I recently got into a debate with brand marketer Justin Basini after Kraft announced further offer on Cadbury. We both agreed it’s quite sad to see such a jewel of Britain slip away from the empire. Where we did disagree was on the worth of a brand.

Justin argues that:

“Whilst Cadbury is a global corporation I believe that history is an important part of the embedded value of any company. Brands are created by people and their actions. And the mythology of a company is important as an implicit guide for those making decisions, providing a different perspective or a pause for thought.”

I agree. I however believe that brand value is largely factored into corporate valuation through it’s influence on sales. Simply put, nostalgia is for memorabilia collectors and has no value to sales. How much we love a brand is displayed by the public voting with their pounds. Older consumers with a greater history with a brand tend to be a more stable clientèle, yet it’s fairly easy still for something new to screw up the relationship. It’s therefore worth significantly less than patents, copyrights and so on.

It’s also not like Kraft aren’t really wanting this. £11.9billion is no small change and when added to the release of new shares and getting into hot water with the Sage of Omaha (Warren Buffett is a major Kraft shareholder), one has to see that they really are valuing Cadbury at significantly more than it was 6 months ago. They want this. A lot.

Lastly it’s worth remembering the Cadbury’s didn’t innovate Fairtrade Cocoa into their products. Craig Sams, British organic food entrepreneur was the one who forced their hand. You may have seen his Whole Earth organic range and his Green & Blacks label was gaining widespread support and enjoyed a reputation for ethical behaviour that a monster the size of Cadbury could never have created. How did Cadbury respond to the fact that Green & Blacks became widely regarded as “the best cocoa buyable”? Simple. They bought them over, leaving Craig Sams in charge. Their distribution network put Green & Blacks everywhere and they moved the innovation from that company into their bigger structure. The hope is that innovation can now enter a bigger fish and through that ensure that even more producers are given a fair deal for their contribution to the food we all enjoy.

On the basis of that I can’t argue with Kraftbury. I’ve doubled my money in less than a year and will now gain a number of Kraft shares whilst banking my capital.

Personally I see the sudden interest in M&As and IPOs to be an indicator of something more; thank you Kraft for helping me get out with significant gains.

Here’s the link to Justin‘s full discussion; do chip in if you’ve a point – http://www.blog.basini.com/2010/01/cadbury-kraft-merger-already-destroying.html

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