The t-shirt test: Competing on brand vs price

Mark Zuckerberg, the CEO of Meta, believes that wearing the same t-shirt everyday reduces the number of decisions he has to make, allowing him to become more productive. However, he does not wear just any t-shirt. He reportedly only wears Brunello Cucinelli, a luxury Italian fashion brand whose t-shirts have a price tag of more than $300. 

For sure, Cucinelli’s t-shirts are made of the best materials and have a better fit than the Hanesbrands t-shirt you can buy for $10 at your local Wal-Mart. But Cucinelli’s premium comes mostly from its brand, which is associated with sophistication and exclusivity. If it is good enough for Mark, it is good enough for you.

Cucinelli generates a profit of $75 for every T-shirt it sells, Hanebrands, a US manufacturer of basic clothing, makes just $2 per t-shirt. Hanesbrand faces tough competition, and it needs to compete on price, Cucinelli sells its brand. This is hard to replicate. Cucinelli is also growing faster. It’s no wonder that Cucinelli’s stock outperformed Hanesbrands by more than 9x’s over the last decade.

Vontobel Quality Growth only invests in quality companies that have strong brands, pricing power and higher margins, like Cuccinelli. This is why a portfolio of quality companies can compound wealth over the long-run, with less risk.  

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