InvestorQ : Can moat be tangible or intangible items?
Anjana Aiyar made post

Can moat be tangible or intangible items?

Answer
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Arya Nanda answered.
2 years ago


Moats can be both but in most cases, they are intangible. In fact, even when the moat is tangible, the actual advantage comes from some factor that is actually intangible. To understand the concept of a moat you need to look at the advantages that are not tangible. Plant and machinery is never an entry barrier. But how do you replicate the goodwill and brands that companies like Hindustan Unilever or Nestle or Britannia have built over the years? The reason the Indian Pharma industry is currently facing a crisis is that it never created intellectual property that could have given it an intangible advantage. That is why valuations are trending to commodity levels. When you buy a Britannia or Nestle product, you do not pay because of the look of Maggi or Britannia biscuits. You pay for the trust and the assurance of quality and taste that comes with the name. That is an economic advantage that is very hard to replicate.