Up to €1 trillion estimated brand value loss from COVID-19 globally
The brand value of the world’s 500 biggest companies, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated €936 billion as a result of the Coronavirus outbreak.
Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of enterprise value loss observed for the sector in the period between January and March 2020.
The analysis shows that the top 10 most valuable Belgian brands from the Brand Finance Belgium 10 2020 ranking could lose up to 15% of brand value cumulatively, a drop of €3 billion compared to the original valuation date of 1st January 2020.
KBC claims top spot for 5th consecutive year
KBC has defended its title of Belgium’s most valuable brand for the fifth consecutive year, but only recorded a slight increase in brand value, up 2% to €3.9 billion. 2019 marked a turbulent year for the bank as it navigated alleged involvement in a money laundering scandal. The bank has however adapted to the uncertainty in the sector by conducting efficiency measures to improve customer service by streamlining its workforce over the next 3 years.
The only other bank in the ranking, Belfius, has recorded a similarly modest uplift in brand value, up 1% to €1.4 billion, staying in 6th place.
Belgian banks, like many other banks across the world, have been suffering as a result of the fragile global economic and political landscape. With the banking sector in the heavy impacted bracket in our COVID-19 analysis, equating to a potential 20% brand value loss, the road ahead looks similarly rocky.
Richard Haigh, Managing Director, Brand Finance commented:
“The banking sector is certainly familiar with being scrutinised closely. KBC no doubt has a significant challenge ahead of it to repair its reputation after recent accusations. This, paired with the unprecedented level of uncertainty surrounding the global economy as COVID-19 enthrals the world, puts both banks globally and at home in Belgium in a challenging position.”
BDO inches closer to top spot
In second place, and closing the gap behind longstanding leader KBC, BDO is the fastest growing brand in the ranking, recording an impressive 30% brand value increase over the course of 2019 to €3.7 billion. The global accounting and consultancy network firm celebrated double digit growth last year, a testament to the brand’s commitment to both organic expansion and its solid M&A activity, with the brand closing 20 mergers and acquisitions within the first three quarters of 2019.
Focusing on growth, the brand now operates in 167 countries and territories and has increased its headcount by 10% over the last year. Furthermore, with over US$300 million invested in technology and innovation worldwide, and through the continued partnership with Microsoft, BDO Global is ensuring its position as a truly global and innovative brand.
Brand Finance has calculated that commercial services brands are in the moderately impacted bracket and could therefore face up to a potential 10% loss in brand value as a result of the COVID-19 pandemic.
Stella falls flat
In contrast, global beer brand Stella Artois is the fastest falling brand in the ranking, dropping 11% to €1.4 billion. Along with its parent company – brewing giant AB InBev (Belgium’s third most valuable brand behind KBC and BDO, at €2.2 billion) – the brand has been negotiating a sharp decline in demand in China, a key market, as the nation faces a slowing economy and tighter alcohol regulations that prohibit sales after 2 AM. Stella Artois, which targets the premium category in China, has suffered further as consumers seek cheaper alternatives.
AB InBev undertook one of 2019’s largest IPOs in an attempt to reduce its mountainous debt pile, following its record acquisition of SABMiller in 2016.
Brand Finance has calculated that beer brands could potentially lose up to 20% of their brand value following the coronavirus pandemic, therefore falling into the heavily impacted bracket. AB InBev have already warned of a significant global sales hit, which started to plummet as Chinese New Year celebrations were cancelled. In March 2020, AB InBev withdrew its 2020 profit forecast due to the unprecedented levels of global uncertainty.
Telenet rings in as nation’s strongest brand
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction, and corporate reputation. Alongside revenue forecasts, brand strength is a crucial driver of brand value. According to these criteria, Telenet (down 2% to €972 million) is Belgium’s strongest brand with a Brand Strength Index (BSI) score of 80.4 out of 100 and a corresponding AAA- brand strength rating.
The brand has been successfully implementing its three-year plan which seeks to win a greater share of the Belgian market through offering superior connectivity and through leveraging its best in class customer service. With 61% of homes across its Flemish and Brussels footprint using Telenet’s network, the brand is certainly moving in the right direction.
Telenet has also celebrated higher CSR scores and has reconfirmed its position as a leader in sustainability, winning multiple awards for its economic, environmental and social performances.
Richard Haigh, Managing Director, Brand Finance commented:
“The telecoms industry is one of the few sectors of the economy that should see limited impact as a result of COVID-19. In fact, telecoms brands have the opportunity to embrace the working from home revolution, which has led to extraordinary demand for remote working resources and connectivity.”
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 10 most valuable Belgian brands are included in the Brand Finance Belgium 10 2020 report.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, charts, and more information about the methodology, as well as definitions of key terms are available in the Brand Finance Belgium 10 2020 report.
Data compiled for the Brand Finance rankings and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).
Brand Finance’s brand value rankings have been certified by the Marketing Accountability Standards Board (MASB) through the Marketing Metric Audit Protocol (MMAP), the formal process for validating the relationship between marketing measurement and financial performance.
Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of enterprise value loss observed for the sector in the period between January and March 2020
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a 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 Brand 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.