PROJECT - 2

PRODUCT & BRAND MANAGEMENT

FROOTI
PART 3: BRAND VALUE MEASUREMENT

Submitted by:

 Bhavna Bhaswati
 Kiran Thakur
 Punam Garu
 Saranya Roy

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 CONTENTS

S. No TOPICS PAGE
1 Executive Summary 3

2 Importance of Brand Valuation 6

3 Rational of Selecting the Models 8

4 Chip Shafer Model 9

5 Findings of Chip Shafer Model 11

6 Royalty Method 14

7 Findings of Royalty Method 15

8 Recommendations 16

9 Annexure 17

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 EXECUTIVE SUMMARY
PHASE- I

In Phase- I of our project, we measured the brand image of the brand Frooti in the
mango drink category, using a combination of the BAV model and laddering method. Our last
findings indicated that Frooti was the market leader in the mango drink category beating off its
competitors.

PHASE- II

In Phase – II of the project, we measured the brand equity index of the brand Frooti in the
mango drink category, using Brand Loyalty, Price Premia, Brand leveragability and Brand
Association parameters. Maaza was the leader in all three parameters viz. Brand Loyalty, Price
Premia, and Brand Association. Frooti is the second most preferred brand among the proposed
brands.

PHASE- III

Brand valuation is the process used to calculate the value of brands. Historically, most of a
company’s value was in tangible assets such as property, stock, machinery or land. This has now
changed and the majority of most company’s value is in intangible assets, such as their brand
name or names.Over recent years, intangible assets have become more important to businesses
operating in a wide variety of industries. This in turn has put a premium on being able to come
up with credible ways to value brands. With high levels of competition and excess capacity in
virtually every industry, strong brands help companies differentiate themselves in the market and
communicate why their products and services are uniquely able to satisfy customer needs. Hence
it becomes very crucial to estimate the brand value.

OBJECTIVE:

To measure the Brand Value for the brand Frooti.

METHODOLOGY:

We took two models to estimate the brand value of Frooti -

Chip Shafer and Relief-from-royalty method.

 Total Sample Size: 22

 Method of data Collection: Primary Survey

 Instrument of Data collection: Questionnaire through online survey

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  Sampling Technique: Here we collected data from correspondents who were present in
the survey of phase I & II.

The reason to do so is because a lot of questions needed for the Shafer and Relief were
already answered in our findings done in Phase I and II of the project.

Therefore, instead of asking the same question we only asked the questions that were not
repeatable. The data of repeated questions are taken from previous two phases.

CHIP SHAFER MODEL

We took four parameters i.e. Reputation, Momentum, Vision and Connection to

evaluate the intangible value of the brand. We interviewed twenty two respondents on
the basis of our questionnaire which contained questions on the above mentioned
parameters.

Findings-

TOTAL SCORE

After assigning scores individually for each of brand across the 4 components and assigning
scores as the Shafer model, Maaza has emerged as a leader by a huge margin followed by Frooti
and Slice. Maaza was the eader with huge margins in more than one component which clearly
shows the strong value the brand has on the consumers.

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RELIEF-FROM-ROYALTY METHOD

Every brand has a power to charge premium from its customers. Some brands have
more premiums compared to others. If a company does not own that brand then it has
to pay a royalty fee for using that brand. Here we are trying to find that royalty fee of
Frooti and its major competitors.

In this we can get the following:

 The Royalty rate of a brand is % of points scored / Total points
 Royalty Fees is Royalty rate as % of Total sales.

FINDINGS

The price of a 200ml tetra pack of Frooti (and others) costs Rs 12. Therefore, the sales of
Frooti would be Rs 108. Hence the Royalty fees that Frooti can charge is 64.20% of 108
i.e. Rs 69.33. Similarly the royalty fees that Maaza and Slice can charge are Rs. 90.00, and
Rs 20.67 respectively.

Hence, we see that here also Maaza is the leader in charging a royalty fee.

