Top Swedish brands could lose over SEK 150 billion from COVID-19
As the COVID-19 pandemic wreaks havoc on the global and national economy, Sweden’s top 50 most valuable brands could lose up to 14% of brand value cumulatively, a drop of over SEK 150 billion compared to the original valuation date of 1st January 2020, according to the latest Brand Finance Sweden 50 2020 report.
Looking beyond Sweden, 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 R15 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.
Richard Haigh, Managing Director, Brand Finance, commented:
“Sweden’s response to the coronavirus pandemic certainly hit the headlines globally as the nation imposed relaxed guidelines compared to its European counterparts. Although there is no denying that the Swedish economy is going to feel the crippling effects of the pandemic, the unconventional approach may allow brands to rebound in the coming year.”
IKEA retains top spot
IKEA has retained the title of Sweden’s most valuable brand despite recording a 4% brand value loss to SEK 188.2 billion. The world’s biggest furniture retailer has committed to its business transformation, aiming to merge its physical stores with a greater online proposition as the world becomes ever more digital.
Hailed as a forward-thinking brand, last year the furniture giant announced its commitment to becoming a circular business by 2030 – where all its products can be reused, refurbished or recycled.
The very nature of IKEA’s business, paired with its lack of strong online presence, means the brand has struggled to maintain sales revenue as it negotiates reduced store hours and closures amid the pandemic. As with other brands globally, the level of damage to IKEA will depend on how long coronavirus engulfs its markets.
If soars 48%
If is Sweden’s fastest growing brand, following an impressive 48% brand value increase to SEK 13.1 billion, simultaneously jumping 6 spots in the ranking from 24th to 18th position.
Hiring nearly 7,000 employees and with 3.7 million customers across the Nordic and Baltic regions, the insurance brand has celebrated solid performances in its commercial and industrial business areas.
Brand Finance’s analysis has shown that insurance brands are likely to be heavily impacted by the COVID-19 pandemic, with a potential 20% brand value loss as a result. However, as the leading property and casualty insurer in the Nordic region, the brand is likely to be somewhat protected from the damage as fewer such claims are expected during the far-reaching and ongoing lockdown period.
Telia Company rings in as nation’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, Telia Company (up 1% to SEK 43.5 billion) is Sweden’s strongest brand with a Brand Strength Index (BSI) score of 83.2 out of 100 and a corresponding AAA- brand strength rating.
Telia Company has performed strongly across key metrics in Brand Finance’s global brand monitor study including price, products, consideration, familiarity, environment, governance and reputation. With a continued focus on its CSR initiatives, the telecoms brand prides itself on its sustainable and responsible business practices which it cites as the prerequisite for both sustainable growth and profitability.
The telecoms industry is one of the few sectors in the economy that should see limited impact from COVID-19, according to Brand Finance’s analysis. Telia Company, along with fellow telecoms brands, has the opportunity to embrace the working from home revolution, which has led to extraordinary demand for remote working resources and connectivity.
Brand Finance Nordic 50 2020: Standout Sweden
Swedish brands dominate the Brand Finance Nordic 50 2020 ranking, claiming one in two positions, with a combined brand value of SEK 953.7 billion. IKEA (down 4% to SEK 188.2 billion), Volvo (up 28% to SEK 163.3 billion) and H&M (down 7% to SEK 133.8 billion) have retained the top 3 positions in the ranking. 25 brands from Sweden feature, compared with 14 from Denmark, six from Finland and five from Norway.
Brand Finance has calculated that Nordic brands could stand to lose up 13% of their brand values, however, as a result of the COVID-19 pandemic, equating to SEK 219 billion.
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 50 most valuable Swedish brands are included in the Brand Finance Sweden 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 Sweden 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.
M: +44 (0)7508 304 782
Senior Communications Manager
M: +44 (0)7939 118 932
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.