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How South African companies are undermining their future profitability and growth with branding missteps

Jon Cherry
By Jon Cherry
5 Nov 2024
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The world’s most successful companies all think about brands very differently from companies that are not as successful over time. Restricting investment in brand is seen as business suicide.

The other day I bumped into an old acquaintance who works in the local advertising industry. Like everyone else I know in advertising he looked tired and desperately in need of a drink, even though it wasn’t even 8am.

The story of quiet desperation that he shared echoes many other accounts of talented individuals trying to work in an industry whose value is increasingly being questioned by clients.

Over the past 15 years, probably no other industry has changed more; the glory days of big, bold and confident mass media ads flighted on prime-time TV are long gone and have been replaced by a nauseatingly groundless marketing mindset obsessed with performance marketing tactics. 

In South Africa, smaller (post-Covid-19) budgets controlled by inexperienced brand teams are now being almost completely funneled into expensive digital channels that produce an uptick in sales while the money is being spent, but do very little to sustainably build a brand’s reputation over the long term. 

The demand for creativity in the process of creating promotional material is at an all-time low. As margins get squeezed, companies choose to save money rather than “waste” it on “clever films” and silly stuff like that. 

Future economic consequences


To better understand the future economic consequences of this approach, it’s easiest to look at history. 

Every year a British consultancy by the name of Brand Finance publishes an analysis of the brand values of South Africa’s leading brands. 

In 2014 the cumulative value of the Top 10 South African brands was $16.76-billion. 

In 2024, a decade later, the nominal value of the Top 10 South African brands has decreased, and they are now shockingly worth $16.3-billion. MTN, the country’s most valuable brand over the past decade, has declined by -34%, from being worth over $5.3-billion in 2014 to $3.5-billion in 2024.

But sadly not even this staggering level of underperformance was enough to knock it from the number one spot, which also illustrates how dismally everyone else has done over the period. 

In stark comparison, in what is guaranteed to further depress even the most hardened local marketing professional, the Top 10 global brands in 2014 were worth $600-billion, while today they are valued at over $2-trillion: that’s a more than 300% increase in 10 years.

Besides the poor performance in brand value, the world’s most successful companies all tend to think about brands very differently from companies that are not as successful over time. The likes of Apple, Microsoft, Coca-Cola, Cadbury and Disney all see and treat their brands as a revenue generator, rather than a cost. Restricting investment in brand is seen as business suicide. 

Globalised marketplace


They deeply understand that in our modern globalised marketplace, competing on product, price and proximity (all of which can be replicated) is just not good enough to generate growth, and the only reliable differentiator worth investing in that can influence the purchasing decision and unlock margin, is brand.

It might sound like something you would read on one of those stupid motivational posters that usually feature a beam of sunlight filtering through dark clouds onto a glistening gnarly ocean, but a quote in the latest Interbrand Best Global Brands 2024 report has got it spot on: “The fastest-growing companies are not branding their businesses — they’re ‘businessing’ their brands.” 

What this means is that rather than spending money to round up people to buy the stuff they make, brands that deliver exceptional growth spend enormous amounts of effort building trust and a reputation, while continuously trying to understand what customers will need and want in the future — and then they go about developing the strengths and competencies to create and deliver that to future customers.

Brand comes first, the business figures out how to make it commercially viable.

In South Africa the brand-building conversation is an awkward afterthought. Our companies generally have an outdated understanding of what a brand is, and it isn’t uncommon for some executives of leading corporations to consider innovation as a great opportunity for some frivolous team building. 

The competence of those tasked with “doing marketing” is also highly questionable. Most have very little marketing experience, and hardly any have any kind of advanced degrees in marketing or business. Not that this is a prerequisite, but at the very least, those tasked with the most important job in business should have some mad skills in building great reputations.  

Even in the upper echelons of the government, there is a universal ignorance as to how outperformance is achieved. 

Jobs are created and rising amounts of tax are paid by companies that consistently grow profits thanks to leveraging strong brands. Research shows that prosperity comes more readily as a result of brand strength; so why is it that I feel confident to take a big bet that the concept isn’t mentioned in any official policy documentation concerning the future of the economy?

If successfully financing the budget deficit is of interest to the finance minister, then a strategic focus on the need for strong South African brands should be the drum that gets beaten with feverish gusto.

Growth


If we are to have a reasonable chance of building an economy that enables the kind of growth that creates the opportunities and flow that we need, then we are all going to have to have a serious rethink about how we build brands in South Africa. 

Companies will need to take how much they invest in marketing seriously. Internal audit teams will need to get better at assessing the strategic risk associated with filling key marketing roles with personnel who lack the competencies to drive brand growth.

The true value of good marketing and innovation needs to be elevated on to a higher stage, one that recognises that “strong brand” and “profitable business” are indivisible from each other. DM

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