Coca-Cola Co. (KO) and PepsiCo Inc. (PEP) are the most respected brands in the United States. While Coke has enjoyed this status for six years straight, Pepsi moved up from being the sixth most respected brand in 2012.
24/7 Wall St. reviewed consultancy firm CoreBrand’s recent report on brand reputation. CoreBrand measured the familiarity and favorability of 1,000 companies. Familiarity is based on how widely known the companies are, and favorability is based on how well people think of these companies. The report identified the top 100 brands for familiarity with the lowest favorability scores. Companies such as Delta, Philip Morris and H&R Block are widely known yet not favorably viewed. These are the least respected companies in America.
To earn a high level of respect, explained CoreBrand CEO Jim Gregory, “consistency over time is probably the most important thing.” Not surprisingly, many of the most highly regarded companies, including PepsiCo, Coca-Cola, Hershey and Harley Davidson, have made products that are easily identified with the parent company. They also have done well financially, have had few problems with management, and rarely have had problems with product or service quality.
The companies with the worst levels of respect, on the other hand, have failed to maintain a strong brand image relative to their wide recognition. This could be because of a perception that the company is badly managed or that its relationship with customers has been damaged because of management's mistakes. Best Buy went through a cycle of declining sales and executive turnover, the latter of which played out very visibly in the press. As Gregory explained, "A company can address one big issue, and it usually doesn't cause a lot of damage to a company.” But, he added, “when you have one thing after another [go wrong] over a long period of time, it does cause damage to the brand."
Turmoil within the organization is one of the biggest factors working against many of the least respected brands. J.C. Penney, for example, which ranked as the fourth-least respected company, has recently fired its relatively new CEO, Ron Johnson, who made several strategic changes during his tenure, and placed former CEO Mike Ullman back in charge. Ullman changed the business model -- again. “For J.C. Penney, just about the time that their rebranding effort was beginning to make some headway, ‘boom’ they go through a changed management and then have another change,” Gregory noted. He added that the people surveyed for this report typically did not appreciate companies that “go through multiple strategic changes in a short amount of time.”
While nearly all the least respected brands have dealt with short-term PR and management issues, another reason many are not respected can simply be because of the industries they are in. For example, Delta's brand respect is not terrible, but relative to its size it is poor. The company’s bad ranking is in part the result of its restructuring after its messy merger with NorthWest in 2008. It is also, Gregory noted, “somewhat endemic of the industry. The airline industry is not a very strong industry in terms of favorability.” Similarly, Philip Morris is in the generally unfavorably viewed tobacco industry.
CoreBrand's new report, “Brand Respect: The Most and Least Respected Corporate Brands,” is based on a review of the country’s largest companies pulled from a poll of U.S. executives at 1,000 companies. In order to identify the least respected brands, the report identified the top 100 brands for familiarity with the lowest favorability scores. Both scores range from one to 100.
These are the least respected companies in America.
Foot Locker Inc. (FL) has been restructuring since hitting bottom in 2008, when the stock price was as low as $5.49. The stock is now trading well above $30 per share, and the company has performed well financially. It is possible that the company was just lost in athletic footwear companies crowd and is finally finding its way out. Foot Locker’s familiarity scores are rising, according to CoreBrand. A recent ad campaign featuring NBA players James Harden and Stephen Curry has helped boost visibility online. The company has also been improving its reputation, according to CoreBrand. According to CoreBrand CEO Jim Gregory, the reason the company still makes the list is that as fast as the company's favorability has grown, so has its familiarity. Gregory believes it unlikely the company would make it on the list of least respected brands list next year.
Rite Aid Corp. (RAD) is the country’s third-largest drugstore chain by sales. In recent years, in addition to its larger traditional competitors, Rite Aid found formidable adversaries in even bigger chains Walmart and Target. The company was caught in an accounting fraud scandal in the late 1990s that lasted through the early 2000s and ended with former CEO Martin Grass receiving an eight-year prison sentence. The company is also in an industry that tends to have lower customer satisfaction, according to the American Customer Satisfaction Index.
8. Capital One > Favorability score: 61 > Familiarity score: 84 > Industry: Credit card
In July of last year, Capital One Financial Corp. (COF) achieved the dubious distinction of being the first company to feel the wrath of the then-new Consumer Financial Protection Bureau (CFPB). It settled charges of misleading customers into paying for unnecessary services by paying a total of $210 million in reimbursements and fines. While the company has produced some very entertaining advertising to help promote its image, it contends with being part of a sector that suffers from essentially undifferentiated offerings, Gregory noted. The bank’s $9 billion acquisition of a portion ING’s U.S. business raised concerns about the creation of another “too big to fail” institution before it was approved in early 2012.
