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Value of Unilever Brand Portfolio more than Double KraftHeinz

20 March 2017
This article is more than 3 years old.

· Unilever’s portfolio of brands valued at $42.9 billion, more than double KraftHeinz

· Food brands experience a challenging year, with the top 4 all losing brand value

· Australia’s Devondale is the fastest growing food brand, up 35% year on year

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

Combining the values of these brands based on ownership reveals the brand portfolio values of the FMCG corporate giants. Unilever’s total portfolio value is US$42.9 billion, more than double that of KraftHeinz, which recently attempted a takeover of the Anglo-Dutch company.

Unilever is a major UK employer, well-known for its business ethics and focus on sustainability. Dozens of its brands, such as Marmite, Colmans and PG Tips, have achieved ‘national treasure’ status in the UK and beyond. So when KraftHeinz (whose brand portfolio is worth just US$20.2bn) launched its bid, there was widespread surprise and trepidation. Eyebrows were raised in UK government circles and the upper echelons of business too, as the bid appeared to confirm the vulnerability of British firms to takeover by foreign counterparts following the Brexit vote.

In the event, Unilever’s CEO Paul Pohlman rebuffed the US$143 billion deal, which was seen to significantly undervalue the company. Brand Finance’s CEO David Haigh comments, “Unilever has one of the world’s most valuable brand portfolios, more than double the value of KraftHeinz. Quantifying this and bringing it to the fore will be key to defending any future bids or ensuring that shareholders receive fair value.”

The size and scope of the world’s biggest food brand portfolios can be found on pages 12 and 13 of the Brand Finance Food & Beverage 2017 report. Click here to access the document.

In general, the last year has proved challenging for food brands. Brands with significant confectionary lines have had the most difficulty as concerns around health eat into revenues. Kraft, Hershey’s, Mars and Nestle have lost 4%, 10%, 14% and 17% of their brand value this year respectively. This trend is global, with Chinese snack food manufacturers Want Want and Master Kong dropping significantly too. Kellogg’s brand value has dropped 3%. Demand for cereal is faltering as consumers explore a wider variety of breakfast options.

The dairy segment is holding up a little better than the food sector as a whole. This year’s fastest growing food brand is Australia’s largest dairy brand, Devondale. Its brand value is up 35% year on year to US$1.5 billion. Devondale’s growth is the result of changing consumer tastes and growing demand in South East Asia. Asia’s growing taste for dairy bodes well for Yili. It is barely known in the West, but thanks to marketing initiatives such as sponsorship of China’s Olympic team, it scores very highly on brand equity measures such as Consideration, Familiarity and Recommendation in China, its domestic market. Yili is now the world’s second most valuable (and the strongest) dairy brand.

ENDS

Note to Editors

Brand values are reported in USD. For precise conversions into local currency values, please confirm rates with the Brand Finance team. More information about the methodology, as well as definitions of key terms are available in the Brand Finance Food & Beverage 2017 report document.

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Media Contacts

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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