Top South Korean brands could lose over ₩27 trillion from COVID-19
As the COVID-19 pandemic wreaks havoc on the global and national economy, South Korea’s top 50 most valuable brands could lose up to 11% of brand value cumulatively, a drop of over ₩27 trillion compared to the original valuation date of 1st January 2020, according to the latest Brand Finance South Korea 50 2020 ranking.
Looking beyond South Korea, 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 ₩1,200 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. 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 (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.
Samsung holds on to title of most valuable South Korean brand
Increasing in brand value by 8% to ₩90.0 trillion, Samsung remains the most valuable brand in South Korea, also claiming the title of the most valuable B2C brand in Asia and the fifth most valuable brand in the Brand Finance Global 500 2020 ranking. The tech giant managed to beat its predicted earnings this year, largely due to the popularity of its 5G phones – as of November 2019, the company owns 54% of the global 5G market. The success of Samsung Electronics was further spurred during the global COVID-19 pandemic, with increased demand for home working and schooling support boosting its earnings by 23% during the second quarter of 2020. This has reinforced the brand’s positive trajectory for the rest of the year as it looks to develop cutting-edge technologies, including the new foldable Samsung Galaxy Bloom phone and SelfieType invisible virtual keyboard.
David Haigh, CEO, Brand Finance commented:
“Despite the coronavirus pandemic causing a decline in smartphone sales, Samsung has experienced a greater recovery than predicted at the onset of the global lockdown. With the expanding capacity of Samsung data centres to meet the increased demand for computer chips, the brand is in a good position to continue delivering what it knows best – innovative and high quality technology.”
Coupang fastest growing, up by impressive 69%
With an impressive brand value growth of 69% to ₩2.8 trillion, Coupang is the fastest growing brand on the Brand Finance South Korea 50 2020 ranking for the second consecutive year. Despite being a newly established brand, Coupang has expanded rapidly over the last 10 years, beating Amazon to become the biggest online retailer in South Korea. Climbing 21 spots on the ranking this year, Coupang’s growth is due to strong revenues and forecasts. However, a word of warning may be in order, as Brand Finance has estimated a heavy impact on the retail sector due to COVID-19, which could cause a 20% drop in brand value in next year’s ranking.
KEPCO is country’s strongest
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, KEPCO (up 15% to ₩8.6 trillion) is the strongest brand in South Korea with a Brand Strength Index (BSI) score of 87.4 out of 100 and a corresponding AAA brand strength rating.
KEPCO prides itself on being one of the world’s leading brands spearheading the shift and expansion towards the use of safe and clean energy, in its bid to reduce carbon emissions and tackle the global climate change issue. The South Korean brand has strived towards its CSR initiatives as part of its wider goal to become a sustainable global utility brand and has been recognised internationally for its efforts.
In the coming year, KEPCO is likely to suffer a limited impact as a result of the COVID-19 pandemic, in line with the utilities sector, which Brand Finance predicts will undergo a 0% brand value change. The sector is largely sheltered as a result of the very nature of its operations and regulated structure of longer-term contracts, ensuring that utilities brands have access to adequate supplies and equipment to continue operations.
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 50 most valuable South Korean brands are included in the Brand Finance South Korea 50 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 South Korea 50 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.