Economic crisis causes $6.3 trillion of intangible assets value to be lost since January 2011, according to Brand Finance plc.
Financial service brands hit hardest
Tougher legislation, sluggish activity in the corporate market and ongoing fears regarding exposure to sovereign debt has meant banking and insurance brands have suffered. Bank brands in the top 100 have lost $25.9bn from their total brand value (7%) since January 2011.
HSBC has become the world’s most valuable bank brand keeping a steady position at 10. Bank of America experienced a brand value fall of $5.3bn taking it down to position 14. Likewise Wells Fargo saw a 12% reduction in brand value and Santander also slipped back in the league table with a reduction of $3.3bn.
Insurance brands saw a drop of 6% with AXA fairing worst, with a loss of $1.6bn brand value taking them out of the top 50 global brands.
Sparking technology industry
The economic crisis has not led to a blanket reduction in brand value. Technology and electronics brands are prospering with Google, Apple and Microsoft taking the top 3 positions in the league table. Apple has increased its value by 33%, making it a more valuable brand than Microsoft for the first time.
The total brand value for the 46 US headquartered brands declined 2% from January. US brands dependent on their home market suffered bigger losses than global brands including McDonald’s, Nike and Coca-Cola who all improve their position in the league table.
Japanese brands dropped 3% as a result of the tsunami disrupting business. Europe has also felt the pressure with Spanish brands down 13% and France 5%, both are exposed to issues within the financial services sector.
In contrast, emerging economies including China, India and South Korea all show strong performances. In China the total brand value increased with two new brands entering the top 100; PetroChina and China Life Insurance Company. Argricultural Bank of China increased brand value by $1.5bn, rising from 99 to 71 in the league table.
Samsung is another notable performer, increasing the value of its brand to $26.6bn (up 24%). The South Korean company has not experienced the supply chain disruptions by their Japanese competitors and is developing a stronger hold on both the TV and smart phone markets. Similarly in India TATA moved up the league table with a new brand value of $14.8 bn at position 41 (previously 50).
David Haigh, CEO of Brand Finance plc, comments:
“As stock markets around the world falter, we are seeing a drop in the amount of intangible value global businesses hold and the value of the individual brands. The dramatic shifts that can be seen since the BrandFinance® Global 500 launched earlier this year illustrate how vital it is for businesses to track the value of their brands. Even the world’s biggest businesses are not immune to change.”
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 over 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.
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.