In some industry sectors, the branding strategy is the most important element of competitive strategy. One such example is the home appliance sector, where profitability depends a lot on the branding strategy. While large parts of this sector follow a mass market and large-scale production approach, some players follow a niche and premium strategy.
Mature market: This month’s peer group analysis from MARKABLES examines brand and enterprise value multiples for 26 home appliance businesses (“white goods”) acquired between 2001 and 2015. The peer group includes brands such as Indesit, Hotpoint, Sanyo, Enodis, Amana, ProLine, US Craftsmaster, GSW, ATAG, and others. Operating in a rather mature and competitive market, these businesses are valued at an average of 1.0 times revenues. Brand accounts for approximately 25% of enterprise value, and the median trademark royalty rate is between 2% and 2.5% on revenues. This is not really impressive considering the brand awareness and marketing spend in this sector.
A few brands stand out from the pack, however. These are niche brands following a premium strategy, such as premium cooking ranges, wine coolers, or luxury outdoor grills. Despite their disadvantages in scale, they show higher profitability and brand value multiples. Their trademark royalty rates are above 5%, and the brand/enterprise value ratio is 35% and above. Not surprisingly, profitability of these businesses is twice as high, with enterprise value at 2.0 times revenues. Premium branding can help to increase value, but it is restricted to the smaller volume in the niche.
MARKABLES (Switzerland) has a database of over 8,200 global trademark valuations published in financial reporting documents of listed companies.
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