· IKEA grows 42% in brand value to US$24 billion
· H&M is second following 24% increase to US$19 billion
· Ericsson brand value plummets but careful restructuring may help make up for losses
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 Swedish brands are included in the Brand Finance Sweden 50 league table.
IKEA tops the Brand Finance Sweden 50 league table with a brand value of over US$24 billion after impressive growth of 42% year on year. The strength of IKEA’s brand is built on its associations with much of what is best about the Swedish national ‘brand’, namely; style, simplicity, functionality and a lack of pretention. Though customers grumble about the difficulty of assembling flat pack furniture, IKEA’s striking but tasteful designs, reliability and extremely competitive pricing have assured its position. This year’s rapid brand value growth has been supported by a 20% increase in profits last year combined with continuing creative and effective communications.
Advertising and marketing campaigns range from the whimsical, to the practical, and to the meaningful. The ‘IKEA Retail Therapy’ website was ostensibly created to enable customers to find solutions to their everyday problems as easily as possible. The light-hearted initiative saw the official names of IKEA products replaced with common Google searches such as ‘My Partner Snores’ and ‘How To Get Over Someone’. The page featured a catalogue of the brand’s products with their original names replaced by the internet searches, in this way offering quick solutions to everyone who searched for an answer to their dilemma online. Campaigns with more of a social purpose have been employed too, including the ‘Where Life Happens’ series, intended to provoke discussion on family issues, such as ageing, adolescence, divorce, and adoption.
IKEA is looking to the longer term too. Brand extension is one route to growth; a chain of IKEA restaurants has been mooted to capitalize on the affection and demand for the brand’s in store food offerings such as its famous meatballs. The ‘internet of things’ is claimed to herald a revolution in domestic life. As one of the most iconic domestic lifestyle brands globally, IKEA has not shied away from the challenge, surveying its customers’ attitudes to the idea of embedding smart systems in furniture to help manage homes.
H&M is second, with a brand value of over US$19 billion, following 24% growth. The clothing giant is also the country’s most powerful brand with a Brand Strength Index (BSI) score of 86. Emerging online competitors are pushing the H&M Group to look for new ways to attract customers. One solution has been to launch new brands such as COS, Monki, Weekday, or the recently announced Arket. Although at the corporate level this may increase revenue and customer acquisition, the decision not to deploy the core brand and focus attention and resources elsewhere could reduce its strength and value in future.
Ericsson has seen its financial problems reflected in the loss of almost half of its brand value in a year. It has dropped from US$9.5 billion to a 10-year low of just over US$5 billion. Despite this decline, the brand remains a key asset for the business constituting 29% of the total Enterprise Value. Restructuring could help to put Ericsson back on a more stable financial footing, so a stabilization of brand value in 2018 could be expected. Prudently, new CEO Börje Ekholm has promised not cut the R&D budget as part of the restructuring process. Brand investment of this kind is essential even at difficult times to ensure long term growth.
Bank brands continue to feature prominently in the Brand Finance Sweden 50 ranking with four in the top 10; Nordea (3th), Swedbank (7th), Svenska Handelsbanken (8th), and SEB (9th). However, recently unveiled government plans to increase resolution fees (to aid struggling financial firms) could drive this number down if brands such as Nordea make good threats to move out of Sweden.
Note to Editors
For more definitions of key terms, methodology and more stories, please consult the Brand Finance Sweden 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.
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.