Do Brand Moats Really Matter? A Rule #1 Look at Pricing Power and Branding

I want to talk today about something that trips up even seasoned investors: brand moats. As Rule #1 investors, we're always looking for businesses with durable competitive advantages—and a brand moat often gets the spotlight. But here's the truth:

Just because a brand is well-known doesn’t mean it has pricing power.

In this post, I’ll break down what a real brand moat looks like, why so many companies don’t actually have one, and how inflation has become a brutal test for weak brands. Let’s look at a few examples—including a cautionary tale from Ben & Jerry's and insights from Buffett's portfolio—so you can make smarter investment decisions.

What Is a Brand Moat, Really?

A brand moat isn’t just name recognition. It’s not clever marketing or cool packaging. A real brand moat gives a company the ability to raise prices without losing customers. It creates loyalty that competitors can't easily break.

Take Coca-Cola, for example. People have been loyal to Coke for more than 100 years. The company has successfully raised prices through wars, recessions, and inflationary cycles—and consumers keep coming back. That’s pricing power.

But what happens when a popular brand doesn’t have that kind of control?

Case Study: Ben & Jerry’s Meltdown

Recently, Unilever announced it was dropping Ben & Jerry's along with several other ice cream brands. Why? Inflation hit ingredients like eggs and cream hard, and when Unilever tried to raise prices, customers walked away.

Despite its fame and feel-good mission, Ben & Jerry's didn’t have the pricing power to hold onto consumers.

Everybody's heard of Ben & Jerry's. But that doesn't mean they can raise prices and keep their customers.

This is the test of a brand moat. If customers leave you for a cheaper option the minute prices go up, you don’t have a moat. You have a marketing budget.

Coca-Cola vs. Ben & Jerry’s: Branding That Binds

Let’s contrast that with Coca-Cola. Coke has built an emotional connection with consumers. People can tell the difference in taste, feel nostalgic about it, and often won't settle for Pepsi or generic brands.

• Coke raises prices, consumers stay.

• Ben & Jerry’s raises prices, consumers leave.

That’s the difference between a true brand moat and brand awareness.

What Buffett's Portfolio Reveals About Brand Moats

Warren Buffett loves businesses with moats, especially brand moats. But not all brand investments in Berkshire Hathaway’s portfolio have worked out equally well.

Heinz

Heinz was thought to have a strong brand, but it couldn’t compete with cheaper alternatives from Costco and Walmart. Turns out, name alone wasn’t enough.

Fruit of the Loom

This brand sells because of price and quality—not because of emotional connection. It may appear like a brand moat, but it’s really a price moat.

NetJets

Now this is closer to a true brand moat. People trust NetJets for safety, availability, and quality. When you’re flying at 30,000 feet, you don’t want to go with the lowest bidder. The brand stands for trust and reliability, and people will pay for that.

You don't want to price shop for eye surgery—or private jets.

Brand, Quality, or Price: Know the Difference

Many investors confuse brand moats with price or quality moats. Here’s a quick breakdown:

Just because you recognize a brand doesn’t mean it can weather inflation or competitive pricing. Be skeptical.

How to Spot a Real Brand Moat

Here are a few Rule #1 filters to apply before declaring a brand moat:

• Can the company raise prices during inflation without losing customers?

• Do consumers choose this brand for more than just price?

• Is the brand associated with trust, nostalgia, or emotional loyalty?

• Would customers switch if a cheaper product appeared?

If the answer to that last question is yes, then you don’t have a brand moat. You may have a solid company, but the margin of safety is thinner than you think.

Final Takeaway: Moats Must Be Proven

Brand moats can be powerful, but only when they translate into pricing power and long-term customer loyalty. As investors, we need to dig deeper than the logo. Ask yourself: Does this brand have true staying power when times get tough?

That’s what separates a good investment from a great one.