Nestlé and Coca-Cola reign supreme
Nestlé and Coca-Cola have yet again dominated brand rankings in their respective industries, each keeping runners-up at a healthy distance of over US$10 billion, according to a new report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy.
Valued at US$19.4 billion, Nestlé again claimed the title of the world’s most valuable food brand, more than double the value of second-ranked Danone (US$9.1 billion). Nestlé’s brand value registered virtually no change from last year, with revenues performing at only a satisfactory level. This was caused by challenging sales in both North and South American markets.
Despite a 5% decrease to US$30.4 billion, Coca-Cola once more came in first among the world’s most valuable soft drink brands, over US$10 billion ahead of Pepsi (US$20.0 billion). While the global market for its core product is shrinking, Coca-Cola is actively leveraging its brand with less sugar-laden products such as Coca-Cola Zero Sugar. Diet options are helping to support overall forecast-revenue stability despite health-conscious consumers turning away from traditional sugary drinks.
David Haigh, CEO of Brand Finance, commented:
“With producers and analysts used to the lack of change among the food and drink industry leaders, performance of emerging market brands is likely to cause a stir. We are already starting to see this from brands like Yili. The value of China’s largest dairy brand jumped ahead of international leaders such as Kellogg’s, Kraft, and Heinz.”
Yili milking brand potential
Dairy is one of the strongest performing sectors in the food industry registering an average 13% brand value growth year on year versus 4% for the table as a whole. Within the sector, the Chinese market is the most dynamic in the world, set to overtake the US as the largest market for dairy products by 2022. This phenomenon is due to rising affluence and improved accessibility of products in China’s lower tier cities. As Chinese consumers increasingly prefer dairy products which are more premium, with health benefits and innovative flavours, leading brands such Yili focus on the changing demand and product innovation.
Thanks to this dynamic, Yili stands out as best-performing among the 10 most valuable food brands in the world, rising to 3rd place from 8th in 2017 following an eye-watering 43% growth to US$6.2 billion brand value. This is off the back of fast revenue growth and high profitability, meaning it is now a darling of investors. The brand is dominant in the Chinese market but has a clear potential for expansion into non-dairy categories or internationally as many major Chinese brands take advantage of the Belt and Road initiative to bolster growth abroad.
Although Yili is ahead of Danone in terms of brand potential, the French giant still boasts a more valuable brand, growing above the average for the industry at 15% year on year. Its performance was mainly driven by good sales. Also noteworthy is the performance of Mengniu, another Chinese dairy brand growing at a similar pace as Yili, up 45% year on year, but from a lower base, with their brand value now established at US$3.4 billion.
Lavazza’s shot to the top
While the top six soft drink brands retained the same ranks as last year, brands further down the table have seen much more change. Energy drink brand Monster registered fastest-growth in the top 10 (up 31% to US$3.7 billion), closely followed by Dr Pepper’s performance (up 30% to US$3.3 billion). At the same time, popular brands Fanta (down 12% to US$2.6 billion) and 7-Up (down 3% to US$2.2 billion) fell out from the top 10 this year.
However, fastest-growing in this year’s Brand Finance Soft Drinks 25 league table is Italian coffee brand Lavazza. Up 34% to US$1.2 billion, it moved up from the penultimate 24th to 17th rank in 2018. Popular in and outside of Italy, Lavazza owes the surge to organic brand growth in all its markets, while ambitious acquisitions have also boosted the group’s income. Steadily increasing, consolidated revenues reached €2.0 billion in 2017, up 6.3% from the previous year.
Ferrero’s best-performing portfolio
Although Pepsi (up 8% to US$20.0 billion) is second to Coca-Cola in terms of brand value, the total portfolio of its holding company – PepsiCo – is greater than that of its competitor’s parent. The Coca-Cola Company’s US$45.0 billion portfolio remains second to that of PepsiCo’s, worth US$55.1 billion. More valuable than either of those two is the brand portfolio of the Swiss giant Nestlé, at US$63.2 billion, despite recording a 6% year on year decrease.
Mirroring Lavazza’s success in the drinks brand ranking, Italy’s Ferrero boasts the best-performing food and drink brand portfolio, up 29% to US$8.7 billion this year. All of Ferrero’s major brands recorded significant year on year growth, with three making the Brand Finance Food 50 league table. Ranked 16th, Kinder is Ferrero’s most valuable and fastest-growing brand (up 41% to US$3.1 billion), while Nutella is a new entrant to the ranking, claiming 38th spot.
Note to Editors
Every year, leading independent brand valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 50 most valuable food brands and the 25 most valuable soft drink brands are included in the Brand Finance Food 50 and Brand Finance Soft Drinks 25 2018 league tables.
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 assessed through a balanced scorecard of factors (such as marketing investment, stakeholder equity, and business performance) and used to determine what proportion of a business’s revenue is contributed by the brand.
Additional insights, more information about the methodology, as well as definitions of key terms are available in the Brand Finance Food & Drink 2018 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, 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.
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.