UK-listed consumer goods giant Unilever (ULVR) is in the middle of a well-publicised restructuring which involves focusing on the product ranges in its portfolio which it feels resonate most strongly with shoppers.

The decision to focus on these so called ‘power brands’ is just the latest illustration of how much brands matter, how there is a clear hierarchy for brands, how their fortunes can fluctuate and the impact this can have on the businesses which own them.

In this article we look at brands, what makes them so powerful and what happens when a brand starts to lose its appeal. We also highlight one up-and-coming and one established brand which we think are worth investing in.

WHY DO BRANDS MATTER?

Enduring brands play a significant role in driving sales, expanding market share, and increasing shareholder value, and are central to the success of many top-performing businesses. Firms with strong brands create deep connections with consumers: their products foster self-assurance, provide status, or become indispensable everyday staples which foster loyalty.

Because of this, consumers remain willing to spend, even during difficult economic periods, to obtain their trusted brands. This, in turn, grants many brand owners impressive pricing power. Typically, the essential or desirable nature of their products offers companies with popular brands reliable, steady revenues and above-average profit margins, which are sustained through substantial marketing and innovation spending.

Building a compelling brand and continuously investing in its development gives a company a genuine advantage over rivals. This approach establishes ‘barriers to entry’—or what Warren Buffett, famed as the Sage of Omaha, describes as a ‘moat’ around the enterprise.

Buffett, who has shared much investment insight over the years, once noted: ‘In business, I look for economic castles protected by unbreachable moats.’

Here, the ‘castle’ stands for the company, while the ‘moat’ symbolises a robust competitive edge: the broader the moat, the stronger the long-term defence.

A valuable brand, though an intangible asset in accounting terms, is one of the clearest forms of these economic moats, helping to erect barriers to entry which shield against competition.

Focusing on widening and deepening this moat not only bolsters a company’s pricing power but also equips it to withstand long-term market changes.

Buffett also famously stated: ‘The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10%, then you’ve got a terrible business.’

INVESTING IN BRANDS

Conveniently for investors, many of the world’s top brands are accessible through the US stock market which, in turn, is easy to trade on most investment platforms. This includes the likes of McDonald’s (MCD:NYSE), Visa (V:NYSE), and Coca-Cola (KO:NYSE).

The Kantar ‘Brandz’ ranking of the world’s most valuable brands for 2025, presented in the table, shows Apple (AAPL:NASDAQ) at the top – as it has been for several years in these lists – with a brand value approaching $1.3 trillion. Following closely behind are Alphabet (GOOG:NASDAQ) owned Google, Microsoft (MSFT:NASDAQ), relative newcomer Nvidia (NVDA), and Facebook and Instagram (both under the Meta Platforms (META:NASDAQ) umbrella).

Investors also have the option of tapping into the brand strength of luxury name Hermes (RMS:EPA) and streaming giant Netflix (NFLX:NASDAQ) on the stock exchange among many others.

BIG BRANDS CAN STRUGGLE

A strong brand may give a company a decent underpinning, but it is no guarantee of success. While Apple has the most valuable brand in the world, its shares have slumped 7% year-to-date compared with a 10% advance for the S&P 500 index as it has had to contend with the impact of tariffs on the business.

The recent struggles of Nike (NKE:NYSE) and Adidas (ADS:ETR) – which dominate the sportswear market – are also testament to the reality that a strong brand still needs careful management.

This can be seen in Nike losing share to specialists in areas like running thanks to a lack of innovation and Adidas enduring an ultimately damaging tie-up with controversial rapper Ye (formerly known as Kanye West).

Compounding this, both pursued ill-fated direct-to-consumer strategies which meant their brands were not necessarily as front and centre as they had been in third-party outlets.

Both are also currently in different phases of their respective recovery strategies and are fortunate they can lean on what remain exceptionally strong brands as they look to turn around their fortunes.

Next, we consider what happens when a company’s brand starts to fade and what the potential implications are for investors.

WANING BRANDS

While brands can be valuable intangible assets which support a company’s ability to raise prices and drive customer loyalties, there are many brands of yesteryear which have either lost their lustre or disappeared completely.

Therefore, it is incumbent on companies to continuously assess the effectiveness of their brands to ensure they continue to resonate with customers and drive loyalty.

One risk to watch out for, particularly in areas like casual dining or food-to-go – is cannibalisation. This can happen when a brand is expanded too aggressively, and new stores start to eat into the sales from existing nearby stores. This can lead to lower volume growth, weaker footfall and potentially, declining brand loyalty.

