Brand Resilience in Economic Crisis - AXIAM Capital Management

Investment success requires a well-defined “circle of competence”. At AXIAM, we start by looking at companies that own strong brands and then apply other financial criteria to short list our favourites. One of the main reasons for this approach is that companies that own strong brands tend to be resilient, especially in times of economic crisis. We call this attribute “ brand resilience ”.

“Draw a circle around the businesses you understand and then eliminate those that fail to qualify on the basis of value, good management, and limited exposure to hard times. ”

Warren Buffett Speaks

Brand Evaluation

The value of a brand can be determined in many ways and we therefore use an independent and rigorous means of doing the evaluation to provide us with global brand values and rankings on an annual basis. WPP Millward Brown publishes the BrandZ Top 100 Report annually. This report contains global brand rankings and values for the world’s top 100 most valuable brands. This 3rd party, independent report is the:

“only ranking based on a brand valuation methodology that is grounded in both quantitative customer research and in depth financial analysis.”

BrandZ Top 100 Most Valuable Global Brands 2010

Economic Crisis, Brand Resilience and Investing

Brand resilience is evident throughout the economic cycle because brands have the following characteristics:

Brands tend to outperform major indexes

“The value of the BrandZ™ Strong Brands Portfolio increased 124.9 percent over … 12 years, outperforming both the S&P 500 and the MSCI World Index, demonstrating that valuable brands deliver superior shareholders returns.”

Brandz Top 100 Global Report 2017

Brands decline less in an economic crisis

Source: BrandZ Report 2010

Despite the 2008/9 global economic crisis, the BrandZ Top 100 Portfolio grew in value by 18.7% over the 4 years from 2006 to 2010. This is phenomenal considering that the S&P 500 declined by 11.5% over the same period. This shows us that strong brands maintain their value even in tough economic times.

Brands recover quicker after an economic crisis

After the same economic crisis in 2008/9, strong brand resilience was also proven when the BrandZ Top 100 recovered quicker than the S&P 500. (See the graph in point 2 above)

We find that companies with strong brands that have high consumer loyalty and provide for basic human needs, tend to continue to grow and deliver profits on an ongoing basis regardless of the economic situation.

At AXIAM, we buy shares in companies, irrespective of their geography, that have great brands that are known, loved and used around the world daily and we keep them for a long time. Sign up to our newsletter or follow us on Twitter to learn more about investment in the best global brands or contact our fund management team to invest.