J.C. Penney Co. Inc. (JCP) has done about as much as it can do to alienate its customers. When it hired highly regarded Apple (AAPL) executive Ron Johnson from Apple as its new CEO, the company had decided to overhaul its business model, notably abolishing its coupons program. Johnson's strategy resulted in massive losses, leading to his ouster just under two years later and the return of company’s former CEO, Mike Ullman. The best measure of the company’s downfall is the shocking drop in its sales. Same-store sales were down 25% in 2012, and this trend of declining sales hasn't let up since Ullman's return.
Like other consumer electronics stores, Best Buy Co. Inc. (BBY) continues to be battered by one retailer in particular: Amazon.com Inc. (AMZN). Widely referred to as Amazon’s Showroom, Best Buy is being undercut by the e-retailer’s lower prices while being burdened by the huge costs associated with running big stores. Making matters worse, former CEO Brian Dunn was embroiled in a sexual harassment scandal in 2012. Both Dunn and Chairman Richard Schulze were forced to resign after it became clear that both hid the affair from the board. A failed takeover bid by Schulze consumed management’s attention for several months at the end of last year.
In general, discount stores’ favorability ratings follow the overall economy. Hard times hit low-income customers hardest, and that is where Big Lots Inc.’s (BIG) customers come from. In fact, Big Lots' favorability score, which was lowest during the bottom of the recession, has recovered somewhat, according to CoreBrand. The protracted economic hardship may have directly affected Big Lots’ appeal, especially if the company’s prices were not low enough for cash-strapped consumers. However, an insider trading scandal reported late last year did not appear to damage Big Lots’ stock price very much -- or for very long. In fact, despite the charges, shares of Big Lots have risen 14% this year.
Denny’s Corp. (DENN) is a well-known name in the family restaurant business, but the company has a long history of alienating its customers. In the early 1990s the company settled charges of racial bias at some of its California stores. Since then, the chain has never really been able completely to overcome the fallout. Fortune named the company one of the best employers for minorities in 2004, but even that did not wipe away the earlier blots against the restaurant chain. One of Denny’s largest franchisees pressed CEO John Miller to add 5% to menu items to cover Obamacare expenses. The same franchisee suggested the customers could cover the higher price by cutting tips. Some customers boycotted the food chain and this hurt sales.
H&R Block Inc.’s (HRB) biggest problem is likely the result of the business it’s in: tax return preparation. Worse, the company does not do much to help its reputation. H&R Block has been involved in several small scandals related to privacy and deceptive practices. Also, earlier this year, it was one of several firms that missed a change in IRS filing rules that resulted in delays in tax refunds to 600,000 customers. While H&R Block is never likely to win a popularity contest, it could do a much better job of creating a more positive image for itself.
The tobacco industry has suffered from an image problem for decades. The negative perception reached its peak in the 1990s, when courts agreed that the companies had hid the harmful of effects of tobacco from smokers. Philip Morris tried to sanitize its image with acquisitions of unrelated businesses such as Kraft and Miller Brewing. The companies were later spun-off or sold. The tobacco company, then called Altria (MO), split its U.S. and international divisions. The Philip Morris brand was used for the new international company, and the U.S. operations stayed with Altria. Most Americans are not familiar with Altria. However, Philip Morris International Inc. (PM) continues to have a poor reputation because it is still associated with the tobacco industry. Tobacco companies may gain respect from investors by paying handsome dividends. Among the public at large, however, they are viewed far less favorably. This has likely Hurt Philip Morris’s overall respectability, according to Gregory.
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That an airlines is less respected than a tobacco company is almost unbelievable. But Delta Air Lines Inc. (DAL), like most other air carriers, is unpopular with many Americans. Airlines receive extremely poor customer satisfaction grades due to increased delays and new charges for baggage and meals. Delta’s 2008 acquisition of Northwest Airlines has made things particularly bad for passengers. The creation of the new company has caused a nearly endless stream of ticketing and scheduling problems that have taken years to iron out. While airfares have declined by nearly 15% in inflation-adjusted dollars since 1995, they have risen from $300 to roughly $375 since the bottom of the recession.
