· Major study reveals China’s 100 most valuable brands
· Total brand value of the top 100 has more than tripled in five years to $823bn
· Study suggests President Xi’s desire for world-renowned Chinese brands is being fulfilled
Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies. Brands are first evaluated to determine their power / strength (based on factors such as marketing investment, familiarity, loyalty, staff satisfaction and corporate reputation) and given a corresponding letter grade up to AAA+. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand, which is projected into perpetuity to determine the brand’s value. China’s 100 most valuable brands are ranked and included in the Brand Finance China 100 2017.
In August 2014, President Xi declared that, “We should have our own flagship products and establish our own world-renowned brands.” President Xi presciently saw that the future of China’s industry had to lie beyond manufacturing and that focus had to move from the promotion of ‘Made in China’ to ‘Branded in China’. His grasp of the importance of brands is paying dividends. The value of China’s 100 most valuable brands has more than trebled in the last five years from US$266 billion in 2012 to US$823 billion today.
ICBC is China’s most valuable brand. Its brand value has grown 32% year on year to a total of US$47.8 billion, constituting 20% of its US$239 billion market capitalization (at our valuation date). Its growth has been so strong that it has overtaken Wells Fargo to become the world’s most valuable banking brand. It is one of an increasing number of Chinese brands that rank highly in Brand Finance’s international league tables, including CSCEC, Moutai and Huawei, which are all the most valuable brands in their respective industries.
Alibaba is China’s most valuable tech brand. Its BSI score is 3.3% up from 2016, and its Brand Value has nearly doubled. Valued at over $34.8 billion, the online marketplace continues to thrive at home, but in order to accelerate growth abroad, it is investing in marketing communications including joining McDonald’s, Coca-Cola and Visa as a major sponsor of the Olympics Games.
China’s brands have a number of common attributes that help to explain these impressive results. The first is scale; China’s vast population and the growing prosperity of its citizens create a huge market for its major brands. Relative to other parts of the world, China’s economy is growing rapidly, expanding both organically and through a strong demand for foreign acquisitions. M&A activity of Chinese firms abroad has significantly accelerated in the last two years, hitting a record high in 2016 with such notable takeovers as ChemChina’s acquisition of Syngenta or Haier Group’s of GE’s home appliance division.
Cultural factors are just as significant as macroeconomic ones. Chinese consumers have a relationship with their brands that Western brands can only dream of. Information from Brand Finance’s Brand Strength Index reveals far higher levels of trust and loyalty for Chinese brands than European or American ones. Patriotism is a further boon. Bureaucracy and other factors can make operating in China challenging for foreign brands, but even taking this into account, Chinese consumers are particularly likely to choose domestic brands at the expense of foreign ones. The success of Huawei and other domestic smartphone manufacturers (to the detriment of Apple) bears this out.
Note to Editors
You can find more stories about China’s most valuable brands in the Brand Finance China 100 report document. Brand values on Brand Finance’s website are reported in USD. For conversions to CNY, please hover over the ‘I’ button and select CNY from the grid that appears.
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 over 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.