The iconic Greggs (GRG) sausage roll officially became a national treasure after being displayed in Madam Tussauds in the run-up to National Sausage Roll Day on 5 June.

Could that signal a peak in the popularity of the sausage roll? Some analysts believe so following a string of poor trading updates from the food-to-go food retailer.

The company attributed a slowdown in first half like-for-like sales growth to the hot weather, but some analysts have questioned the wisdom of the firm’s expansion strategy and diversification into longer opening hours.

Management insists investments are starting to payoff and investors should be patient. At the first-half update (2 July) CEO Roisin Currie insisted: ‘Through our disciplined estate expansion and focus on innovation, Greggs is evolving its offer further and making the brand more convenient for a wider range of customers.’

Greggs operates from 2,649 outlets and plans to open 140 to 150 net new sites this year, targeting locations in the south of England where it believes it is under-represented. Longer-term the company sees opportunities for ‘significantly’ more than 3,500 shops.

OVEREXPANSION NARRATIVE GAINING TRACTION

Whichever camp you fall into, the overexpansion narrative is gaining traction with investors who try to make money from short selling. These investors ‘borrow stock’ from a prime broker and sell them with the intention of buying the shares back at a lower price.

According to S&P Global the percentage of shares out on loan has increased from 0.3% to 6.3% over the last five months to the end of July.

However, not everyone agrees with the peak sausage roll narrative with one former shareholder telling the Financial Times that delivering 3% to 4% like-for-like sales growth would be enough to justify investment in expansion.

Another food retailer potentially feeling the effects of overexpansion is Domino’s Pizza (DOM) which lowered full-year guidance on 5 August and signalled a slowdown in the pace of new store openings, reflecting a more cautious approach from franchisees.

A slower planning environment means the company now expects to open mid-20s new stores form around 50 stores previously.

Domino’s reported a 15% decline in first half pre-tax profit to £43.7 million but insisted it was gaining market share against a weak consumer environment and increased employment costs.

Market share gains have been given a boost by Domino’s trial of a loyalty programme which has performed ahead of expectations in its second phase and is on track for a full roll-out in 2026.

To complement organic growth ambitions Domino’s is actively looking to add another brand to its stable but said it will revert to share buybacks should an acquisition not be found before the end of the year.

Operating roughly 1,400 stores, Domino’s believes it can grow to 1,600 stores across the UK & Ireland by 2028, generating £2 billion of system sales and get to 2,000 stores by 2033.

Management sees opportunities in smaller address count territories where competition is less fierce and average sales performance is greater.

Investors appear less enthusiastic about Domino’s growth ambitions if the stock price is anything to go by, with the shares languishing at 10-year lows.

Not helping matters, analysts have revised down their 2025 and 2026 earnings per share forecasts by around 20% over the last year, with no sign of let up, suggesting faltering confidence in Domino’s growth strategy.

NOT SO COOL

Fashion retailer Superdry was founded in 1985 by Julian Dunkerton in Cheltenham and at its peak the brand sold in 157 countries, generating more than £600 million of annual sales, and had a market capitalisation of almost £2 billion.

A decline in the popularity of the brand resulted in the company being delisted from the London Stock Exchange in July 2024 with Dunkerton promising the retailer would shed its ‘dad brand’ image and become ‘cool’ again.

Ted Baker was a fixture on UK high streets in the late 1980s known for its quirky advertising and British fashion heritage.

Starting out as a menswear brand in Glasgow it eventually opened shops across the UK and in the US while also signing licensing agreements in Asia and the Middle East.

A combination of factors, including being slow to establish digital sales channels and a failure to adapt to athleisure trends during the pandemic reduced the appeal of a brand, which had its roots in sought-after products for special occasions.

Founder Ray Kelvin stepped down as CEO in 2019 after allegations of inappropriate behaviour, which he denied. A string of profit warnings led to the brand being snapped up by US multi-brand outfit Authentic Brands for £210 million in 2022.

The US firm purchased the brand name while No Ordinary Label ran the UK stores until the company filed for administration in 2024. 

Meanwhile, Authentic Brands licensed the brand to United Legwear & Apparel which runs Ted Baker’s online sales and distribution in the UK and Europe.

Authentic brands previously filed for a US IPO in 2021 then later withdrew to raise money privately. The company owns more than 50 iconic brands and generates approximately $32 billion in annual systemwide retail sales. The company was valued at $12.7 billion in its latest funding round.

