Overview: Strong Brands Prove Their Value
In November 2016, United States voters went to the polls and pulled the lever for one of the most unconventional presidential candidates in the country’s history. Donald J. Trump has rewarded them with a wildly unpredictable presidency, marked by both divisive language and a willingness to reach across the aisle. As a result, everything from a sporting event to a commencement speech has the potential to become a politicized flashpoint.
Americans are not only divided politically. Economically, there are two Americas today. In 2016, the country’s median household income, $57,000 per year put it in front of major industrialized nations like Germany and the United Kingdom. However, that number obscures a great divide. The median household income of the bottom 60% was only $33,000 per year, leaving a significant number of Americans at or near the nation’s poverty line. And income for the lower end of the American spectrum has stagnated for 40 years.
Meanwhile, in the nation’s glittering cities, like New York, San Francisco, and Seattle (where the two richest people in the world live), top brands are rapidly changing the world through technology and innovation. The country’s Fearsome Five—Google, Apple, Amazon, Microsoft, and Facebook—are known and loved for transforming the way human beings do just about everything, from shopping and dating, to learning and finding entertainment. And while income in much of America has remained the same, it has risen dramatically for those at the top.
In other words, America is being squeezed in the middle. Many established brands, which have traditionally targeted the country’s large middle class, are feeling the pain. Across a broad range of FMCG goods, shoppers are either moving up or down the aisle. Store brands and dollar stores are scooping up the business at one end of the spectrum. Organic, sustainable, and other high end brands are attracting much of the rest. Those in the middle are struggling to maintain relevancy and share of wallet.
America is also on the move in a number of critical ways. For one, manufacturing, long in decline, is staging a comeback. A number of factors are contributing to the return. The shale boom has given the country some of the lowest natural gas prices in the world. For much of 2017, for example, the price of natural gas in Louisiana was under $3/ MMBtu. In China, it was over $5.
It’s not merely energy however. China, once the world’s workshop, has become relatively less competitive across a range of factors. Land prices in parts of South Carolina are a quarter of what they are in the relevant areas of the Yangtze River Valley. Labor costs in China have risen, improving Chinese workers lives, while those in the United States, where unions have been weakened, have been stagnant or falling for decades. Add in supply chain costs, and by 2015, by some estimates, the United States had already slipped past China in cost-competitiveness for many types of manufacturing.
Currently, this is contributing to a slowly rising tide of re-industrialization, bringing a new generation of automated factories to places like the Carolinas and upstate New York—and a lot of Chinese investment. The world’s technology powerhouse may soon be making its own clocks again.
This reindustrialization is taking place next to a changing role for many urban centers. Americans are moving to cities, which are experiencing a revitalization. Places like Pittsburgh have reshaped themselves from faded industrial powerhouses into innovation centers. Young, well paid professionals are leaving the suburbs to enjoy a new landscape of trendy restaurants and rich entertainment options.
Another major change comes with technology. American life is being reorganized around a new breed of faster and more convenient goods and services. Americans already have one of the highest percentages of smart phones per handset user in the world today. Building on this, brands as diverse as Amazon and Domino’s Pizza are transforming both consumer expectations and their reality. At the same time, these developments are furthering division, with consumers both fragmented and elusive, even as marketers ramp up ever more sophisticated ways to reach out and target them.
American brands soar above the fray
While there is massive uncertainty about the future, America’s brands are incredibly strong and should prove resilient to whatever comes next. The BrandZ Top 100 Most Valuable US Brands 2018 has an aggregate value of more than $3 trillion. By comparison, the top 100 Chinese brands have a value of roughly one sixth the size at $557 billion. American brands also account for 54 of the Top 100 Global Brands in terms of Brand Value.
American brands are growing at a fast rate too. While this is the first year that BrandZ has evaluated a full spectrum of 100 United States brands, a large number of them have been valued over time as a result of global valuation studies. Since the 2017 Global Top 100 Brands study, the top 10 United States brands have grown 26 percent in value.
Part of the reason is that the American economy is doing well. The unemployment rate has hovered under an enviable 5 percent in the past year. Since Trump’s election, the stock market has risen more than 20 percent (something that could, of course, change rapidly). And while Americans may be unequal in their earnings and face staggering healthcare costs, that same median income of $33,000 still puts its lower 60 percent ahead of many developed countries. Americans are also spending, following declines related to the 2009 global financial crisis. Household debt has risen above $12 trillion, a number that indicates that its citizens feel confident enough to borrow to buy cars and homes.
Globally, consumers have a split view of America and its brands as well. In the Best Countries ranking, developed by WPP’s Y&R BAV Group with partners US News & World Report and The Wharton School, the United States has slipped from 4th to 7th in the past year, with particularly large drops in measures such as openness for business and quality of life.
Nonetheless, American brands are not merely doing well, they’re doing extremely well. This proves that investing in a strong brand can serve as an insurance policy in uncertain times. American brands, especially at the top, are either highly innovative or well entrenched in consumers’ minds (the country ranks highly for both culture and innovation). Whatever people think of the United States as a whole, they still love Google, and they trust Tide.
All of this contributes to a favorable and optimistic climate for American brands. As they lean in to either heritage or digital innovation, they are increasing their Brand Value and fueling future growth and increasing shareholder value. While America itself may be mired in uncertainty, its leading brands are building Brand Love with clear purposes, intelligent innovation, effective communications, and great customer experiences.
In 2018, America will very likely see more of the same in terms of social and political turmoil (the certain factor in the uncertainty remains Donald Trump). It will likely also see more of the same in the value and strength of its brands. Apparently, strong brands are one of the few things where if you keep investing in them, past performance does predict future success.