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 IMPORTANCE OF BRAND VALUATION

Brand valuation is the process used to calculate the value of brands. Historically, most of a
company’s value was in tangible assets such as property, stock, machinery or land. This has now
changed and the majority of most company’s value is in intangible assets, such as their brand
name or names.

The value of brand has been recognized for over a hundred years. John Stuart, Chairman of
Quaker said in about 1900, "If this business was split up, I would give you the land and
bricks and mortar, and I would take the brands and trademarks, and I would fare better
than you."

Why do we need Brand Valuation?

Brands are valued for many different reasons, such as for legal disputes, strategic
management, internal communications, business management, brand
securitisation and M&A. Brand valuation models follow standard guidelines. Models for
valuing brands follow the same principles of valuation that are used for valuing other tangible
assets – economic income approach, market approach and cost approach.

Different approaches for estimating value of a brand are-

1. Valuation based on the aggregate cost of all marketing, advertising and research and
development expenditure devoted to the brand over a stipulated period.

2. The replacement cost method

3. Gross Margin Approach: Valuation based on premium pricing of a branded product over a
non branded product.

4. Valuation at market price

5. Valuation based on customer related factors such as esteem, recognition or awareness.

6. Valuation based on potential future earnings discounted to present day values

7. Royalty relief method: We assume what royalty the firm would have to pay if the brand was
not owned by them as a percentage of sales

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7|Page
 RATIONAL FOR SELECTING THE TWO MODELS

We have selected the Chip Safer and Relief Royalty model for valuing the brand.

The other methods cannot be used due to non-availability of financial data. Parle Agro is a
Private Limited Company. Because of this its balance sheet is not available online.

Keventer Agro a Limited Company is a full fledged franchisee for Frooti and few other Parle
brands. It manufactures, packages, distributes and markets Parle’s Frooti. Though Keventer is a
Limited Company, its balance sheet is not available on its website. It says it’s under construction.

Hence, by using Chip Safer and Relief Royalty model, which does not requires financial data and
can be done through survey we were able to find the Brand Valuation of Frooti.

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CHIP SHAFER MODEL

Chip Shafer model is used to estimate the brand value. According to Shafer, CEO of Trajectories
Grouping Irvine, California; only a third of Fortune 500 company market value can be
accounted for by shareholders’ equity (assets- liabilities+ earnings). The rest is called “intangible
assets,” which consists of such things as patents, intellectual property, goodwill and brands.
Shafer estimates only about 5% of these intangibles are quantifiable assets such as patents and
intellectual property. A majority of this 5% value is do with the expectations and perceptions
about how a company will do in future.

BRAND VALUATION FORMULA

Formula: B = (R + M + V) C, where

 R equals reputation
 M equals momentum
 V equals vision
 C equals connection

Brand valuation has been broken into these four components that largely have to do with

 What you’ve done in the past

 What you’re doing right now
 What we can expect you to do in the future
 How familiar we are with your brand.

The past performance components deals primarily with things that have been done to build
trust in your brand.

 Do we like you?
 Do you offer high quality?
 Do you deliver on your promises?
 Are your customers satisfied?

The present performance component attempts to determine your momentum in the market
place. Shafer refers the old physics law of mass*speed= momentum. Big companies don’t have
to move too fast to have huge momentum, whereas fast-moving companies don’t have to be big
to make sizable gains in market position. The objective in this section is to determine how well
you are implementing your game plan.

The future, or vision component, looks not only at measures of whether customers and
prospects regard your enterprise as a forward-thinking company, but more importantly, whether

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they think you have the credibility to pull off your vision of the future. “Having a clear,
compelling vision based on a deep understanding of customer dynamics is incredibly important,”

The fourth area concerns connection to the marketplace. It’s more than simple awareness
because it deals with familiarity, understanding of company values and the likelihood of doing
business with your company. As you can see from the formula, if you score well in all three basic
performance areas (past, present and future) but fail to show connectedness to customers and
prospects, your brand score will suffer accordingly.

