Brand Dilution Can Drive Stocks Lower.

Great consumer brands have historically been built
on consistently delivered superior value for the customer.
That can result from superior innovation, superior quality,
or simply any superior customer value proposition.

It has typically taken years to build strong trusted brands,
but their value can be lost or diminished very quickly by mistakes
or by intentional reduction in the customer value proposition –
with the result of reduced value of a company’s stock.

Mercedes used to be the globally prominent luxury brand
that advertised as the “Best Engineered Car in the World”
and then later as “The Safest Car In The World”.

Its cars were renowned for their long service lives
with low maintenance frequency.
But, today, that is no longer true.
Other cars have similar designs, engineering,
safety features, and in many cases higher quality.
Mercedes now ranks 26th among car brands in reliability.

Mercedes failed to maintain
its distinctive customer value proposition,
and its stock, MBG.DE,
has lost about $49 Billion of market value
since its 1998 peak.

Nike (NKE), Lululemon (LULU), and Starbucks (SBUX)
are three more examples of companies
where well-paid management
has made huge mistakes
that cost the shareholders $Billions:

– Nike down $220 Billion since its 2021 peak.

       – Lululemon down $50 Billion since its 2023 peak.

       – Starbucks down $17 Billion since its 2021 peak.

even while their CEOs took away huge paydays
ranging from $20 million to $100 million per year.

Today, Brand Dilution seems to be everywhere –
reduced quality, smaller packages,
higher prices for less –
massive reduction in delivered customer value.

Evidence strongly suggests it’s being done
primarily to increase CEO compensation
but the shareholders often get reduced share values.

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The information herein is provided solely to inform
and is not intended as, and is not to be construed as,
investment advice or as an investment recommendation.
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and accept all responsibility thereof.
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Past performance is not necessarily indicative of future results.