• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
  • Editorial Calendar 19-20
BW Businessworld

Mirror Mirror On The Wall...

Photo Credit :

No valuation consultant will ever tell you whether a brand valuation exercise actually helps. This week, when the Godrej group announced the valuation of its corporate brand, an exercise that it had initiated with global valuation firm, Interbrand, the initiative was pegged as "a diagnostic understanding of the brand to aid future strategy".

At $2.86 billion, the Godrej brand's value equals 32 per cent of the enterprise value of the group, which has businesses spanning consumer goods and durables to real estate. Godrej executives say the present brand value of the group is higher than the global average for companies in similar businesses. Globally, for consumer goods companies, the brand value will be in the average of 25-26 per cent of enterprise value, they claim. And for a B2B business enterprise it could be in the range of low double digits. (Godrej has B2B businesses in the form of hi-tech engineering and so on.) However, the value of Godrej, which falls in the peer-group of global brands such as HTC, Yamaha, Shiseido and Nivea, is less than 1/10 the size of the world number 10, Hewlett Packard. In 2010, HP was valued by Interbrand to be over $ 26 billion.

That does not bother consultants like Graham Hales, CEO, Interbrand, London, who was involved in the Godrej valuation exercise. "Brand valuation is becoming less of a brand value reporting exercise, but more of a diagnostic understanding on what you should do to increase the brand value. Companies use the figure as a catalyst to understand how you can make it better in the future," he says.

Godrej group executives nod in agreement. Tanya Dubash, executive director and president marketing, Godrej Industries — who has been leading the makeover of the Godrej brand — says the timing of the brand valuation exercise is perfect in the brand journey of the 114-year-old Godrej brand. Three years after the brand underwent a makeover in the summer of 2008, "the current valuation exercise helps in giving the group a diagnostic toolkit and a set of drivers to enhance the brand value in both master brand and of some key individual businesses", she says. Her father, group chairman Adi Godrej seconds that. "From this exercise we get a lot of information that will help in improving each of the individual businesses, which in turn will help the master brand," he says. A valuation exercise yields a lot of research and diagnostics that help the master brand and also the sub-brands at a later date, Godrej elaborates.

The valuation exercise has been undertaken at two levels. Apart from the master brand, the group has also valued its consumer brands and B2B businesses such as aerospace and security solutions. Among the consumer brands, Good Knight, a mosquito repellant brand that the Group acquired from the Mumbai-based Transelektra, has topped the valuation charts among individual brands along with group company Godrej Properties that boasts an enviable land bank in Mumbai.

Is the Godrej brand under-leveraged? Simply put, is the brand's value much bigger than the potential business value that it currently generates? Hales points out that every brand has opportunities to increase its value. "The current valuation exercise is to understand how the present value is created and to replicate and grow that in the future," he says.

Finally, do brand valuation exercises help in attracting joint-venture partners? That's a pertinent question for Godrej that has had several joint ventures with leading global players — GE, P&G, Pillsbury, Sara Lee and now, Hershey's — for its consumer businesses. "That's a debatable issue. The JVs are in a narrow field of business and if that field is valued, it does help sometimes," says Godrej and quickly adds, "and we are not looking at any new joint ventures".

(This story was published in Businessworld Issue Dated 23-05-2011)