Lego Brand Value Grows 68% in a Year

18 May 2017
This article is more than 3 years old.

· Lego, Denmark’s most valuable brand, grows 68% to US$7.6 billion

· Pandora’s value is up 42% to US$2.9 billion due to increasing global reach

· Danish brands grow by an average of 26%, ahead of the global figure of 11%

Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies. A brand’s strength is assessed (based on factors such as marketing investment, familiarity, preference, sustainability and margins) to determine what proportion of a business’s revenue is contributed by the brand. This is projected into perpetuity and discounted to determine the brand’s value. The 50 most valuable Danish brands are included in the Brand Finance Denmark 50 league table.

Lego tops the table with a brand value of US$7.6billion, up 68% year on year. Lego is also the strongest brand, not just in Denmark, but globally. Lego scores highly on a wide variety of BSI metrics such as familiarity, loyalty, promotion, marketing investment, staff satisfaction and corporate reputation. The building blocks for Lego’s brand strength have always been present, however in the last few years this strength has been enhanced through a combination of strategic partnerships and licensing deals.

The Lego Movie in 2014 and the Lego Batman Movie last year were both critical and commercial successes, providing not just immediate revenue but also an unrivalled marketing tool. Further releases are planned for the next few years, which will continue to build the brand whilst contributing significantly to Lego’s already vast licensing income. Video game partnerships have had a similar effect. The combination of Lego and Star Wars in particular has been irresistible to the public.

Geographic expansion has also provided Lego with many opportunities for growth. Lego opened its first factory in Jiaxing, China, in 2014, as well as a new Asian Head Office in Shanghai. China does present risks; Lego cannot rely on the nostalgia or awareness it has enjoyed in Europe and the US for decades, making success there uncertain. However, domestic scandals over the safety of children’s products leave fertile ground for a foreign firm with a reputation for reliability, quality and child development.

Though Lego will always draw its strength from the simplicity of its tangible products, it is also responding to the digital era. Lego Boost, set to launch in August, allows children to turn Lego creations into programmable robots using a smartphone app. Meanwhile Lego Life enables kids to post pictures of their proudest creations or imagine new ones, making Lego a profoundly social and personal experience.

Arla is 2nd, with a brand value of US$3.7billion. The dairy industry is experiencing severe overproduction, lowering prices and squeezing margins. The differentiating power of brand is therefore more critical than ever. Arla is working hard to leverage its brand and to reinforce it. Several campaigns have been launched recently in both the UK and US. Its UK campaign invited people to ‘Eat Monday for Breakfast’, promoting the idea that Arla products help people start their week with energy, enthusiasm and ambition rather than the usual resignation and dread. US$30 million has been invested in the ‘Live Unprocessed’ campaign to position the brand as a champion of natural, healthy eating, in contrast to competitors such as Kraft. Children were asked to imagine what processed food ingredients ‘rBST’, ‘Xanthan’ and ‘Sorcic Acid’ look like. The response was to portray them as monsters or aliens. Their ideas were turned into animations to emphasise their apparent ghoulishness.

Pandora remains in 5th place with a 42% increase in brand value to US$2.9billion. The UK and the US are currently its two largest markets but Pandora is achieving rapid global expansion. It opened its first store in India and has also targeted China, having set up an e-commerce site and storefront on Tmall (a Wechat rival), targeting a younger demographic than its average western customer.

Per Aarsleff has had the largest fall in brand value, dropping 38% to US$162million. Operating profits are lower than expected and shares have fallen 10% due to delayed or allegedly, poorly executed projects. However, things could improve in the coming year or two, with multimillion projects from Banedanmark to be completed in 2019.

Note to Editors

For more definitions of key terms, methodology and more stories, please consult the Brand Finance Denmark 50 report document.

Brand values are reported in USD. For conversions into local currency, please consult the hover over the ‘i’ button on the web version of the table and select.

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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.

Methodology

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 Strength

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 Valuation Approach

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.

Disclaimer

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.