s how you’ll get not only a good brand strategy but also united commitment to it.”