· UPS remains the most valuable logistics brand, valued at US$22 billion
· FedEx completes the acquisition of TNT Express, the fastest falling brand
· Royal Mail’s troubles go beyond the standard negative impact from Brexit
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. The world’s most valuable logistics brands are ranked and included in the Brand Finance Logistics 25 2017.
With the rapid rise of e-commerce and technological developments in the past few years, there are vast opportunities for logistics brands that can simplify business processes and capitalise on new technologies. The two most valuable logistics brands, UPS and FedEx, have already carved out vastly sophisticated transport and delivery networks on a global scale and adapted to the challenges of this new era.
With a BSI score of 83 and brand value of US$22 billion, UPS is the most valuable as well as the most powerful logistics brand. UPS recently invested in 14 Boeing 747s, in addition to some much smaller aircraft, as it joins Amazon in the race to use drones for deliveries. UPS rolled out its ‘What’s Your Story?’ campaign in March last year, to further develop its relationship with small business customers. This forms part of its broader “United Problem Solvers” strategy intended to position UPS as more than a delivery service, but rather as a go-to service to realise business ambitions or overcome hurdles. It humanises the factual, though (arguably) less engaging ‘We Love Logistics’ campaign adopted in 2010.
Though still in second place, FedEx, saw its brand value grow by an impressive 31%. The company has increased its spending to US$5.1 billion for the year starting June 1st 2016 to update its aircraft fleet and to facilitate growth in e-commerce facilitation. FedEx has also recently handed its UEFA Europa League sponsorship assets to the UEFA Foundation and children’s charity, Street League to enable over 100 children the chance to walk out with Liverpool Football Club’s players. Though there is a risk that this move will reduce FedEx’s awareness scores, the goodwill gesture may improve recommendation and scores for governance and CSR measures.
FedEx and UPS have been embroiled in disputes over their controversial takeover bid of Holland’s TNT Express. UPS was blocked from acquiring the business for US$5 billion by EU anti-trust authorities in 2013 over concerns about market dominance in Europe. Eyebrows were raised however when FedEx was subsequently allowed to acquire the business. In a significant decision this month, the EU’s general court ruled that UPS’ rights of defence had been infringed, opening the door for UPS to sue for damages. UPS, though understandably frustrated, may well have dodged a bullet however. FedEx acquired TNT Express for US$1 billion less than the previous agreed price and over the course of the last year the value of the brand has plunged. Brand value is down 42% to US$810 million, making TNT Express the fastest falling brand this year. Profitability has been weak for years but brand value remained high on optimism that the picture would change. Time and optimism have now run out for TNT Express however and even FedEx may find maximizing value a challenge.
Royal Mail is another poor performer, down 21% year on year. The Brexit referendum has negatively affected many UK brands but Royal Mail’s troubles go beyond this. Its share price has dropped consistently from September 2016 and now stand at a near all-time low. Online migration of ad budgets is hitting revenue from direct mail (despite the best efforts of the great and the good of the UK’s advertising and marketing community pitching in for the ‘MailMen’ campaign) while a continuing fall in letter volumes is weighing heavily on Royal Mail given its Universal Service Obligation.
Note to Editors
Brand values are reported in USD. For precise conversions into local currency values, please confirm rates with the Brand Finance team.
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.