View from City Road: Brands not investors' only concerns

What ever happened to Haig? Don't be vague] Twenty years ago it was a leading whisky brand but it has fallen a long way down the charts since then.

While some brands have disappeared, new ones have emerged. Take Haagen-Dazs, which Grand Metropolitan calls a 'superpremium' ice-cream. It has come to dominate the sector in next to no time.

That brands come and go is not new; it was true long before Philip Morris announced at the end of March that the Marlboro cowboy was cutting up rough. That news has, however, served to remind investors, long uneasy about brand valuations, of their vulnerability.

This is why Grand Met, which makes its annual presentation to investors today, and Guinness, which saw analysts last week, have proved sensitive to barbs about brands.

Taking them out of Grand Met's September 1992 balance sheet would have left the company with gearing of 188 per cent. Grand Met says there is nothing to worry about as the brands are worth far more than their balance-sheet values. For Guinness, the effect would be to drive gearing up towards 90 per cent. It too says the brands could be sold at a book profit.

Accounting considerations aside, Philip Morris's price cuts have hit a raw nerve. Companies like Unilever, Cadbury Schweppes and the drinks companies have rushed to explain why the American cigarette market is different from those they supply.

For example, Anthony Greener, the chairman of Guinness, said last week that whereas drinking spirits is a social activity, smoking is, at least in the US, perceived to be anti-social. As a result people buy booze on image and fags on price.

The companies involved - with the exception of those that have put brands in their balance sheet - have probably overreacted. They have blamed the brand debate for falls in share prices when other factors could easily explain them. Unilever has underperformed by 15 per cent in three months but that could reflect worries about Germany. In Cadbury's case the lag is only 6 per cent and that could reflect fears it will bid for United Biscuits. Guinness has, however, managed to rise above the Marlboro woes and outperform the rest of the market. Looks like brands are not investors' only concerns.