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Everyday we read about the power and influence of brands. Like deities they occupy our minds and command our behaviour, control our everyday lives. It is not surprising that they have become such a central element in marketing, and that so much nonsense is written about them. It was not always so.
As tanners we know the term brand is thought to originate from burning a mark onto property or products, coming from the Norse word "Brandr", and cattle were among the first to receive regular brands. The word Maverick came about in the early 19th century to mean unbranded cattle in the U.S. Starting as a symbol, or a mark, brands soon became identified with the company and all that it is associated with.
The value to the company of being or owning a "brand" became visible in the late 1980s when Philip Morris bought Kraft and Nestle took over Rowntrees both for big multiples of net asset value; eight times in the case of Rowntrees. What was going onto the balance sheet instead of physical assets was the future strong cash flows that well managed brands can guarantee.
Brands can be more than just standard businesses. What must Michael Knighton be thinking when he just missed buying Manchester United in 1989 for £20 million (US$31 million)? As society, and management, started to apply "brand thinking" to what had just been a soccer club it was floated in 1992 for £47 million (US$73 million), bought by the American Glazer family in 2005 for £790 million (US$1.2 billion) and valued in August of this year at £1.85 billion (US$2.9 billion).
Of course good management is essential. A brand is like a bank account that needs keeping topped up with good activities, and with minimal negative events or "withdrawals". You need to invest continuously in brands.
"Leather" can also be considered a brand as most of the rules of branding apply. Working with "brand leather" differentiates it from other materials and should keep it away from commodity trading and prices. Yet for "brand leather" to succeed all the world's tanners must play their part. Sadly, this is not the case and we have had a bad century so far. We have always known that sights like Fez, some parts of Kanpur and Hazaribagh badly damage the image of leather. Yet these are small corners of misbehaviour which society can accept for a while given they know that the industry is trying to resolve them. Harder to defend is those who make leather that looks like plastic and open the door to non leather competitors; just as it those who market leather as "chrome-free" and in so doing damage the image of 80% of all the leather made in the world for no good purpose than short term gain.
Volkswagen has just shown us how to destroy brand value, so much so that the withdrawals look likely to be greater than the bank balance. The outcome for VW is very uncertain. At a very challenging time for the leather industry we should stop making those unnecessary "withdrawals" and not follow VW.
Listen to the podcast here: Brand responsibility
Follow Mike Redwood on twitter: @michaelredwood
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