tobrandname,thevalueofthebrandnamecanbecomputed
asthedifferencebetweentheestimatedvalueofthefirmand
the book value of capital invested in that firm.
Thisapproachwillyieldthesamevalueasthegenericfirm
approach, if generic firms earn zero excess returns. The
limitationoftheapproachisthatexcessreturnscomefromall
ofafirm’scompetitiveadvantagesandnotjustbrandname.
Inaddition,accountingchoicesand manipulationcanaffect
capital invested estimates,and thus affect thebrand name
value estimates.
ILLUSTRATION 12.3: Estimating the Value of Brand
Name—Generic Approach and Excess Return Model
Inthisexample,wefirstvalueCoca-Colausingthegeneric
firmapproachandthencontrastthevalueofbrandnamethat
we get with thevalue obtained through theexcess return
approach.
To apply the generic approach, after casting a wide net
lookingforgenericbeverage companieswecame uponthe
Canadian beverage manufacturer Cott Corporation, which
sellsgenericcarbonateddrinks,primarilyintheUnitedStates.
In the following table, we compare the key statistics for
Coca-Cola and Cott Corporation.
Coca-Cola Cott
Revenues $21.962 million$949 million
Operating margin (after-tax)15.57% 5.28%