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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: Tomato who wrote (1075)	2/25/1999 1:25:00 AM
From: Jurgis Bekepuris	Read Replies (2) \| Respond to of 4691

Tomato, I am totally amazed nobody picked up your question. Well, let's start the ball rolling. First axiom: Tastes change. Second axiom: Not all tastes change with the same rate. Coke, pepsi, wrigley's, hershey's are probably the stalwarts of brands. Some of them survived a century, some at least 50 years. Though tastes change, Coke remains a steady brand purchased by billions of fanatics. :-) Make no mistake though. "A fool" could not run a company like KO, even though Buffett sometime ago quipped that he wants businesses that could do well while being run by fools. KO needs to diversify both geographically and drink-wise to get a larger market share. And it's very easy to diworsefy. I don't drink Coke, but I drink Nestea, so I'm contributing to Coke's profits. I guess that's a good diversification, while OAT buying Snapple was a bad idea. Gillette with its razors and batteries is on the middle ground between stalwart food staples and fickle clothes and shoe makers. Razors are here to stay, even though I swear every time I shave. Maybe laser shaving will kill razors, but I wouldn't bet. Batteries are not as good. You have to innovate, and the product is a commodity. Finally, the apparel brands are the most fickle in the industry. The tastes change every season, and very few brands can claim to be "timeless". I liked James's observation though that "size matters", i.e. Nike can spend more on advertising than smaller brands, effectively sustaining its top position. Third axiom: Inventory BAD Coke, Hershey and even Gillette do not have to keep 3 months' inventory of products. Their products don't go out of fashion and don't have to be sold at firesale prices. Once again in apparel or shoe businesses, the situation is totally different. Inventory is a constant problem. In summary, there's a difference between brands in different fields, and it's good to keep that in mind. Jurgis