Swoosh, there it is
Unquestionably, NIKE, Inc. (NYSE:NKE)’s brand name is its greatest asset. The brand ranks at number 26 on Forbes list of the most powerful brands with an estimated value of nearly $16 billion. For some perspective, Pepsi and Adidas rank 27 and 53 respectively.
However, brand name is only part of the equation for Nike. As the saying goes, sometimes it takes money to make money, and Nike’s strategy in China is a great example of financial strength at work. CEO Don Blair hopes to double NIKE, Inc. (NYSE:NKE)’s revenue in China to $4 billion by 2015. That’s a daunting task, considering the footwear king will be attempting to sell running shoes and snowboarding accessories to a nation not particularly interested in either sport.
That means that Nike will have to do what it does best: Market like a champion. The company has signed the first Chinese Olympic gold medalist in track and field (Lui Xiang) to promote running. To generate interest in snowboarding, NIKE, Inc. (NYSE:NKE) built a course outside of Beijing, flew in snowboarding legends, and sponsored the “Nike Snow Jam Series” in 2012.
On the other hand, promoting basketball should prove to be an easier channel to pursue, especially considering Nike can cart three-time MVP LeBron James from city to city. In fact, since coming into the league in 2003, James has made nine trips to the world’s most populated country.
Looking ahead, King James may have some company on his future Asian exploits. NIKE, Inc. (NYSE:NKE) made a short-term investment in a relatively unknown Taiwanese-American from Harvard in 2010 by the name of Jeremy Lin, which is looking like it’ll pay long-term dividends. With “Lin-sanity” quickly becoming the most popular Asian basketball player in the world, Nike will be sure to cash in big.
Ultimately, the story of NIKE, Inc. (NYSE:NKE) has been and will continue to be its ability to leverage its unmistakable brand name and financial strength to create global growth opportunities.
Lululemon
According to Bloomberg Businessweek, in the U.S. alone, the women’s athletic apparel is a $30 billion dollar business. With Lululemon Athletica inc. (NASDAQ:LULU) pulling in $1.4 billion in revenue in 2013, investors aren’t the only ones taking notice. GAP, Nordstrom, and Nike have all gotten in on the action by developing lines of yoga-inspired apparel.
However, Lululemon Athletica inc. (NASDAQ:LULU) has been able to continue to grow its market share due, in part, to its competitive advantage. Which is, well, snob appeal.
What exactly is “snob appeal?” It’s the reason people buy BMWs or shop at Whole Foods Market, Inc. (NASDAQ:WFM) — there’s a sense of superiority surrounding those brands. This can be superior product quality, it could be authenticity, or it could be totally made up! But when a product becomes something more than just the product, that is, when it stands for ideas like luxury or a certain lifestyle, pants aren’t just pants anymore – and what’s more advantageous than that?
However, when a company depends on snob appeal, any issue with the products’ credibility becomes magnified. This will show to be especially true if yoga pants are so sheer that customers can’t bend over without everyone knowing the color of their underwear.
As a retailer of high end, high-priced yoga apparel, consumers expect a certain standard of quality from Lululemon Athletica inc. (NASDAQ:LULU). With that in mind, investors may need to be wary of the fact that Lululemon Athletica inc. (NASDAQ:LULU) is in the process of recovering from a recall. If the Lulu faithful decided to branch out to other retailers in the interim, that could be a problem. However, as it stands right now it appears that the recall has had little effect on the company’s predicted growth potential — at least according to Wall Street analysts. And that’s a promising sign for the company’s future.
Sodastream
When you sneeze, you unconsciously ask for a Kleenex, even though the tissues in your house may not be the iconic Kimberly Clark Corp (NYSE:KMB) brand at all. In a similar way, I believe Sodastream International Ltd (NASDAQ:SODA) will become synonymous with soda making. Other companies will try a hand at designing a soda making product, but it will always be the imitator, and being the product comes with huge competitive edge.
Okay, so it’s not a perfect product. When compared to Coca-Cola, a Sodastream International Ltd (NASDAQ:SODA) isn’t particularly cost effective, and, on top of that, it’s time consuming. Both of those issues, though, are obstacles that I believe the company has the tools to overcome. That’s principally because Sodastream is more environmentally friendly — which customers appreciate — and the product has a wow factor that is difficult to compete with.
From the reviews I’ve read, the soda maker itself works just as advertised. However, there have been some complaints about the quality of the refill flavors. This would be a serious issue if not for Sodastream International Ltd (NASDAQ:SODA)’s new partnerships with Kraft, Campbell, and Ocean Spray. And if that wasn’t good enough, Sodastream has also partnered with Samsung to create the first refrigerator designed to dispense sparkling water.
It’s possible we’re only seeing the tip of the iceberg for Sodastream International Ltd (NASDAQ:SODA)’s potential. As far as I’m concerned, Sodastream has put itself in a fantastic position to continue its prolific growth for years to come.
In Conclusion
After this second stage of analysis, we’re beginning to unveil the true colors of our companies. NIKE, Inc. (NYSE:NKE) and Sodastream International Ltd (NASDAQ:SODA) continue to impress, with Lululemon Athletica inc. (NASDAQ:LULU) starting to lag behind just slightly. But don’t write anyone off just yet. Stay tuned as we revisit our three companies by looking at strength of management.
The article Big Moats for Your First Stocks originally appeared on Fool.com and is written by Dave Koppenheffer.
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