Jarden Corporation: ready for some boo-yah!? ~ Brand Mix

Wednesday, December 9, 2009

Jarden Corporation: ready for some boo-yah!?



Would a new approach to branding double Jarden's share price?

I'm not a big fan of Mad Money. The whole Jim Cramer thing--the shouting, the close-ups, the boosterism, the hysteria--it just doesn't work for me. But this segment was interesting. Cramer had invited Martin Franklin, CEO of Jarden Corporation, to talk about why home goods, specifically appliances, are doing so well this holiday season. Also, to harangue him about the fact that Jarden may be one of the biggest companies that no one's ever heard of.

Jarden is a $5 billion plus company or as Cramer put it: "a pastiche of a company, a mosaic of different brands." The brands include (among many others): Mr. Coffee, Crock Pot, Sunbeam, Oster, Coleman Outdoor and, for you skiing fans, K2, Marker and Volkl. It's #1 in 20 different categories and particular strong in home appliances sold through Target and other mass merchants.

Cramer thinks highly of the company and wishes it was better known. Standing in front of a large collection of Jarden products, he told Franklin: "What I'm amazed about, at this moment in time, is that all these brands are yours but no-one knows it. When is this going to be the Jarden Crock Pot? You'd double your stock if you'd let us know. What's the matter? You don't want to double your stock?"

Franklin responded that the Jarden brand is known to retailers and that it was never the goal to make it a consumer-facing brand. But does Cramer have a point when he says that Jarden is undervalued because it's not well known? And would slapping a Jarden logo on all of its products help?

Better known = Better valuation? As Franklin pointed out, retailers all know Jarden and presumably key analysts and investment managers also know the company. So, who cares if anyone else knows who they are? But, in fact, it does make a difference both for individual and professional investors.

Individual investors prefer to invest in stocks they know well and strong brands do better in the market than weak ones. From 2000 to 2008 the top 100 brands generated a 31% return vs. a 28% loss for the S&P 500 according to this article in TradingMarkets.com. For these investors, the challenge is to establish the link between the brands they know (like Mr. Coffee) and Jarden, the company whose shares they buy.

For professional investors it's more about how they classify a stock. In the case of Jarden, its chosen path of public anonymity positions it as a holding company or conglomerate. For a variety of reasons, these companies typically trade at a discount to the market (as much as 10%, according to CFO Magazine). If Jarden raised its profile it could potentially escape this label.

Logo-slapping? If Jarden wanted to raise its profile, would Cramer's logo-slapping idea work? It's worked for some companies--Nestlé and Mattel for example and it would establish the connection between Jarden and its well-known brands. But would it work? Probably not. The problem is that there isn't a common thread linking all of Jarden's product portfolio. K2 sales would not be helped by association (via Jarden) with Crock Pot. At best, the Jarden brand could be used to endorse a subset of its portfolio (like its home appliances) in the same way that Nestlé is used to endorse its human food brands but not its dog food brands.

The alternative to logo-slapping is to develop awareness and reputation for the company by investing in the corporate brand in the mode of, say, P&G. Could this work for Jarden? Possibly but it would require time, commitment and investment before it paid dividends. To be effective, Jarden would need to find and express a purpose for its brand (something to stand for).

So, could a new approach to branding double Jarden's share price? I'm going to say "yes" but with a high level of difficulty. Agree?

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