A coalescing of factors has led to arrested growth across the chemicals sector this year, with the brand value of the top 25 most valuable chemicals brands contracting by 8% on average, according to the latest report by Brand Finance - the world's leading independent brand valuation consultancy.
Long-term trends including shifting consumer sentiment and its knock-on effects for the industry, have continued to play a role in hampering chemicals brands. Issues that have been compounded by COVID-19, which has brought about a slowdown of industrial sectors, weaker economic outlooks globally and falling oil prices, all leading to faltering brand value growth.
BASF claims 7-year stronghold at #1
Cementing its position as the global industry leader, German juggernaut BASF has once again defended its title as the world’s most valuable chemicals brand. Despite celebrating seven years at the top of the Brand Finance Chemicals 25 ranking, BASF has suffered another brand value decrease this year, dropping 8% to US$7.3 billion. As with brands across the sector, BASF cites COVID-19 as its main concern, claiming the virus could reduce global chemical production growth to a mere 1% – the worst growth for the sector since the Great Recession. The auto market – which accounts for approximately 20% of BASF sales – has taken a significant hit to production over the last year, compounding troubles for the brand.
Aside from determining overall brand value, Brand Finance also evaluates the relative strength of brands through a balanced scorecard of metrics on marketing investment, stakeholder equity, and business performance. Once more defending its position, BASF remains the world’s strongest chemicals brand, a title it snagged for the first time in 2020, despite its Brand Strength Index (BSI) score dropping slightly this year to 84.2 out of 100 and its brand strength rating being downgraded to an AAA-.
BASF is well-recognised within the chemicals industry for its corporate climate action and water security efforts, pledging to become carbon dioxide neutral by 2030. The brand continues to embrace new technology and innovative climate friendly production methods, including digitalising its chemical plants, showcasing its commitment to becoming greener.
Savio D’Souza, Valuation Director at Brand Finance, commented:
“Once again BASF dominates the chemicals sector, claiming the title of the world’s most valuable and strongest chemicals brand. Facing yet another year of economic headwinds – the difficulties surrounding COVID-19 only compounding previous troubles around Brexit and the US-China Trade War - the German juggernaut has certainly been put to the test. BASF will be relying on the sheer scale of its operation and strength of its brand to weather the storm and hopefully see a return to positive brand value growth in the near future.”
Dow and out as SABIC rises
SABIC has overtaken Dow to become the second most valuable chemicals brand in the ranking, on the back of resilient business performance. Dow’s considerable 23% brand value loss is the result of a weakened outlook for growth in the business in its core markets.
SABIC (down 7% to US$4.0 billion) is committed to its vision of becoming the world’s largest petrochemical company by 2030, undertaking several strategic partnerships over the last year and aligning with the chemical arm of oil and gas leader Saudi Aramco. The brand has strategically aligned with the UN’s Sustainable Development Goals (SDG) and developed more open and creative collaborations with other companies, NGOs, academia, and governments to better meet the expectations of customers and stakeholders.
Savio D’Souza, Valuation Director, Brand Finance, commented:
“SABIC continues to consolidate its position near the peak of the chemicals industry, attaining a AAA- brand strength rating last year and this year becoming the second most valuable chemicals brand. The brand has maintained its investments in its global corporate marketing campaign while also strengthening its highly regarded specialised technical sales teams. Both of these have contributed to its strong performance this year in spite of tough economic conditions.”
In the wake of their 2019 demerger, Dow (brand value US$3.7 billion), DuPont (down 9% to US$2.0 billion) and Corteva (down 20% to US$1.4 billion) have all seen their second consecutive year of decline in brand values as newly separated entities, as they continue to adjust to life apart. Dow and Dupont both have very strong brands with brand strength ratings of AAA-, which the companies will no doubt leverage to return to growth in the coming years.
Dupont started last year under rocky circumstances with the removal of its CEO and CFO due to subpar performances. Now under Ed Breen’s leadership – an architect of the Dow and Dupont merger as well as the breakup - the brand has taken no time to start streamlining, undertaking several non-core divestitures.
China’s Rongsheng Petrochemical is fastest growing
Zhejiang-based Rongsheng Petrochemical (up 14% to US$1.6 billion) is the sector’s fastest growing brand after seeing profits more than triple in the past year, bolstered by the launch of its 400,000 barrel-per-day Zhejiang Petrochemical Co (ZPC).
Also hailing from China is the ranking’s only new entrant for 2021, Xinjiang Zhongtai Chemical, with a brand value of US$1.2 billion. Entering the ranking in 20th position, Xinjiang Zhongtai is the largest state-owned enterprise in Xinjiang and is as a major market player due to consistently increasing revenues and widespread influence on the regional economy through the long value chain of its integrated operations.
Note to Editors
Every year, Brand Finance puts 5,000 of the biggest brands to the test, evaluating their strength and quantifying their value, and publishes nearly 100 reports, ranking brands across all sectors and countries. The world’s 25 most valuable chemicals brands are included in the Brand Finance Chemicals 25 2020 report.
The full Brand Finance Chemicals 25 2021 ranking, additional insights, charts, more information about the methodology, as well as definitions of key terms are available in the Brand Finance Chemicals 25 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. Please see below for a full explanation of our methodology.
About Brand Finance
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Definition of Brand
Brand is defined 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 value refers to the present value of earnings specifically related to brand reputation. Organisations own and control these earnings by owning trademark rights.
All brand valuation methodologies are essentially trying to identify this, although the approach and assumptions differ. As a result, published brand values can be different.
These differences are similar to the way equity analysts provide business valuations that are different to one another. The only way you find out the “real” value is by looking at what people really pay.
As a result, Brand Finance always incorporates a review of what users of brands actually pay for the use of brands in the form of brand royalty agreements, which are found in more or less every sector in the world.
This is known as the “Royalty Relief” methodology and is by far the most widely used approach for brand valuations since it is grounded in reality.
It is the basis for our public rankings but we always augment it with a real understanding of people’s perceptions and their effects on demand – from our database of market research on over 3000 brands in over 30 markets.
Brand Valuation Methodology
For our rankings, Brand Finance uses the simplest method possible to help readers understand, gain trust in, and actively use brand valuations.
Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668.
Our Brand Strength Index assessment, a balanced scorecard of brand-related measures, is also compliant with international standards (ISO 20671) and operates as a predictive tool of future brand value changes and a control panel to help business improving marketing.
We do this in the following four steps:
1. Brand Impact
We review what brands already pay in royalty agreements. This is augmented by an analysis of how brands impact profitability in the sector versus generic brands.
This results in a range of possible royalties that could be charged in the sector for brands (for example a range of 0% to 2% of revenue).
2. Brand Strength
We adjust the rate higher or lower for brands by analysing Brand Strength. We analyse brand strength by looking at three core pillars: “Investment” which are activities supporting the future strength of the brand; “Equity” which are real perceptions sourced from our original market research and other data partners; “Performance” which are brand-related measures of business results, such as market share.
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.
3. Brand Impact x Brand Strength
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. Brand Value Calculation
We determine brand-specific revenues as a proportion of parent company revenues attributable to the brand in question and forecast those revenues by analysing historic revenues, equity analyst forecasts, and economic growth rates.
We then apply the royalty rate to the forecast revenues to derive brand revenues and apply the relevant valuation assumptions to arrive at a discounted, post-tax present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.