There was a peculiar cult about in the 1980s which, for want of a better name,
could be called "brand worship".  Its core belief was that brand names had a great
and immutable value that most people had failed to appreciate.  It found some of
its keenest followers in Europe, which was stuffed with fine old-name products
suffering a similar fate as its fine old-name aristocrats.

When in 1988 the Swiss food-products company Nestle bought the British
confectionery group Rowntree, the price paid included well over $1 billion for
something that had never appeared on Rowntree's balance sheet: the value of some
of the names in its portfolio of products, like Polo, Kit-Kat and After Eight.

As this hidden value became more widely recognized, a number of companies
decided to put the value of their brands on to their balance sheet.  The drinks and
hotels group Grand Metropolitan added $500 million for a few of its more recently
acquired product, such as Smirnoff vodka.  When Polly Peck bought the Del
Monte fresh-fruits business it added $250 million to its assets for the value of the Del Monte name alone. (Polly Peck subsequently collapsed, in part because it
overstretched itself with the Del Monte purchase.)  This practice was not just
cosmetic.  It improved the companies' gearing and, as a consequence, their ability
to borrow from banks, and thence their capacity to buy yet more brands.

However, events conspired to bring the brand-worshippers down to earth.  The
value of brand was seen to be far less tangible than the accountants who were
using it to puff up balance sheets might have wished.  For a start, names can go off
faster than a raw steak in Riyadh: sales of Perrier water were decimated in 1990 by
the discovery of small quantities of benzene in samples taken from the water's
source.

Like wise the great name of Solomon Brothers was humbled overnight by the
discovery in 1991 of dirty dealing in its US government securities department.
Solomon had few assets but its name and a bunch of screens.  Full-page
advertisements with a Japanese-style confession from its new chairman, Warren
Buffet, only went some way towards restoring the value of the Solomon brand of
securities business.

It was not just the vulnerability of brands to unexpected events that reduced their
glamour.  Two market-related events were also working against them.  In
consumer goods, retailers were gaining the upper hand in their eternal power
struggle with manufacturers.  In the UK, in particular, food retailing was becoming
increasingly concentrated, with over half of all sales going through a few chains
like Sainsbury and Tesco.

These powerful chains found that one way of increasing their profit margins was to
have "own-label" products specially manufactured for them.  Consumers came to
value Safeways' name on a bottle of wine, or Marks & Spencer's St. Michael label
on a bar of chocolate, quite as highly as any of the well-established manufacturers
of these products.

In a time of recession consumers were even more attracted to Own-labeled
products by their price.  This was always lower than the famous-name
manufacturers.  For the balance-sheet value of these manufacturers' brands always
lay essentially in the premium that they could charge for sticking their name on the
product.  That premium could be as high as 50%, and it was always bound to
attract pot-shots.

Another setback for the brand-worshippers came from the unexpected difficulties
they found in taking brands across borders.  In the excitement of globalization,
companies anticipated making huge economies of scale from marketing the same
brand the same way right across the globe.  Any product with a strong market
share in one country was fair game for globalization.  If products that are as
American as McDonald's and Coca-Cola could do it, then anybody could.

They could not, of Course, because not all names travel well.  For example, Irish
Mist liqueur has a hard time in German-speaking markets (mist in German means
manure).  Moreover, within the global village that marketing people were blindly
assuming already existed, distinct tastes were proving remarkably persistent.

Unilever, which had traditionally rejoiced in allowing its national detergent
companies great autonomy to develop their own products, came under the
influence of the globalizers and reversed its policy for the launch of Radion, a
detergent that was sold on its ability to remove odors as well as dirt.  With Radion
the company imposed a universally uniform package design and a bright orange
color on, in many cases, reluctant national managers.

Since then Unilevers has reached a happy compromise with its international
brands.  It defines what it sees as a product's "core brand values", those which
meets common needs in all its main markets, and then it tinkers with other aspects
of the brand according to the needs of different local markets.

The main lesson of the cult of the brand, and of its downfall, is that brands cannot
be left unattended for long.  Building them up is a long, hard process and so is
maintaining them;  a fact that has by those who have bought an already established
brand in the belief that with such-and -such a name they cannot go wrong.

Look at the products in the supermarket shelves that have not had their market shares drastically eroded by own-brand products.  They include instant coffee and breakfast cereals.  The likes of Nescafe and Kellogg have retained their market leadership because they have spent much of the premium in their prices on constantly developing new products and on improving existing ones.  Then they have spent even more on advertising the fact.  The brand that is merely sat upon will soon be squashed.