Up to $1.5 trillion estimated brand value loss from COVID-19
The brand value of the world’s 500 biggest companies, according to the Brand Finance Global 500 2020, is set to potentially lose an estimated $1.45 trillion as a result of the Coronavirus outbreak, with the aviation sector being the most affected.
Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect of the outbreak on Enterprise Value, as at 18th March 2020, compared to what it was on 1st January 2020. Based on this impact on Business Value, Brand Finance estimated the likely impact on Brand Value for each sector. Each sector has been classified into 3 categories – limited impact (0% brand value loss), moderate impact (10% brand value loss) and heavily impacted (20% brand value loss) - based on the severity of Business Value loss observed for the sector in the period between 1st Jan 2020 and 18th March 2020.
With a current combined value of $287,231m Canadian Brands Estimated to Drop 16% in value following the impact of COVID-19, equating to $45 billion.
Charles Scarlett-Smith, Director, Brand Finance Canada, commented:
“Brand Finance’s study of the most valuable Canadian brands was conducted prior to the outbreak of COVID-19. Nothing should be taken away from the extraordinary achievements of these brands over the last year, however it is an unavoidable fact that the market is in a completely different state now than it was in January when the study was completed.
The future of Canadian brands is still quite unclear, but it is likely that we will see a big shifts and changes in the hierarchy as the dust settles and we are able to take stock of the damage caused by COVID-19”.
TD tops ranking for first time in 7 years
Banking brands are the jewel in Canada’s crown, with a combined brand value of an $84 billion, according to the latest report by Brand Finance, the world’s leading independent brand valuation consultancy. For a second year running, Canada ranks 3rd overall in this metric, ranking higher than the UK in 4th position at $78 billion, and Japan in 5th position at $53.3 billion.
In many ways it’s a fitting sector to thrive in the Canadian economy, which is renowned for its conservative attitudes towards risk. Attitudes which served the banking brands well during the economic crisis in 2008. Canadian banks are set up to ride economic turbulence and although the severity of COVID-19’s damage is yet to be determined, hopes are still high that Canada’s banking brands will recover quickly once the virus is under control.
TD has taken the title of the most valuable Canadian brand with a brand value of $21.2 billion, after posting an impressive 16% brand value growth, the highest in the banking sector. Success in the US, as well as maintaining strong customer equity on home soil, has been the backbone of the brand’s success over the last year.
RBC (brand value down 10% to $20.5 billion), BMO (down 6% to $12.5 billion), Scotiabank (down 10% to $13.3 billion), and CIBC (no change, $10.4 billion) have all faltered this year. Aside from calculating brand value, Brand Finance also evaluates the relative strength of brands, which is a crucial driver of brand value. RBC’s brand value decrease is being driven in large part to its decrease in brand strength, recording a drop from 83.1 to 80.2 out of 100 in its Brand Strength Index (BSI) score. RBC is performing poorly in brand investment measures, exacerbated by its falling recommendation and reputation scores.
Scotiabank has suffered after recording less than remarkable returns on overseas investments in Central America after years of rapid expansion. CIBC’s brand value has decreased nominally. Our valuation was, however, made prior to the recently announced layoffs of over 2,000 employees as part of a larger corporate restructuring. Time will tell if CIBC will use this as an opportunity to take stock and rebound stronger, to ultimately protect its brand value in the coming year.
Bold brand strategy decision brings in big bucks for Canada Life
Canada Life’s brand value grew by an astonishing 693% to $10.2 billion, simultaneously jumping 51 positions in the ranking to 6th. This is largely down to the brave strategic decision by parent company Great-West Lifeco, who consolidated its Canada Life, London Life, and Great-West Life sub-brands under a single banner, making the company a far superior and sleeker operation. Going forward, the Canada Life brand will require
much less investment to operate and maintain than its previously vast portfolio of IP. It’s a risk that sometimes results, however, in a net loss of customer preferences and acquisition. Thus far Canada Life has been able to remain relatively immune from a negative impact on the bottom line.
Elsewhere in the insurance sector, fierce competitors Manulife (up 27% to $5.8 billion) and Sunlife (up 25% to $5.1 billion) have also performed exceptionally well, ranking 17thand 18th respectively. Last May, Manulife announced that its asset and wealth management division would rebrand 30 loose IP holdings under the one banner, Manulife Investment Management. As witnessed with Canada Life, if the brands are properly transitioned without loss of equity, Manulife is likely to reap the benefits of a masterbrand approach.
With a possible 20% drop in brand value due to coronavirus, the insurance sector is one of the most severely affected sectors globally, according to Brand Finance’s latest analysis.
Big 3 telcos stumble in crowded market
Environmental market forces continue to squeeze the big three Canadian telco brands. Bell (down 10% to $9.3 billion), TELUS (down 4% to $8.6 billion), and Rogers (down 15% to $7.4 billion) have all suffered brand value losses and risk falling out of the top ten if the trend lasts. Although all three effectively diversify their offerings beyond traditional telecommunications, the market is still over-saturated and over-pricing has fostered a resentful relationship between brands and customers.
Luckily for the Big 3, however, Brand Finance has calculated that Telco brands will be largely unaffected by COVID-19 in the long term. In fact, these brands have the opportunity to leverage the increased worldwide demand for reliable connectivity. Counter-intuitively the time is ripe for investment – fortune will favour the brave.
Out of the sectors that Brand Finance analyses in the Canadian market reputation research telcos, on average, have the lowest scores. Canadian telcos decreased in brand value by an average of 7% and brand strength fell by an average of 2.1 BSI points. Shaw is an exception to the rule, increasing its brand value by 3% and brand strength by 0.6 points.
TELUS, for the second year running, is the third strongest brand in Canada, with a BSI score of 82.9 out of 100, allowing the brand to remain relatively insulated from market forces and close the gap behind leader Bell.
Crown Royal has taken the crown as Canada’s Strongest brand
Crown Royal (down 2% to $1.7 billion) has taken the title of Canada’s strongest brand, simultaneously dethroning WestJet (down 7% to $981 million). The brand is in an illustrious club, as one of only two brands in the Canada 100 ranking to achieve a AAA brand rating (BSI score of 88.1 out of 100).
Brand Finance has calculated that Spirits brands may lose up to 10% in brand value following the COVID-19 outbreak, as consumer behaviour switches from party to panic mode.
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 100 most valuable Canadian brands are included in the Brand Finance Canada 100 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 Canada 100 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.
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.