· Michelin brand value grows 30% to US$7.9 billion in latest Brand Finance Tyres 10 ranking
· Japanese brands slip as Bridgestone, Yokohama and Sumitomo all fall in value
· Chinese tyre brands gain traction as they begin to challenge for top ten ranking
Michelin has become the world’s most valuable tyre brand following 30% brand value growth to US$7.9 billion over the last year according to the latest Brand Finance Auto & Tyres 2018 report. It overtook Bridgestone (down 6% to US$7.0 billion), which slipped from first to second place in the annual Brand Finance Tyres 10 ranking.
As well as being the most valuable brand, Michelin is also the strongest. Its Brand Strength Index (BSI) score was up a sector-leading 6% to 86.9 out of 100. The corresponding brand rating improved a notch to AAA, making Michelin the only tyre brand with a clear triple-A rating.
Sustainability and technology initiatives have strengthened the Michelin brand, including a concept for a 3D-printed tyre that can be adapted to road conditions and never needs replacing which was unveiled last summer to widespread acclaim. Michelin tyres also performed well in motorsport, winning at the Le Mans 24hr race and being used in Formula E, which is itself becoming a desirable place to showcase technology for leading car manufacturers.
Alex Haigh, Director of Brand Finance, commented:
“A strong brand is about more than marketing. Michelin has started direct sales of tyres to customers through retail outlets and the internet, a move that helps build a direct relationship with consumers, and allows the company to collect valuable data. It is also widening its sub-brand portfolio, allowing it to sell price-competitive tyres and premium ones without cannibalising market share.”
Japanese Brands Slip
The world’s biggest tyre company by market capitalisation, Bridgestone, dropped to second place. Bridgestone was not the only Japanese brand to lose value, with Yokohama down 18% to US$0.8 billion and Sumitomo Rubber Industries down 62% to US$0.6 billion. A weak domestic market affected all three producers, while value gains from stronger sales growth in North America, Europe, and Asia were partially offset by a weaker yen.
Chinese Tyres Gain Traction
At the same time, Chinese companies have appeared as successful challengers to the established players in the tyre industry. Although mainland Chinese brands are still outside the top 10, the largest ones, such as Linglong and Sailun Jinyu, are making their mark, and given their current brand value growth, should make a successful entrance to the top 10 as early as next year.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands.
The Brand Finance Auto & Tyres 2018 report includes three key league tables:
Brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand.
More information about the methodology as well as definitions of key terms are available in the Brand Finance Auto & Tyres 2018 report.
Data compiled for the ranking tables and report is provided for the benefit of the media and is not to be used for any commercial or technical purpose without written permission from Brand Finance.
T: +44 (0)2073899400
M: +44 (0)7508304782
T: +44 (0)2073899400
M: +44 (0)7966963669
About Brand Finance
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.