This year’s BrandZ list of the world’s most valuable brands, compiled by research company Millward Brown, saw Apple retain its lead and featured the familiar presence of brands such as Google, McDonald’s and Coca-Cola in the top 10. But while many of the individual names at the top remain the same, some industry sectors have seen significant changes in brand values, due to consumer behaviour in emerging markets.
Three categories have seen growth that far exceeds the others: luxury, where the aggregated values of all the surveyed brands has risen by 15 per cent; fast food, which has jumped by the same amount; and apparel, just behind on 13 per cent. Oil and gas trails in fourth with 8 per cent growth. Millward Brown BrandZ director Peter Walshe says most of the growth in the value of global sectors can be explained by one simple mantra: “China.”
He continues: “Categories like luxury, fast food and apparel are very much driven by expansion into huge markets with a voracious appetite for brands that are very different, brands that are very special and brands that give a certain amount of kudos and good feeling because of the fact that they are multinational.”
When it comes to brand values, the luxury sector is a mixed picture. Half of the top 10 in this category have lost value, but this has been more than offset by brand value growth elsewhere. For example, second-placed luxury brand Hermès has increased its value by 61 per cent, third-placed Rolex has seen growth of 36 per cent and 10th-placed Burberry by 21 per cent.
Despite some of the biggest financial institutions in the western world losing billions of dollars, developing economies balanced out those losses as they reaped the profits of investing in industrial growth
Although developing Asian markets are responsible for much of luxury brands’ growth, those that have increased their value also benefit from a resurgence in developed economies such as the US and Europe, where wealthy consumers have rediscovered their appreciation of haute couture.
In fast food, growth is more consistent across the top 10 brands, with eight of them increasing their brand values. The top six also score at least 8 out of 10 on brand momentum, which estimates the brand’s potential for making future contributions to overall financial growth. Unsurprisingly, McDonald’s leads the category with a brand value of $95bn (£59.9bn), more than five times that of its nearest competitor, after recording its best like-for-like sales increases since 2006. But Walshe wonders how long this can go on.
“Certainly those brands are trying to keep up with the times and trying to change and offer more healthy products [in the fast food category]. But however much you might laud their efforts, there are some big clouds on the horizon, which are to do with issues such as obesity. When Jacques Rogge, of the International Olympic Committee, is questioning some of his major sponsors [such as McDonald’s], you can see how the tide is turning in terms of corporate responsibility.”
The biggest loss of value for a category occurred in insurance, where brands lost 16 per cent of their combined value, compared with the next biggest drops, both of 7 per cent, in the automotive and telecoms categories. Among the 10 most valuable insurance brands, Allianz saw the steepest decline, losing 45 per cent of its brand value. Walshe puts the poor performance of the category down to insurance brands’ vulnerability to economic conditions.
“That is really to do with the rest of the world outside China. The financial crisis was very expensive and that is one of the reasons that insurance companies are making less money. The drop in insurance brands is more to do with financial performance than it is to do with brand performance.”
He adds, however, that insurance brands need to focus on communicating what is different about their brands in a way that is meaningful to their target customers, and which extends beyond price.
In between the biggest risers and fallers, some categories remained surprisingly flat. For example, in the technology sector, brand values grew by just 2 per cent even though four of the world’s five most valuable brands overall are in this category.
Walshe says the main reason for this is that “there are both tremendous winners and tremendous losers”. BlackBerry, for example, lost 75 per cent of its value, HP lost 35 per cent and Nokia fell out of the top 20 technology brands altogether, in a year when all three confronted doubts about their futures.
“In technology, if you don’t keep up, innovate and maintain your meaningful difference, you can very quickly fall out of favour. These brands have dropped relatively quickly and dramatically,” Walshe says.
Millward Brown BrandZ director Peter Walshe says most of the growth in the value of global sectors can be explained by one simple mantra: “China.”
Whether Facebook will suffer similar losses in next year’s study following its fluctuating stock market performance remains to be seen, but during 2011 Facebook’s value rose 74 per cent – the biggest rise identified by the whole BrandZ report.
And despite the importance of China to global brands more widely, Facebook and other technology brands seeing similar growth have barely been hindered by authorities there blocking some or all of their services.
