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Time is Ticking for the Swiss Watch Brands

10 May 2017
This article is more than 3 years old.

Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies. The 50 most valuable Swiss brands are included in the Brand Finance Switzerland 50.

The falling brand values of Tissot (down 18%), Omega (17%), Longines (12%) and Swatch (11%) reflect the current decline in the Swiss watch industry. The industry has suffered more than two years of declining sales, which were down 9% in the first five months of 2016 due to weaker demand from China and emerging markets. Brands like Apple and Samsung, who are well established in the tech space, have introduced smartwatches, threatening the necessity for an old-fashioned watch. Time is ticking for traditional watch brands to invent new products that incorporate technology or they risk losing market share.

Interestingly, TAG Heuer’s brand value grew 39% to CHF 3 billion. Amidst a 10% decline in Swiss watch exports, TAG Heuer reported more than 10% revenue growth in 2016. The revival is attributed mainly to new models and the launch of its ‘TAG Heuer Connected’ line, which makes the brand the first Swiss watchmaker to offer smartwatches. The main challenge Swiss watch makers currently face is the rise of technology. TAG Heuer recently opened an office in Silicon Valley to solidify its smartwatch alliance with Google and Intel Corps. It is clear that TAG Heuer has embraced the need for change and its growing brand value reinforces the importance of innovation.

Rolex is the most powerful Swiss brand this year with a Brand Strength Index score of 89.2. Compared with the more affordable Swatch and mid-market Tissot, Rolex’s renown and premium status seem to allow it to bypass the industry’s market conditions. Rolex’s brand value is up 14% to CHF 6.8 billion.

Despite a 20% drop in brand value to CHF 18.8 billion, Nestlé remains Switzerland’s most valuable brand and the world’s most valuable food brand. Its brand value is more than double that of Switzerland’s second most valuable brand, UBS. In spite of its incredible feat, Nestlé has been hit by the pervasive trend for healthier, more natural food, which has reduced demand for Nestlé’s crucial confectionary brands. Nestlé operates dozens of individual product brands such as KitKat and Butterfinger, however, the Nestlé brand acts as an endorser, visible on all packaging - a decline in these product brands hits the value of the Nestlé brand too.

In contrast, Lindt’s brand value has risen 18% to CHF 1.5 billion, making it the fastest growing Swiss food brand in the table this year. The chocolate industry has been plagued with higher raw material prices and weak consumer sentiment, yet, Lindt bucks the trend. The brand reported higher profits and grew at a faster pace than the overall chocolate market in 2016. Results in Japan and Brazil were particularly impressive with high double-digit sales growth mainly due to the opening of the company’s own shops and cafes. Furthermore, in line with its global expansion strategy, Lindt has opened new stores in Wales and Australia, boosting its network to close to 400 stores. Thanks to seasonal and premium products such as Lindor chocolate balls and gold foil-wrapped Easter bunnies, Lindt has grown sales in stagnant markets; organic sales growth increased 2.6% as a result of Christmas season promotions. With its growing network and product lines, Lindt manages to escape the declining industry, and it will be interesting to see whether the brand bolsters its value further next year.

Pharmaceutical giant, Roche, is Switzerland’s fastest growing brand and eighth most valuable. Roche’s brand value has grown 52% in value to CHF 5.9 billion and has overtaken Pfizer to become the world’s most valuable pharmaceutical brand. New immune-oncology drug, Tecentriq, achieved FDA approval for lung cancer and Roche expects almost €4.5 billion in revenues by 2021 as a result. A trio of breast-cancer therapies boosted earnings, which offsets sluggish sales of some older drugs. Novartis, the only other pharma brand in the table, has also performed well, its brand value up 9% to CHF 4.5 billion, which seems mainly as a result of strong Growth Products performance.

ENDS

Note to Editors

For more definitions of key terms, methodology and more stories, please consult the Brand Finance Switzerland 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.

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Konrad Jagodzinski
Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Florina Cormack-Loyd
Senior Communications Manager
Brand Finance

About 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.

Methodology

Definition of Brand

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

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 Valuation Approach

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.

Disclaimer

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.

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