Top 50 luxury & premium brands could lose up to $35bn from COVID-19
The world’s top 50 most valuable luxury and premium brands could lose up to US$35 billion worth of brand value as a result of the COVID-19 pandemic, according to the latest Brand Finance Luxury & Premium 50 2020 report.
Within the luxury and premium ranking, three sub sectors are represented: apparel, automobiles and cosmetics & personal care. Brand Finance’s analysis has shown that these sub sectors are likely to be impacted differently by coronavirus, with apparel brands the most heavily impacted, facing a 20% brand value loss, autos moderately impacted, facing a 10% brand value loss and cosmetics brands largely sheltered from the damage of pandemic.
Looking beyond the luxury and premium sector, the value of the 500 most valuable brands in the world, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated US$1 trillion as a result of the Coronavirus outbreak.
Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. The likely impact on brand value was estimated for each sector. The industries have been classified into three categories – limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss).
Alex Haigh, Valuation Director, Brand Finance commented:
“There is no denying the importance of the Chinese market in ensuring the good health and growth in the luxury & premium sector. We have witnessed the Chinese successfully keep the sector above water following the 2008 crash and luxury brands will be relying on this market once again in the wake of the Coronavirus pandemic. Porsche – the most valuable luxury and premium brand in the world – sold a staggering 86,000 units in China in 2019 alone, and the auto giant, along with fellow brands across the sector, will be hopeful that keen spenders will keep demand high.”
Porsche celebrates electrifying year
German automobile brand, Porsche, has retained the title of the world’s most valuable luxury and premium brand by a considerable margin, following a 16% brand value increase to US$33.9 billion.
Porsche has cemented itself as the epitome of luxury – a brand renowned for its superior quality and world-class sports car manufacturing. Now rising to the challenge of an increasingly eco-conscious society, Porsche has become a pioneer in sustainability through the introduction of its first electric vehicle, the Taycan – making the brand the first traditional luxury car manufacturer to launch a fully electric model.
As the most commercially successful luxury car brand, Porsche has seen some of the fastest long-term growth of any brand in our auto rankings, built off sports cars and later SUVs and similar models. It is testament to the brand’s strength and wide appeal that its move to sports electric vehicles is one of the most hotly anticipated new models this year.
Givenchy up 74%
Givenchy is the fastest-growing brand in this year’s ranking, its brand value growing an impressive 74% to US$2.0 billion, simultaneously jumping 11 spots in the ranking from 37th to 26th.
Givenchy’s strong performance and growth, particularly in its makeup division and through its L’Interdit perfume, contributed to its parent company LVMH’s solid financial performance over the previous year. Givenchy has continued to focus on further developing its omni-channel e-commerce platform, the Maison Givenchy, originally launched in 2017 to coincide with former Artistic Director Clare Waight Keller’s - the first female artistic director of the brand - first show.
LVMH, the world’s largest luxury goods conglomerate, has been extending its philanthropic arm further following its €200 million pledge to the rebuilding of Notre Dame, by donating funds and resources to fight the pandemic.
A further eight LVMH brands feature in this year’s ranking with a total brand value of US$39.3 billion and have grown, on average, by 19%.
French brands on the rise
Five French brands feature in the top 10 and have all celebrated a strong year, their brand values growing on average by 14%.
Sitting in third, Louis Vuitton is the fastest growing brand in the top 10, increasing by 21% to US$16.5 billion. Fifth-ranking Chanel recorded a solid 20% brand value growth to US$13.7 billion. The brand, which has been negotiating the absence of longstanding Creative Director Karl Lagerfeld who died in February last year, reported sales that broke US$12.8 billion in 2019.
Ferrari in a league of its own
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, familiarity, loyalty, staff satisfaction, and corporate reputation. According to these criteria Ferrari has retained its position as the world’s strongest luxury and premium brand with a Brand Strength Index (BSI) score of 94.1 out of 100 and a corresponding elite AAA+ brand strength rating.
Alongside revenue forecasts, brand strength is a crucial driver of brand value. As Ferrari’s brand strength maintained its rating, its brand value grew, improving 9% to US$9.1 billion.
Ferrari announced five new models in 2019, including the SF90 Stradale and Ferrari Roma, both aimed at new market segments. The company also established a manufacturing agreement with the Giorgio Armani Group to help push Ferrari collections into a more premium space.
For years, Ferrari has utilised merchandise to support brand awareness and diversify revenue streams but is now taking steps to preserve the exclusivity of the brand. The company plans to reduce current licensing agreements by 50% and eliminate 30% of product categories.
As with other auto brands, Ferrari’s shipments have suffered this year, which have halved versus its 2019 numbers. The suspension of the Formula 1 season has also damaged the brand’s sponsorship, commercial and brand revenues.
Alex Haigh, Valuation Director, Brand Finance commented:
“The embodiment of luxury, Ferrari continues to be admired and desired around the world, and its outstanding brand strength reflects this. It is no wonder that many consumers, who might never own a Ferrari car, want a bag or a watch emblazoned with the Prancing Horse, but it is also crucial that management remain at the steering wheel of the brand’s future and maintain its exclusive positioning by monitoring the licensing output closely.”
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 50 most valuable luxury and premium brands are included in the Brand Finance Luxury & Premium 50 2020 report.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, charts, and more information about the methodology, as well as definitions of key terms are available in in the Brand Finance Luxury & Premium 50 2020 report.
Data compiled for the Brand Finance rankings and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance for more than 25 years, Brand Finance evaluates the strength of brands and quantifies their financial value to help organizations 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 also operates the Global Brand Equity Monitor, conducting original market research annually on over 5,000 brands, surveying more than 150,000 respondents across 38 countries and 31 industry sectors. Combining perceptual data from the Global Brand Equity Monitor with data from its valuation database enables Brand Finance to arm brand leaders with the data and analytics they need to enhance brand and business value.
Brand Finance is a regulated accountancy firm, leading the standardization 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.