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Economic downturn wipes $67 billion off top global brands’ valuation

Brand Finance plc, the world's leading independent brand valuation consultancy, recently revealed the impact of recession on the 100 leading Global and US brands.

In March 2008 Brand Finance released the 2008 version of its report on the 500 most valuable Global Brands.

In the months since this year’s annual report was released, the world has been gripped by a significant economic crisis that has had a deep and profound impact on enterprises all over the planet. The economy has been hit by commodity prices rises, the credit crunch, rising unemployment and tumbling share prices.  As a result of this Global economic crisis, Brand Finance has revisited its findings and has updated the values of the top 100 Global and top 100 US brands.

The study is calculated by Brand Finance based on the widely used and technically superior “Royalty from Relief” methodology, which assumes that a company does not own its brand name, and then calculates how much it would have to pay to license it from a third party.

The update reveals that:

Global trends:

  • Between January and September the enterprise value of the 100 most valuable Global branded businesses has decreased by 13.3 percent, a drop of US$1.6 trillion.
  • Between January and September the brand value of the 100 most valuable Global brands has decreased by 4.2 percent, a drop of US$67 billion.

Sector trends:

  • As the price of oil continues to rise so does the value of the leading petrochemical brands. Four of the top five brands that record an increased in brand value belong to leading brands in the oil and gas sector. These include; ExxonMobil (19.4 percent), BP (18.3 percent), Chevron (17.9 percent) and Shell (12.8 percent).
  • The only other sector to record a significant increase in overall brand value is healthcare, suggesting that despite a decrease in spending, consumers are prioritizing health and well-being. Johnson & Johnson does especially well and outperforms its competitors by jumping an impressive 16 places to 84 in the table, illustrating the trend across the sector.
  • The retail sector’s total enterprise value has risen by 9.1 percent. During the current recession low-priced retailers are leveraging their position by providing customer with value for money goods.
  • Everyday consumer brands have benefitted as consumers trade-down and rediscover good value products. McDonald’s is an example of a brand that has benefitted from successful re-positioning as a healthier, value for money option. Trading on its heritage and consumer brand equity, McDonald’s brand value increases by 9percent to US$23,968m. On the other hand, brands such as Starbucks struggle to gain share of (shrinking) wallet as consumers cut unnecessary spending habits and turn to more essential goods.
  •  With the current economic conditions, it is not surprising that the financial services sector has decreased in brand value across the board. Financial service institutions need to refocus attention on the key value drivers of their brands and develop longer term strategies.

Brand Rankings:

  • Wal-Mart has overtaken Coca-Cola, to become the most valuable global brand in the BrandFinance500. The value of the brand has increased 9percent since December, to US$42,567m driving a 23.5 percent increase in Wal-Mart’s enterprise value over same period. Wal-Mart has turned the recession to its advantage by leveraging its reputation for low prices.
  • CITI tumbled out of the top ten to fifteenth place with a brand value of US$24,058m (a 14 percent decrease) reflecting its poor performance in the current sub-prime crisis. This allows Vodafone to enter the top ten in ninth place as the leading telecommunications brand (with a brand value of US$26,688m) closely followed by Nokia (with a brand value of US$26,564m)

“In the current climate, it is essential to understand the absolute value of brands and what drives their value,” said David Haigh, CEO of Brand Finance plc. “The Brand Finance™Global 500 report provides an insight into the effect of recession on leading brands.”

“There is clear evidence that basic, value for money brands like WalMart, AT&T, Exxon and McDonalds are performing very strongly, particularly when they invest consistently in advertising and marketing.  By contrast unnecessary or discretionary brands like Starbucks, Nike, Coca Cola and L’Oreal are declining in value as consumers watch their finances more carefully.”

“There is also evidence at the global level that developing world brands are growing rapidly. Samsung, Tata, Bank of China and Lukoil are all good examples of this phenomenon.”

To get your FREE copy of the Brand Finance Top 100 Update Report, click here.

Or, to learn more about how Brand Finance can provide a deeper evaluation of your brand, contact us at (212) 521-4240.
 

Brand Finance plc, is a leading independent valuation advisory firm which advises strongly branded organizations on how to maximize shareholder value through effective management of their intangible assets.

© 2008 Brand Finance plc