Flying the flag raises value of british brands

Brands that use their British heritage to sell themselves have seen their value grow in the year running up to the Queen’s Diamond Jubilee and the London Olympics, according to a new list of the 50 most valuable British brands seen exclusively by Marketing Week.

Out of the 10 brands that have grown in value the most in the past year, according to the Brand Finance study, five are consumer-facing companies that make their British origin a focal point of their marketing.

Virgin Media has seen the value of its brand grow by 64% – more than any other on the list – in a year when it introduced a UK flag motif into its logo. Luxury fashion label Burberry, which holds a royal warrant and uses quintessentially British models such as Rosie Huntington-Whiteley in its advertising, achieves the second-highest jump in brand value, of 41%. High street fashion retailer and London Olympics supporter Next, whose summer collection has a British theme, comes third, growing by 32%.

Chocolate maker Cadbury and car marque Mini also feature in the top 10 for brand value growth, experiencing increases of 27% and 18% respectively. Both retain strong links to their British roots despite now having foreign owners.

In compiling its list of brands of British origin, valuation company Brand Finance assessed the revenue contribution each makes to its parent company by estimating the amount it would cost to licence the brand if the business didn’t own it. It takes into account the current worth of future cashflows that can be attributed to the brand alone.

Strategies for exploiting a brand’s UK connections vary, with some finding that Britishness is more appealing to customers at home than abroad. Virgin Media’s insertion of the Union Jack into its logo is a gesture aimed solely at the UK, since that is its only market (see The Frontline, right).

Despite not being a sponsor of the London 2012 Olympics, Virgin Media has also succeeded in associating itself with athletics in the year when the games take place, through advertising featuring sprinter Usain Bolt. And it recently sponsored this year’s series of ITV show Britain’s Got Talent, targeting a UK audience.

Developing markets

Conversely, Burberry has taken advantage of its British heritage in its marketing to audiences outside the UK. Its sales growth now principally comes from developing markets, particularly China, where consumers are increasingly spending their new-found wealth on premium European fashions.

Despite all having strong cultural links with the UK, 12 of the top 50 most valuable brands of British origin are now held by companies based outside the UK, and eight of these foreign-owned brands are in the top 20 by value. Most of these are business-to-business brands, and so less likely to bring their origins to the forefront of their marketing.

But even for prominent and well-loved consumer brands like Cadbury, owned by US company Kraft since 2010, and Mini, owned by German car maker BMW since 1994, coming under foreign ownership does not appear to have adversely affected their brand perceptions.

Despite Kraft having reneged on promises not to cut British manufacturing jobs, Cadbury’s brand remains strong, according to Brand Finance valuation director Bryn Anderson. “Everyone was concerned about what would happen to the Cadbury brand after the takeover by Kraft. But if you look at its brand value, it has done really well. Kraft has allowed Cadbury to retain its Britishness.”

Exploiting Britishness has not been the only determining factor of changes in brand value in the past year. There are also marked trends among specific business sectors. Three of the big four commercial services companies – PwC, Ernst & Young and Deloitte – have seen top-10 brand value growth. Most banks and supermarkets, conversely, have seen the value of their brands diminish.

RBS is one exception, growing its brand value since 2011 and showing some recovery. However, the value of RBS’s brand is still much lower than those of other banks as a proportion of the overall value of its business. Anderson points out that RBS has taken longer than other banks to rebound from its reputation taking “a massive crash in 2007 and 2008”, though all banks still have ground to make up.

He adds: “There was the economic downturn, financial markets have been struggling and there are the reputational issues they have been dealing with. But commercial services companies, which cover the accounting disciplines, have avoided being caught up in these problems.

All of them have seen significant revenue growth.”

Not all supermarkets have lost brand value. Waitrose, Marks & Spencer and Morrisons have improved their positions year on year, but Sainsbury’s and Asda are among the 10 biggest losers on Brand Finance’s list. The value of both brands as a proportion of the ‘enterprise value’ – the hypothetical value of a business if it were in a position of zero debt – is still high, however, at 49% for Sainsbury’s and 40% for Asda.

Tesco has lost less brand value than either Asda or Sainsbury’s, but still suffered a drop of 5% in a year when it issued profit warnings for the first time in two decades. Anderson suggests that recent price wars featuring heavy discounting and confusing price promotions have tarnished these three brands.

Of these, Sainsbury’s is perhaps best placed to claim back some of its positive associations among British consumers in the short term. As an official sponsor, it will have a prominent presence around the Paralympics and is organising a Family Festival in London’s Hyde Park to celebrate the Queen’s Diamond Jubilee (see main picture).

Anderson says: “Brands that take advantage of the Olympics and the Jubilee will see a real benefit, and the ones that don’t will have missed a trick.”