Another notable success story in technology is IBM, which overtook Google as the world’s second most valuable brand overall in the 2012 BrandZ report. It is also the only brand in the top 10 that is primarily known as a business-to-business company. Walshe says its brand strength can be put down to its “reinvention, focus and going into high value areas”.
The financial category performed similarly to technology. Despite some of the biggest financial institutions in the western world losing billions of dollars, developing economies balanced out those losses as they reaped the profits of investing in industrial growth.
Many of the category trends seen in the BrandZ 2012 report are likely to continue, Walshe suggests, since by their nature these global trends are slow-moving. But given the significant changes of fortune that some brands and categories saw throughout 2011, there could yet be a few shocks. The brands that do best will be those that understand “the balance between price and quality”, he argues.
“That is a huge issue and will continue to be so, simply because of the financial pressures that not only companies but also consumers are under, and the rising cost of raw materials. That is lasting longer and is probably having a worse effect than people might have expected a few years ago.”
We ask marketers on the frontline whether our ‘trends’ research matches their experience on the ground
Beauty and grooming marketing director
P&G UK & Ireland
More than 800 million men around the world shave with Gillette. Olay has just celebrated 60 years in skincare. But even brands with this heritage are constantly evolving and looking to improve and innovate. Particularly in personal care, people care about the products they use and the difference they make in their lives. This means you have the opportunity for amazing brand loyalty when you get it right. But you have to continue to provide performance.
People trust their faces to Gillette and Olay. But we have had to adapt to the new economic reality. Innovation and marketing communications have had to become more multidimensional. You can’t just look to the premium end and we’ve had to innovate up and down the price tiers and into adjacent space. On Gillette, we’re still there for the guys who use Mach 3 [razors], the Fusion guys and the Fusion ProGlide guys. On Olay, we’ve innovated at the top end with Regenerist, on the mid-range with Total Effects and we’ve launched new products in the lower price range in our Essentials line.
Branding is important in any category. But in personal care, there are some important factors at play. Beauty care is more aspirational than other categories. People want to be excited and inspired. This encourages even greater focus on innovation in products but also creativity in marketing. People place great emotional weight on the products that help them look and feel their best and when they find something that really works for them, they can be fiercely loyal. Also, they’ll tell their friends. There is no stronger marketing tool than creating consumer advocates in beauty care.
Vice-president of marketing, communication and citizenship
IBM believes that companies make four deliberate choices about themselves – their enduring idea, who they serve, how they are primarily experienced and what differentiates them.
Our enduring idea is about world changing progress. We serve forward thinkers, be they clients, employees, investors or communities. The core values and beliefs of the IBM company have changed very little over our 100-year history, although the activities we have been and will be involved in change considerably.
While our fundamental brand hasn’t changed, part of standing for progress is ensuring we’re relevant in all the markets we have presence in and it’s this relevance that has enabled us to rise ahead of our category in the BrandZ study.
In the last few years, we started to consider that something has got to change; that as global citizens we need to do something differently, to do something smarter and that we need to look for new ways to solve today’s and tomorrow’s problems. We’re seeing our Smarter Planet business strategy resonate with our clients, communities, shareholders and our employees.
Marketing director UK and Ireland
We are almost exclusively in a business-to-business environment. That changes our communication strategy. But the one thing that is clear for a technology brand is that even in a B2B environment, customers still get emotionally involved in the brand. That has been ignored by a lot of technology brands in the past 10 to 15 years, on the assumption that your purchase is a purely rational decision.
We operate in some specific markets where you can measure market share, but the nature of technology is that nothing stays very discrete. It’s not like if you manufacture cars, I manufacture motorcycles and they are two different markets.
One of the challenges for a technology brand is how you keep relevance within a technology category, but at the same time keep up with the changes in the wider marketplace. Ten or 15 years ago, a lot of the brand players in the technology market were very different from what they are today. We keep on reinventing ourselves as a business because that is the nature of technology.
From an individual product point of view, the longevity of a product in the consumer arena is typically six to 12 months. In mobile phones, if you haven’t moved on in six months, the market has moved on. That is quite different from the B2B arena, where you are looking at a longer-term purchase.
One of the things about our London 2012 sponsorship is that we don’t talk about individual products. All the experiences we share with customers are about demonstrating relevance. That’s what we have focused on very heavily in the past 12 months. London 2012 has been a huge catalyst to change the type of conversation that we have with customers.