The total value of the world’s top 50 most valuable cosmetic brands has declined by 9%, decreasing from US$137.5 billion in 2020 to US$124.8 billion in 2021, according to the latest Brand Finance Cosmetics 50 2021 report.
As a large and diverse sector, there have been mixed fortunes for cosmetics brands, with colour cosmetics the most negatively impacted segment, recording an average brand value decline of 15%. Multi-level marketing brands – including Avon (brand value down 24% to US$772 million) and Oriflame (down 1% to US$802 million) - have faced a 12% drop in brand value on average. The sector’s largest brands in hair care, razors, and fragrance have also been hard hit with an average brand value drop of 10%.
That being said, according to Brand Finance’s Global Brand Equity Monitor, the cosmetics sector has the highest reputation of all sectors globally – only matched by the food sector. A strong reputation, and thus a strong brand, will stand cosmetics brands in good stead to recover at pace in the coming year.
Annie Brown, Associate, Brand Finance, commented:
“The pandemic has undoubtedly forced change upon the cosmetics sector, from stifling demand - a result of lifestyle changes and financial uncertainty - to the rapid rise of digitalisation and e-commerce. Brands that have shown savviness and the ability to adapt will bounce back from the turmoil of the last year, unlike those that have failed to adapt quickly enough.”
L’Oréal strikes again
L’Oréal has retained the title of the world’s most valuable cosmetics brands for the 2nd consecutive year, despite recording a 13% brand value loss to US$10.2 billion. The drop in brand value is largely a result of the brand’s financial outlook dipping, a consequence of the pandemic.
For the first time, Brand Finance has conducted global market research, as part of the Global Brand Equity Monitor, for L’Oréal and L’Oréal Paris brands. The research demonstrates that the brand’s reputation among consumers is significantly lower outside of Europe and North America, particularly in markets such as India, China, and Japan. At the end of last year, the brand undertook some strategic reshuffling of L’Oréal’s geographic zones - with APAC being separated into North and South – a potential indicator of future growth plans post-pandemic.
The beauty behemoth’s position in the market still remains a cut above the rest and it boasts an incredibly strong heritage in the sector. It has been 50 years since L’Oréal first used the slogan “because you’re worth it” and the phrase still bears meaning to consumers today, with the brand successfully remaining relevant through product innovations and continued fresh marketing.
Yves Rocher up impressive 71%
Yves Rocher (brand value US$2.4 billion) is the fastest growing brand in this year’s Brand Finance Cosmetics 50 2021 ranking, following an impressive 71% brand value increase and simultaneously jumping eight spots from 28th to 20th.
Yves Rocher is bouncing back following a sharp decline in brand value is recent years due to the decision to pull out of the UK amid Brexit. The brand does, however, continue to perform well in mainland Europe. During the peak of the Coronavirus pandemic, Yves Rocher’s factories were repurposed to create alcohol gels, producing nearly 45,000 bottles a week.
Fresh and The Body Shop storm into ranking
New entrants Fresh (brand value US$1.1 billion), and The Body Shop (brand value US$725 million) are the second and third fastest growing brands, up 53% and 22%, respectively.
Entering the ranking in 36th position, Fresh - which was purchased by LVMH in 2000 – benefits from the combination of LVMH capital behind it, paired with the founders remaining in control.
The UK’s The Body Shop has claimed 49th position. The brand has undertaken a complete product and branding overhaul in recent years since it was bought by Brazil’s Natura &Co from L’Oréal, now positioning itself as an activist brand at the core, that will be ‘forever against animal testing’. Sales for the brand were solid on its e-commerce platform, which more than compensated for sales lost in stores, which number at 3,000 in more than 70 countries.
Natura is sector’s strongest
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction, and corporate reputation. Alongside revenue forecasts, brand strength is a crucial driver of brand value. According to these criteria, Natura (up 19% to US$1.7 billion) is the world’s strongest cosmetics brand, with a Brand Strength Index (BSI) score of 86.7 out of 100 and a corresponding AAA brand strength rating.
According to Brand Finance’s Global Brand Equity Monitor research, Natura is perceived to be an extremely strong brand across Brazil and South America and although the brand is lesser known outside the region, its proposition remains favoured internationally thanks to the rise in popularity of natural brands.
The brand was largely able to shelter itself from the negative impact of the pandemic due to the diversified risk of its business operations, which covers a wide variety of products from bath, fragrance, body, and make up.
Furthermore, the brand is bolstered by the success of its parent company Natura &Co – which owns Aesop, The Body Shop and Avon – which scores well across corporate brand measures including governance, sustainability, and employee appeal.
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.
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 value refers to the present value of earnings specifically related to brand reputation. Organisations own and control these earnings by owning trademark rights.
All brand valuation methodologies are essentially trying to identify this, although the approach and assumptions differ. As a result, published brand values can be different.
These differences are similar to the way equity analysts provide business valuations that are different to one another. The only way you find out the “real” value is by looking at what people really pay.
As a result, Brand Finance always incorporates a review of what users of brands actually pay for the use of brands in the form of brand royalty agreements, which are found in more or less every sector in the world.
This is known as the “Royalty Relief” methodology and is by far the most widely used approach for brand valuations since it is grounded in reality.
It is the basis for our public rankings but we always augment it with a real understanding of people’s perceptions and their effects on demand – from our database of market research on over 3000 brands in over 30 markets.
Brand Valuation Methodology
For our rankings, Brand Finance uses the simplest method possible to help readers understand, gain trust in, and actively use brand valuations.
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.
Our Brand Strength Index assessment, a balanced scorecard of brand-related measures, is also compliant with international standards (ISO 20671) and operates as a predictive tool of future brand value changes and a control panel to help business improving marketing.
We do this in the following four steps:
1. Brand Impact
We review what brands already pay in royalty agreements. This is augmented by an analysis of how brands impact profitability in the sector versus generic brands.
This results in a range of possible royalties that could be charged in the sector for brands (for example a range of 0% to 2% of revenue).
2. Brand Strength
We adjust the rate higher or lower for brands by analysing Brand Strength. We analyse brand strength by looking at three core pillars: “Investment” which are activities supporting the future strength of the brand; “Equity” which are real perceptions sourced from our original market research and other data partners; “Performance” which are brand-related measures of business results, such as market share.
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.
3. Brand Impact x Brand Strength
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. Brand Value Calculation
We determine brand-specific revenues as a proportion of parent company revenues attributable to the brand in question and forecast those revenues by analysing historic revenues, equity analyst forecasts, and economic growth rates.
We then apply the royalty rate to the forecast revenues to derive brand revenues and apply the relevant valuation assumptions to arrive at a discounted, post-tax 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.