As the COVID-19 pandemic wreaks havoc on the global and national economy, Germany’s top 100 most valuable brands could lose up to 11% of brand value cumulatively, a potential drop of €49 billion compared to the original valuation date of 1st January 2020, according to the latest Brand Finance Germany 100 2020 report.
Looking beyond Germany, the value of the 500 most valuable brands in the world, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated €1 trillion 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. The likely impact on brand value was estimated for each sector. The industries have been classified into three categories – limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the level of brand value loss observed for each sector in the first quarter of 2020.
Mercedes speeds ahead
Mercedes-Benz has retained the title of Germany’s most valuable brand and the most valuable auto brand in the world, with a brand value of €58.7 billion. The auto industry is by far the most valuable sector across the nation - the seven brands in the ranking boasting a cumulative brand value of €185.5 billion.
Mercedes has been investing strongly in R&D in the anticipation of new trends – particularly electric and autonomous vehicles – as well as implementing innovative new business models, including the recently expanded Mercedes Collection subscription service.
Four further auto brands feature in the top 10: Volkswagen in 2nd (brand value up 13% to €40.5 billion); BMW in 3rd (up 5% to €36.6 billion); Porsche in 5th (up 21% to €30.6 billion); and Audi in 9th (down 9% to €15.3 billion). VW's sheer size, global reach and wide range of diverse products differentiate the brand from its peers across the industry. VW commands higher margins than many of its competitors which contributes significantly to its favourable credit profile.
Richard Haigh, Managing Director, Brand Finance commented:
“The COVID-19 pandemic has undoubtedly hit German auto brands hard as they negotiate the shrinking global economy and manufacturing is disrupted and halted. We are already witnessing German car stocks making a slow recovery, however, as Germany begins to ease restrictions and auto brands begin a gradual return to production.”
RWE jumps 32 spots in ranking
RWE has recorded the largest brand value increase in this year’s ranking, following an impressive 96% growth to €886 million. RWE’s portfolio has seen significant changes over the last few years, with the finalisation of its asset swap with E.ON at the end of 2019. As a result of the transaction, RWE is now one of the leading companies in renewable energy in Europe and USA, ranking 3rd in renewables in Europe and 2nd in offshore wind worldwide. The approval and completion of this transaction has boosted investor confidence and contributed to the growth of the brand’s financial expectations.
The new portfolio - referred to as the ‘New RWE’ - is set to have a major focus on energy transition with security of supply. Along with this organisational transformation, the brand has also undertaken a corporate redesign and refresh, supporting the company’s strategic realignment. The company’s updated brand identity reflects the organisational shift towards innovation, change, transparency and sustainability.
The utilities sector is one of the few that should escape the far-reaching damage of the COVID-19 pandemic as the global population continues to rely on their services, according to Brand Finance’s analysis. As with fellow utilities brands, however, RWE has been negotiating concerns around its operations and supply.
BASF is nation’s strongest
In addition to measuring overall brand value, Brand Finance determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. According to these criteria, BASF (brand value €7.1 billion) is Germany’s strongest brand with a Brand Strength Index (BSI) score of 85.9 out of 100 and a corresponding AAA brand strength rating.
The chemical giant’s decision to realign the organisation has not only created the conditions for greater customer proximity, but has also boosted customer competitiveness, thus resulting in more profitable growth. BASF has retained its reputation of being a stable brand in the market, a position only strengthened as its main competitors, Dow and DuPont, have been rearranging their capabilities following the demerger.
BASF has been expanding its business endeavours in Asia-Pacific, focusing on developing agricultural solutions in the region and encouraging climate-friendly farming methods, in line with BASF’s sustainable brand ethos. Construction of the brand’s new plant complex in Zhanjiang, China, however, was halted in February 2020 due to the COVID-19 pandemic. Brand Finance has calculated that the chemicals sector is likely to be one of the worst hit from the virus and chemicals brands could lose up to 20% of their brand values.
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 100 most valuable German brands are included in the Brand Finance Germany 100 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 Germany 100 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.