How does one place a value on a brand’s name and how does it relate to profitability? This piece takes a practical approach to measuring the realized value of a brand using a case study comparison. The results are significant beyond the original expectations of this research.
In this study we compared two brands of popping corn; a popular brand and a local grocery chain store brand. The popular brand is “Orville Redenbacher” and the chain store brand is “Selection”. Orville Redenbacher’s Original Gourmet Popping Corn ($4.79 for 850 gram jar) is compared to Selection Popping Corn ($2.99 for 2000 gram bag). Both brands were bought at the Metro Grocery Store on Front Street in downtown Toronto.
The comparison was carefully designed, executed and video-recorded with the assistance of one of the MetroActive Lifestyle Network members who’s a medical researcher with multiple publications and experience at Johns Hopkins Hospital in Baltimore and Hospital for Sick Children in Toronto.
The results from the comparison speak for themselves. The “Orville Redenbacher” brand is four times more expensive per gram than the “Selection” brand. The analysis is based on the price of each brand per gram, as well as the number of grams that actually popped. An equal number of kernels were counted from each brand. The exact calculations are discussed and noted in the video.
Four adults tasted both brands and three of the four chose “Selection” over “Orville”, the fourth had no preference.
The significance of this is that for every dollar spent, the Orville Redenbacher brand only supplies one-quarter of the raw material. Therefore, the brand’s profit margin is much greater than the competition’s profit margin. Assuming the company is well managed and has comparable overhead to the competitor brands then this should translate into profits of at least four times greater than the competition. In turn this would mean that the valuation of the company should be at least four times that of the competition. As a shareholder this would be a very good thing.
However, the reality is that Orville has a much more significant advertising budget than the grocery store chain brand. In addition, using the plastic bottles versus the plastic bags means its packaging is much more expensive. Then there is the whole corporate overhead to take into account. In the end how much of the benefit from the brand’s equity transfers to the investors depends on these stated factors, as well as the production efficiencies.
As far as the Orville Redenbacher customers are concerned, they’re paying four times as much as if they were buying the grocery chain store brand.