Johnson & Johnson and Coke: How Much Is A Brand Worth?

A couple of weeks ago in a post about Johnson & Johnson, I said the company’s brand name is a priceless asset. But maybe brand names can be objectively valued: A recently released article by Interbrand and Business Week attempts to do just that, and lists the top 100 global brand names for 2006 in order of value.

According to that article the Johnson & Johnson brand name is worth $3.193 billion. That works out to a little less than 2% of JNJ’s market capitalization; the brand name may be worth about $1.10 per share right now, less than I would have thought.

The value of the brand name is a concept which can be useful to blue chip value investors. Last January when I bought Coca Cola (KO) at 39.95, part of my reasoning was that I felt the price did not fully reflect the value of the brand name. It looks like that may have been correct. The article claims that Coca Cola is the world’s most valuable brand name - $67 billion, or 58% of the company’s current market capitalization! No wonder the stock has risen 23% this year, even though sales of their flagship product have been flat.

It may be useful to study this list and bookmark it for future reference, to pay attention to the companies which have a high brand name value in relation to their market capitalization, and to consider the companies that did not make it into the top 100 which you would have expected to be there.