· Michelin maintains top spot for brand value and strength, despite 9% brand value decrease to US$7.2 billion
· Tires sector hit by Chinese slowdown, 7 out of 10 brands in ranking losing brand value
· Continental brand worst hit, brand value down 28% to US$3.4 billion
· Japan’s Sumitomo sees highest brand value increase, up 33% to US$801 million
Michelin defends its title as the world’s most valuable tire brand despite a 9% decrease in brand value to US$7.2 billion, according to the latest report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy.
In addition to calculating overall brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. Along with the level of revenues, brand strength is a crucial driver of brand value.
This year, Michelin also retains its title as the world’s strongest tire brand with a Brand Strength Index (BSI) score of 86.30 out of 100 and a rating of AAA. Michelin is the only brand in the ranking to score a AAA rating and its BSI is well clear of second ranked Bridgestone, with a BSI of 78.10 out of 100.
Tire sector deflates across board
Over the last year, the tire sector has suffered significantly, reflected in the rankings with seven out of ten tire brands losing in brand value, notably: Continental (brand value down 28% to US$3.4 billion), Goodyear (down 10% to US$1.9 billion) and Hankook (down 8% to US$1.5 billion). This trend can be attributed to market uncertainties and a drastic change in customer demands. China, the world’s biggest car market has experienced a sharp downturn in car sales, which saw a decline in 2018 for the first time in 20 years. Additionally, consumer behaviour has shifted, with more customers favouring retreading as opposed to brand new purchases. Retread tires are growing in popularity thanks to their cost efficiency, environmental friendliness and quality performance. This has of course meant that industry margins have taken a huge dent. The imposing threat of American restrictions on foreign import competitors is also a matter of concern, as the industry prepares itself for President Trump’s proposed 25% tariffs.
Alex Haigh, Director, Brand Finance commented:
“Brands in the replacement auto-parts industry - from tire component makers to local garages - are bracing themselves for President Donald Trump’s tariffs on imported Chinese materials and goods. Hefty levies have already amplified the costs of steel and aluminium products, and more tariffs could affect a whole range of other items these companies develop and sell. The bulk of this will be felt in the year ahead by those dealing in tires, rear-view mirrors and windshield wipers.”
Two brands buck the trend
Italy’s Pirelli and Japan’s Sumitomo are the only two tire brands in the rankings to see noteworthy increases in brand value, up 6% to US$1.6 billion and up 33% to US$801 million respectively.
Pirelli and Sumitomo’s strong performances are driven by their commitment to diversification and efforts to differentiate their brands from competitors. Sumitomo has significantly increased its sales revenue over the last year, reporting a 16% rise, which has been boosted by the acquisition of UK-based wholesaler Micheldever Tyre Services Ltd, in a further boost to its European offering. Sumitomo has also been working with Dunlop (brand value up 1% to US$2.0billion) to open a new European Development Centre focused on product innovation and tire development.
Milan-headquartered Pirelli has positioned itself as a premium and powerful brand, renowned for its partnership with the Formula One World Championships to sponsoring wider sporting events including football, baseball and sailing. This strategic diversification combined with its strong Italian heritage has resulted in the successful differentiation from its competitors, and thus a boost in brand value.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest automotive industry brands. The most valuable automotive industry brands in the world are included in the Brand Finance Automotive Industry 2019 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, more information about the methodology, as well as definitions of key terms are available in the Brand Finance Automotive Industry 2019 report.
Brand Finance helped craft the internationally recognized standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
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.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance for more than 25 years, Brand Finance evaluates the strength of brands and quantifies their financial value to help organizations 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 over 100 reports which rank brands across all sectors and countries.
Brand Finance also operates the Global Brand Equity Monitor, conducting original market research annually on over 5,000 brands, surveying more than 150,000 respondents across 38 countries and 31 industry sectors. Combining perceptual data from the Global Brand Equity Monitor with data from its valuation database enables Brand Finance to arm brand leaders with the data and analytics they need to enhance brand and business value.
Brand Finance is a regulated accountancy firm, leading the standardization 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.
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 strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
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 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. 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, while 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 Discount post-tax brand revenues to a net 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.