South African corporates continue to do the nation brand proud
MTN is the nation’s most valuable brand with a value of R37 billion
Retail-side improvements renders Telkom the fastest growing brand this year
SABMiller’s portfolio is the most valuable, totalling R29.7 billion
Every year, leading brand 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. The most valuable South African brands can be found in the Brand Finance South Africa 50. The table’s launch event is in partnership with Brand South Africa.
MTN remains the most valuable brand despite losing 32% of its brand value due to some of its reputational challenges. Woolworths holds the strongest brand position with an increase of 21% in brand value. Woolworths now stands at number five.
Meanwhile, Telkom has seen the greatest increase in brand value following the integration of Business Connexion and improved performance on the retail side with good ratings on Value for Money and Customer Satisfaction according to the South African Customer Satisfaction Index (SAcsi). The increase in brand value sees Telkom move from 23rd position last year to 17th in 2016.
Interestingly, many of the top 10 brands from 2015 have retained their positions in 2016 except for Woolworths which has moved to fifth place, and Absa which has moved to seventh. The top 10 brands are: MTN, Vodacom, Sasol, Standard Bank, Woolworths, FNB, Absa, Nedbank, Investec and Mediclinic. Brands seeing a significant increase in value include Investec (27%) and WesBank (27%). Two new brands have entered the Top 50. Country Road, now owned by Woolworths, enters at 31st place with a value of R4.64 billion and Growthpoint enters at 50 with a value of R1.47 billion.
SABMiller holds the most valuable portfolio amounting to R29.67 billion with four of its brands standing amongst the country’s top 50: Castle, Carling Black Label, Hansa Pilsner and SABMiller. SABMiller is followed by Firstrand with three brands (FNB, WesBank and RMB) valued at R23.12 billion.
The total value of the Top 50 brands increased 3% from R373 billion to R384 billion. Excluding MTN’s drop in brand value of R17 billion, the remaining Top 49 brands have a total of R347 billion in 2016, growing 9% from the total value in 2015 (R319 billion).
Newly appointed Director of Brand Finance Africa, Jeremy Sampson, commented, “The more competitive the market, the more important it is to have a strong brand, leverage it to its full potential and measured and monitor at all times. Brands are increasingly the major assets of companies, yet does anyone have an idea of their true value? Marketing is no longer a 'nice to have' it can be the difference between success and failure”
Brand South Africa’s CEO Dr. Kingsley Makhubela warmly congratulated the Top 50 corporate brands saying, “South African commercial brands are a key component of a strong nation brand and how this is experienced by both domestic and international audiences. As such commercial brands are key messengers in positioning the country competitively.”
“At the same time, we express our appreciation to all other corporate brands in the country for your contribution to the growth and development of South Africa. We thank you for playing your part and look forward to honouring you amongst the Top 50 in years to come,” concluded Dr Makhubela.
Chairman of Brand Finance Africa, Mr. Thebe Ikalafeng, commented, “the story of the Top 50 corporate brands is a good story for the South Africa Nation Brand as well as the continental story. Many of these brands have footprints on the continent and this bodes well for perceptions about business on the continent, their ethics, governance and commitment to social upliftment. Brand Finance salutes the Top 50 corporate brands for their excellence in flying the South Africa and African flags.”
Definition of Brand
In the very broadest sense, a brand is the focus for all the expectations and opinions held by customers, staff and other stakeholders about an organisation and its products and services. However when looking at brands as business assets that can be bought, sold and licensed, a more technical definition is required. Brand Finance helped to craft the internationally recognised standard on Brand Valuation, ISO 10668. That defines a brand as “a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos and designs, or a combination of these, intended to identify goods, services or entities, or a combination of these, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits/value.”
However, a brand makes a contribution to a company beyond that which can be sold to a third party. ‘Brand Contribution’ refers to the total economic benefit that a business derives from its brand, from volume and price premiums over generic products to cost savings over less well-branded competitors.
Brand Strength is the part of our analysis most directly and easily influenced by those responsible for marketing and brand management. In order to determine the strength of a brand we have developed the Brand Strength Index (BSI). We analyse marketing investment, brand equity (the goodwill accumulated with customers, staff and other stakeholders) and finally the impact of those on business performance. Following this analysis, each brand is assigned a BSI score out of 100, which is fed into the brand value calculation. Based on the score, each brand in the league table is assigned a rating between AAA+ and D in a format similar to a credit rating. AAA+ brands are exceptionally strong and well managed while a failing brand would be assigned a D grade.
Brand Finance calculates the values of the brands in its league tables using the ‘Royalty Relief approach’. This approach involves estimating the likely future sales that are attributable to a brand and calculating a royalty rate that would be charged for the use of the brand, i.e. what the owner would have to pay for the use of the brand—assuming it were not already owned.
The steps in this process are as follows:
1 Calculate brand strength on a scale of 0 to 100 based on a number of attributes such as emotional connection, financial performance and sustainability, among others. This score is known as the Brand Strength Index.
2 Determine the royalty rate range for the respective brand sectors. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database of license agreements and other online databases.
3 Calculate royalty rate. The brand strength score is applied to the royalty rate range to arrive at a royalty rate. For example, if the royalty rate range in a brand’s sector is 0-5% and a brand has a brand strength 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 estimating a proportion of parent company revenues attributable to a specific brand.
5 Determine forecast brand specific 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 Brand revenues are discounted post tax to a net present value which equals the brand value.
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.