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Low-cost Retail – rising from the Canadian Economy’s ashes

25 July 2016
This article is more than 4 years old.

· Canada’s 100 most valuable brands have a total value of C$200 billion

· Couche-Tard and Dollarama increase in brand value amidst weakened economy

· Air Canada’s brand value soars 88%, making it the fastest growing brand

· Royal Bank of Canada takes the lead as the nation’s most valuable brand

Every year, leading branded business valuation and strategy consultancy Brand Finance puts thousands of the world’s top brands to the test. They are evaluated to determine which are the most powerful and the most valuable by country, by industry and against all other brands worldwide. Canada’s most valuable brands can be found in the Brand Finance Canada 100.

Canada’s 100 most valuable brands generate a total brand value of C$200 billion. With 21 brands in the table with a total value of C$30.1 billion, the retail sector claims the title as the industry with the most brands in the table. The Oil and Gas industry follows closely behind with a total of 14 brands, contributing C$21.7 billion to the nation’s overall brand value.

The winners amidst the nation’s weak economic condition are undoubtedly the low-cost retailers. Consumer confidence has been affected by the weakened economy, decreasing oil prices, and a slightly elevated unemployment rate – approximately 7%. The increase in price-conscious consumers in light of the economic slowdown has meant that low-cost retailers are able to compete with companies positioned in a higher price bracket. Alongside consumer prudence, Couche-Tard’s revenue forecasts have improved this year, which largely contributed to the brand’s 39% rise in value. Dollarama saw the same forecast, which was a factor that led to its impressive 20% growth in brand value.

Air Canada is the nation’s fastest growing brand, its value rising 88% to an overall brand value of C$1.8 billion. Due to the decline in fuel prices, it propelled the airline giant’s second quarter profits up 33%. As the nation suffered a depreciation in its currency, the cost of commodities priced in U.S. dollars soared, however, the economic hiccup boosted the airline’s passenger revenue by 6.9%. Additionally, external tourism contributed to Air Canada’s success this year when US dollars were exchanged into the depreciating Canadian dollar. The brand cut costs in areas of its operations to offset the depreciation, and this combatting strategy proved useful for the brand’s value overall.

Royal Bank of Canada retains its title as the nation’s most valuable brand despite falling 9% in value to C$13.2 billion. Banking brands have dominated the Canadian table – five banks are in the top 10 alone. The banking industry has been subject to regulatory pressures and tough economic conditions, and the weakening Canadian dollar, therefore it is important to commend Canadian banks for maintaining strong positions in the table this year. The overall brand value of banking brands in the table is C$56.5 billion, making up approximately 30% of the nation’s total brand value. The Canadian banking system is widely considered one of the safest banking systems in the world. Yet, six of the nine banking brands in the table have fallen in brand value this year. However, this fall is consistent with the global trend and therefore does not necessarily impugn the level of safety Canadian banks are renowned for.

ENDS

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Media Contacts

Konrad Jagodzinski
Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Florina Cormack-Loyd
Senior Communications Manager
Brand Finance

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.

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