BRANDS TO BUY

Coca-Cola Company (KO:NYSE) $69.81

Beverages business Coca-Cola Company (KO:NYSE) is a shining example of enduring profitability and sustainable growth, having thrived for well over a century, yet arguably it is still only at the foothills of its prospective global growth journey.

The value of its brand may not be at the level of the global tech giants but its longevity is, in itself valuable. It’s hard to imagine circumstances in which Coca-Cola would lose its dominant position in the soft drinks market.

Coca-Cola’s franchise model has built an immense network, enlisting six million people, 120,000 suppliers, and 3,000 production lines to serve its interests.

The company’s product portfolio extends beyond its flagship soda, including brands like Costa Coffee, Sprite, Fanta, and Dasani, boasting some 30 brands which generate upwards of $1 billion in sales on their own among its 200-strong lineup. Globally, Coca-Cola leads in the water, juice, and international sports drinks categories.

According to its own data, Coca-Cola commands around 14% of beverage volumes in the developed world, but a modest 7% in developing and emerging markets—a primary target for expansion.

These territories, representing 80% of the world’s population, still have enormous untapped potential, with most prospective customers yet to embrace commercial beverages.

As such they offer Coca-Cola a huge runway for future growth backed by an extremely strong portfolio of brands.

The company’s asset-light approach supports robust operating margins, superior returns on invested capital (ROIC), and abundant free cash flow. In 2024, Coca-Cola posted operating margins of 30%, ROIC of 23%, and nearly $11 billion in free cash flow.

This financial strength enables the company to maintain a dominant presence in marketing and advertising, reinvest in the business, and reinforce its competitive advantages—creating a self-sustaining growth engine.

It also leaves plenty of cash left over to pay dividends and the company promises a yield of 3% based on consensus forecasts for 2026, a level which is generous relative to the wider US market.

UK investors should note they may not get those dividends in full unless they hold the shares in a SIPP. To hold Coke in another account you’ll need to complete a W-8BEN form. As well as allowing you to deal in US shares, this form lets you benefit from the US Internal Revenue Service (IRS) treaty rate, which lowers the withholding tax for qualifying US dividends from 30% to 15%.

For more than 60 years, Coca-Cola has achieved consistent annual earnings per share growth of 8% to 9%. Looking ahead, management is aiming for 4% to 6% organic revenue growth and 7% to 9% comparable earnings growth, excluding currency effects.

Currently, the company trades at a cyclically adjusted price-to-earnings ratio that is below its historical average, which, considering its quality and resilience, looks an attractive opportunity. [TS]

SharkNinja (SN:NYSE) $117

Although it might seem to be an overnight success story after sales rocketed during Covid and successive lockdowns, SharkNinja (SN:NYSE) actually traces its roots back over 20 years ago.

Initially, it sold humdrum household goods like cordless sweepers, steam mops and irons, but today it has two multi-billion-dollar brands – Shark, which is the US market leader in cleaning, ‘home environment’ and beauty appliances, and Ninja, the US market leader in kitchen appliances, grills and outdoor cooking equipment.

The rise of home cooking during lockdown generated a tsunami of demand for gadgets like air fryers and bread-making machines, which SharkNinja was ideally placed to serve, but it has since gone on to carve out a bigger and bigger slice of the global appliance market.

Fundamental to the firm’s success is its ethos of setting out to solve problems faced by consumers either due to lack of suitable products or just poorly-designed products.

As chief executive Mark Barrocas likes to say, the company works for one person, the consumer, and it does it one product and one five-star review at a time.

In the last three years the group has expanded into 19 different categories, with the Shark brand now operating in 14 categories, having diversified from vacuum cleaners into items like air purifiers, fans and hair straighteners, while the Ninja brand operates in 20 categories such as juice makers, ice cream makers, coffee machines, cookware and even knives, and Barrocas believes there are still plenty of areas where the two brands can expand and take market share.

Since coming to the stock market the company has built a formidable reputation for beating estimates, and on 7 August it blew past second-quarter forecasts and raised guidance for the sixth quarter running.

Having its products featured in the Apple (AAPL:NASDAQ) film F1: The Movie hasn’t hurt, as it has helped cement the brands in the mainstream, and the company is working on launching a unified DTC (direct to consumer) website which will give it greater control over pricing and margins.

Finally, with more than 90% of products for the US market manufactured outside China and a target of 100% by the year-end the firm is largely unaffected by trade tariffs. [IC]

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