• Reputation is a • This performance

measure of trust, and component attempts
trust is a fundamental to measure the
necessity in all human momentum in the
and business market place
interactions.

Reputation Momemtum

• The future, or vision • Th

Vision Connection
component, looks not
only at measures of
whether customers and
prospects regard you as • The fourth area concerns
a forward-thinking connection to the
company, but more marketplace.
importantly, whether
they think you have the
credibility to pull off
your vision of the
future

PROCESS OF MEASURING BRAND VALUE

 Respondents were asked questions related to the four components of this model.

 A comparative study was done and the brands were assigned scores in each of the
component.

 Then by putting the formula B = (R + M + V) C , the brand value score was assigned to
each of the brand.

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 FINDINGS

REPUTATION

The component ‘Reputation’ which measures the past performance of the brand, includes
questions judging the brand on its attribute i.e. taste, and brand image.
Frooti is the leader, scoring 163 points followed by Maaza with 161 points and Slice with 145
points.

MOMENTUM

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On the component Momentum, there is a new leader, Maaza scoring 49points, followed by Slice
with 32points & Frooti with 23points.

For this particular question we asked respondent to assume the tetra pack size to be 200ml and
purchase rate of the brand to be for 1 week and then we arrived at the score applying the
formula of Mass * Speed = Momentum.

This component was included to have an idea of how strong the brand is doing in terms of
actual and potential sales in volumes.

VISION

On the Component Vision, Maaza is way ahead of the three brands.

This component included questions like brand’s ability to innovate and keep
consumers interested and anxious to have something new and their willingness to recommend
this brand to family and friends. Here Maaza emerged as the leader with 104 points, followed by
Frooti with 79 points and Slice with 45 points.

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CONNECTION

This was the last component to judge the familiarity of the consumers that they had with the
brand and the willingness to get associated with the brand.

This was to basically judge the kind of trust the consumer showed on the brand and the level of
knowledge the consumers had about the brand. Here Frooti slightly edged Maaza as the leader of
the pack with 56 points followed by Maaza with 54 points and Slice with 24 points.

TOTAL SCORE

After assigning scores individually for each of brand across the 4 components and assigning
scores as the Shafer model, Maaza has emerged as a leader by a huge margin followed by Frooti
and Slice. Maaza was the eader with huge margins in more than one component which clearly
shows the strong value the brand has on the consumers.

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RELIEF-FROM-ROYALTY METHOD
(Also, known as royalty savings method)

The relief-from-royalty method determines the value of an intangible asset by reference to the
capitalised value of the hypothetical royalty payments that would be saved through owning the
asset, as compared with licensing the asset from a third party, where you have to pay a license
free.

It involves estimating the total royalty payments that would be needed to make over the asset’s
life, by a hypothetical licensee to a hypothetical licensor. Royalty rates are typically applied as a
percentage of the turnover expected to be generated when using the asset.

HOW TO GO ABOUT IT

The turnover is calculated on the basis of no of brands the correspondence buys. This is
question 1 in the ‘Royalty Method’.

In the subsequent question 2,3, 4 the brands are answered on a scale of ‘yes and no’. They
gather maximum point of 3x1=3

The 5th question gives us maximum point of 5x3=15

Therefore, the maximum a brand can gain in total is 15+3 = 18

From the above,

 The Royalty rate of a brand is % of points scored / Total points
 Royalty Fees is Royalty rate as % of Total sales.

How to calculate:
(The below data is only given as an example and does not represent the actual findings)

Royalty Rate:

 Total points scored by Frooti = 5 point

 All total points = 18
 Royalty rate of Frooti = (5/18)*100 = 27.77%

Total Sales
 As per the correspondents if 10 persons prefer to buy Frooti and a 200ml pack of Frooti
comes for Rs.12.
 Therefore, total sales is 10x12 = 120

Royalty Fee
 Royalty Fee of Frooti = 27.77% x 120 = 33.32%

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FINDINGS

 Out of the 22 respondents, 9 of them preferred Frooti over other brands. The maximum
points that an individual can give is 18. Therefore the maximum score Pepsi can that
Pepsi can obtain is (9*18) 162.

