Spring has sprung a few surprises for British brands in Brand Finance’s UK150 2019 ranking of the UK’s 150 most valuable brands. Whilst politicians continue the Brexit debate in the corridors of power, some brands have surged forward in brand value, suggesting that there is more mettle to the British economy even in the event of a no-deal Brexit. UK GDP growth is forecast by some to remain subdued in 2019 as political uncertainty continues into the Summer months alongside global trade tensions and higher interest rates weighing down on the economy.
Defying this forecast, strong growth continues apace for many among this year’s top 150 British brands. This year’s total brand value for all of the UK’s most valuable 150 brands has risen 10% to £369.11 billion, according to the latest report by Brand Finance, the world’s leading independent brand valuation consultancy which has conducted this study for the 13th year in a row.
Sector success proves UK brand resilience
Sectors where brand growth has risen include professional services, retail, insurance, tourism and leisure, suggesting resilience from UK brands in the face of an exit from the European Union. Star performers in these sectors include EY (brand value up 40% to £18 billion) with its elite AAA+ brand rating, Tesco (up 17% to £8.77 billion), Aviva (up 39% to £5.18 billion), Prudential (up 47% to £4.96 billion), P & O Cruises (brand value up 31% to £0.9 billion) and British Airways (brand value up 23% to £3.23 billion). A positive for these brands is having a global presence and the benefit of established international status so the notion that Brexit will have a major impact is negligible. Whilst EY runs offices in 150 countries, Tesco, operates from 13, and Aviva is present in 16. Prudential to maintain growth has just announced further expansion in West Africa by acquiring a majority stake in Group Beneficial, a life insurer operating in Cameroon, Cote d’Ivoire and Togo.
David Haigh, CEO of Brand Finance, commented:
“It is the best of British brands whose reach already extends beyond the UK which will flourish due to their international presence. This global reach outside of Europe is what will ultimately help sustain momentum and further brand value growth.
Despite the weaker pound and the ongoing Brexit saga, this year’s UK 150 brands show a surprising level of resilience. Lower petrol prices, cheaper flights and the continued desire to have a holiday are benefiting airline, hospitality and retail brands.”
Will Brexit blues affect brand value?
As Brexit uncertainty continues beyond the expected deal date, the fear of a no-deal has seen other brand values falter as consumers are seen to hold back on non-essential spending. Brands significantly affected include household brand JLP (brand value down by 25% to £1.05 billion). Increased online shopping, a weaker pound as a consequence of the referendum, and heavy retail discounting are also cited by Chairman Sir Charlie Mayfield for the decline in JLP’s performance.
Retail resilience as supermarket brands thrive
Supermarket brands in the Brand Finance UK150, which meet customers’ essential needs via their online services, are thriving. Sainsbury’s (brand value up 11% to £4.53 billion), Morrisons (3.9% rise in brand value to £2.56 billion), Co-op brand value soars 45% to £2.05 billion. Waitrose (brand value up 16% to £1.53 billion). Higher wages, low unemployment (the lowest level since the mid-70s) inflation under 2%, and pre-Brexit stockpiling of dry goods, may be instrumental in this growth. However, in the event of a no-deal Brexit, this buoyancy could well be affected. As well as BrewDog, Prudential, Tesco, and others pursing growth through expansion and acquisition, the Co-op’s 4 years run of introducing large numbers of new stores, some through acquisition, has also boosted brand value.
This year a planned £12 billion merger between Sainsbury’s and Asda was blocked after Britain’s competition watchdog, the Competition and Markets Authority, raised a catalogue of concerns, including higher prices and reduced quality and choice for customers.
Online offering is way forward
M&S has seen its brand value drop 13% to £2.5 billion in this year’s Brand Finance UK150 2019, with the brand continuing its reorganization plan in which it aims to relocate a third of its sales online and to have fewer stores in better locations. Marks and Spencer has named the next wave of stores earmarked for closure in its reorganisation plan, with proposed closure forming part of the clothing, homeware and food retailer's five-year plan to shut more than 100 stores by 2022. So far, 30 stores have closed and another eight have already been named. M&S’s recent joint venture announcement with Ocado to provide a home delivery service could boost the brand’s performance.
Other strong retail performers with significant online offerings include: Sports Direct (brand value up 40% to £0.9 billion), B&M (brand value up 32% to £1 billion) and ASOS whose brand value has shot up increase by 35% to £1.17 billion. Despite ASOS’s recent failure to meet customer online demand from a new warehouse in the US, it continues to woo the young British consumer and results in the UK market are healthy.
British auto brands power through
Surprisingly, after last year’s surge, some brand values for auto brands have fallen: Mini’s is down 2% to £2.48 billion, Aston Martin’s falls 5% to £2.53 and Bentley’s drops 5% to £1.76 billion. Land Rover’s brand value slips 21% to £7.03 billion but the brand keeps its place in Brand Finance’s UK top ten strongest brands. Brexit concerns, particularly in the case of Mini’s parent company BMW, and growing interest in the production and sale of environmentally friendly cars, may be partly to blame. However, for Vauxhall (brand value up 4% to £0.5 billion) and luxury brand Rolls Royce (brand value up 56% to £1.23 billion), the story is different. 2018 was its most successful year ever following the sale of 4107 cars to 50 countries. Profit is said to have been boosted by its revamped Phantom flagship, and its Dawn and Wraith coupé models.
BrewDog hops up UK150
It is not doom and gloom all across the board, however, as the UK’s fastest growing brand is much loved craft beer brand BrewDog. With its brand value up 89% since last year, BrewDog is valued at £1.2 billion in this year’s Brand Finance UK150 2019 and shows no signs of slowing down. Known for its flavoursome ales and creative packaging, the brand now owns 80 global locations and is expanding rapidly, both here in the UK and abroad, as it seeks new sites in Exeter, and notably announced plans recently for its craft beer hotel concept.
Heathrow flies into the Brand Finance UK150
Heathrow Airport, with its AA+ brand strength rating, is one of several new arrivals to this year’s ranking. As one of the oldest hub airports in the world and the third largest by passenger numbers, its position at 111th in the top 150 UK brands is well deserved. In 2018 it met the needs of a record 80 million passengers. As well as wanting to be the best service airport in the world the brand has high levels of global awareness and potentially provides the springboard to push the brand beyond the physical infrastructure and extend into adjacent categories.
Note to Editors
Every year, leading brand valuation and strategy consultancy Brand Finance values the UK’s biggest brands. The 150 most valuable brand in the UK are included in the Brand Finance UK 150 2019 ranking.
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, more information about the methodology, as well as definitions of key terms are available in the Brand Finance UK 150 2019 ranking.
Brand Finance helped craft the internationally recognized 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 ICAEW and also the first brand valuation consultancy to join the International Valuation Standards Committee (IVSC).
The methodology used to produce the annual Brand Finance rankings of the most valuable and strongest brands across all sectors and countries has been certified with the Marketing Accountability Standards Board’s (MASB) Marketing Metric Audit Protocol (MMAP).
Data compiled for the Brand Finance league tables 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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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 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 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.