Warren Buffett, Coca Cola and branding
moneyrelations :: Sep.27.2007
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Ellen Roseman recently wrote an article about Investing for beginners where she’s taking suggestions for books and websites for newbies. Since I’m an investor and a beginner, I suggested Warren Buffett’s talk to MBA students at the University of Florida which was posted on YouTube earlier this year. His advice is always down to earth and easy to understand and the perfect foundation for the majority of investors.
I decided to rewatch all 10 parts of the YouTube video and I was reminded again by the concept of branding and moats. You want to invest in a company where the brand is ingrained in the consumer psyche so that it creates a barrier for competing companies. Buffett was certainly trumpeting Coca Cola as a superior brand through-out the question and answer period (his company Berkshire Hathaway owns 8% of KO). Coke sponsors the Olympics and we associate winners and festivity with them. It also has distribution dominance around the world. But the bottom line is, do you set that much store on branding when you buy consumer goods? I briefly touched on this in another post regarding my Colgate/generic name toothbrush conflict. Intellectually, we know that most products are manufactured offshore but we price target ourselves anyways by buying the brand name.
So which companies have the best brands? According to Interbrand and Business Week’s list, Coca Cola comes in at number #1 for 2007. I realize that these lists come and go; on one list Google might be #1 and on another, it might be something else. However, I really have to agree with Mr. Buffett on this one. Twenty years down the line, do you think Google will still be the king of the search engines or will something else take over? Maybe, maybe not, but I have confidence that people will still be gassy drinking Coke in good and bad times.
Of note, Coke reached its 52-week high yesterday.
Investing, Warren Buffett ::
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