 Therefore royalty rate of Frooti = (104/162)*100 =64.20%

 Similarly the royalty rate for Maaza and Slice are75.00% and 57.41%respectively.

There are 9 users of Frooti. The price of a 200ml tetra pack of Frooti (and others) costs Rs 12.
Therefore, the sales of Frooti would be Rs 108. Hence the Royalty fees that Frooti can charge is
64.20% of 108 i.e. Rs 69.33. Similarly the royalty fees that Maaza and Slice can charge are Rs.
90.00, and Rs 20.67 respectively.

Hence, we see that here also Maaza is the leader in charging a royalty fee.

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 RECOMMENDATIONS

RECOMMENDATION 1:

Frooti should concentrate on improving its distribution Network

Rational 1

According to the Shafer Model we see that Frooti is the highest in reputation and connection.
This means that consumers have very high esteem towards Frooti as compared to its
competitors also they connect more to Frooti than Maaza and Slice. This indicates given a choice
maximum consumers would buy Frooti.

How ever, the momentum of Frooti is the least. This strongly indicated that there are some
problems regarding the distribution network of Frooti

Rational 2

Also, as per Royalty method the purchase rate of Frooti is lesser than Maaza.

RECOMMENDATION 2:

Frooti should be more innovative and have broader brand values. Should not strict itself to
narrow brand values.

Rational 1

In the Shafer model its seen that Maaza has higher Vision than Frooti. This means consumers
think Maaza to be more innovative as a brand. This gives Maaza better leveragability than Frooti.

Rational 2

Also, as per Royalty Method Frooti is the least in innovation.

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 Annexure

SHAFER MODEL QUESTIONNAIRE

1. Rate the following brands in terms of the attribute TASTE.

(5 being the highest 1 being the lowest) (This is a measurement of Reputation)

a. Maaza
b. Frooti
c. Slice

2. Rate the following brands in terms of its brand image?

(5 being the highest and 1being the lowest) (This is a measurement of Reputation)

a. Maaza
b. Frooti
c. Slice

3. How many packs of mango drinks out of the following brands do you consume in a
week? (Pack size: 200ml tetra pack)
(5 being the highest 1 being the lowest) (This is a measurement of Momentum)

a. Maaza
b. Frooti
c. Slice

4. Rate the following brands according to their ability to diversify to other areas and
products.
(5 being the highest 1 being the lowest) (This is a measurement of Vision)

a. Maaza
b. Frooti
c. Slice

5. Which of the following brand would you recommend to others?

(This is a measurement of Vision)
a. Maaza
b. Frooti
c. Slice
d. None of the above

6. Match the taglines: Write the corresponding serial number against the correct tag line:
1-Frooti 2-Slice 3-Mazza
(This is a measurement of knowledge i.e connection with the brand)

a. Pure Mango Pleasur

b. Amm ki Pyas Bujao
c. Fresh ‘n’ Juicy

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ROYALTY METHOD QUESTIONNAIRE

1. Which of the following brand of mango drinks would you buy?

a. Maaza
b. Frooti
c. Slice
d. Others

Following questions are related to the brand that you have selected to buy in the previous
question.

2. Would you continue to buy the brand even if it is not easily available?
a. Yes
b. No

3. Would an increase in price become a barrier in purchase?

a. Yes
b. No

4. Would a reduction in promotions of your chosen brand affect your purchase

consideration?
a. Yes
b. No
5. Rate your brand according to the given parameters.
(5 being the highest 1 being the lowest)

a. Taste
b. Innovation
c. Leadership

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