Each year, global valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s largest companies…
British brands have suffered some dramatic falls in their dollar-denominated values this year. Of the 140 of the brands with data for both 2016 and 2017, 88 have declined in value.
On average, the UK’s top brands lost 6% of their value last year. There are a number of reasons behind this, but the common factor is the devaluation of sterling in the wake of the Brexit vote.
Brand Finance says this significant loss of brand value should concern British policy-makers, brand owners, workers and consumers.
Senior politicians have vowed to protect our brand ‘crown jewels’ and Theresa May has promised tougher government scrutiny of brand acquisitions. However, the UK is currently one of the most attractive places to buy brands; it is one of the world centres of the marketing and advertising industry and so, a hub of brand creation; there is relatively little regulatory scrutiny of takeovers; and workforce restructuring is relatively straightforward, particularly compared to European markets.
In this context, the sudden devaluation of British brands leaves them vulnerable to takeovers from international buyers. Unilever and Burberry both recently defended bids from the US (from Kraft-Heinz and Coach respectively), while ITV is reported to have been the subject of repeated offers.
Associated British Foods was unable to bring the Weetabix brand home after a stronger bid from America’s Post Holdings while world renowned chip-maker ARM was acquired by Japan’s SoftBank. This spate of acquisitions and the prospect of more raises serious questions about the potential impact on investment and employment.
David Haigh, CEO of Brand Finance, said: “While the impact of Brexit on the broader economy has not lived up to the doomsday scenarios, British brands are clearly vulnerable to takeover by foreign firms.
“At one level, this is testament to Britain’s strength at developing and managing desirable brand assets. However, more should be done to ensure Britain gets its fair share of the spoils for its quality brands.
“Tighter regulation is one solution, but another is for management and shareholders to be fully aware of both the saleable value of their brands and the value that those brands contribute to the overall business. This way, hasty sales for less than fair value, that endanger British jobs, might be avoided.”
Though British brands have suffered in terms of their dollar value, looking at sterling-denominated figures shows that the majority continue to perform well. Changing the currency almost reverses the decline in fact; 85 of the brands are increasing in value in GBP terms.
Most valuable brand
Shell is Britain’s most valuable brand, with a brand value of £28.3 billion, up 35%. Oil prices saw a fairly steady increase across 2016 as supply became slightly more constrained, helping to improve revenues.
After a drop at the beginning of the year, Brent Crude nearly doubled in value from early January to the end of December. Its asset disposal program following the completion of its merger with BG has helped to consolidate and strengthen Shell’s brand, which has been upgraded from AA+ to AAA- thanks to a Brand Strength Index score of 82.
Shell’s longstanding partnership with Ferrari continues to deliver returns, with a demonstrable price premium attributable to the association with the world’s most powerful auto brand. Shell invests heavily in campaigns that position it as an innovative provider of the clean energy solutions of the future.
As part of its ‘Make the Future’ initiative, Shell enlisted the help of six popstars from around the world for its ‘Best Day of My Life’ video, which became one of the most viral ads of 2016.
Second-placed Vodafone had a more difficult year; even when measured in sterling its brand value declined (by 9%). Fellow telecoms brand BT fell even further, dropping 28% to £8.8 billion, following its accounting scandal and the ongoing Openreach saga.
HSBC, in third place, is also down, though by just 1%. HSBC is going through a period of consolidation. At the domestic level, over a quarter of its UK branches have been closed in the last two years as digitisation and online banking become more prevalent. Internationally, HSBC’s Brazilian business was sold to Bradesco.
The $5.2 billion sale represented a $1.7 billion loss which hit HSBC’s profitability in 2016. Stuart Gulliver will persevere with the cost savings however, having achieved economies of $2.8 billion this year. HSBC’s marketing communications have shifted to reflect its more focused approach.
The ‘World’s Local Bank’ message, conveyed to such great effect by outgoing Marketing Director Chris Clark for so many years has been replaced with campaigns that now focus more on HSBC’s role in facilitating personal and business ambitions.
Banks are of course at particular risk from Brexit. Theresa May’s apparent tough negotiating line may mean that passporting rights are at risk. Stuart Gulliver has indicated that over 1,000 jobs are likely to be moved to Europe once Brexit takes effect in 2019.
Barclays appears to have been hit harder, with a jump in its applied discount rate reflecting its exposure to the uncertainties of the operating environment for UK financial services, leading to a brand value drop of 7% to £10 billion.
The apparel sector has been marked by a stark online/offline divide. The continued scandals surrounding Sports Direct have contributed to a 5% brand value loss. With Mike Ashley facing a Select Committee and heavy media scrutiny over the working conditions at its Shirebrook warehouse as well as its alleged attempted surveillance of MPs, Sports Direct’s brand dropped in value to £1.16 billion.
In contrast, ASOS has staged a revival after a series of unfortunate events including a major warehouse fire. ASOS is benefitting from its international expansion and the exponential growth of ecommerce. The retailer’s brand rose by 29% over the past year to £710 million.
Three airlines made the UK 150 this year, led by British Airways with a brand value of £2.9 billion. However, the longer term shift towards low cost airlines combined with weakened consumer spending power in long-haul locations is evident. British Airways and Virgin Atlantic are both down, by 7% and 15% respectively. In contrast, easyJet is up by 60% to £1.34 billion.
As consumer budgets for holidays remain tight and people look closer to home for their breaks, easyJet’s brand could add further value, though even on short haul flights, the weakened pound threatens a reduction in foreign travel.
Fastest growing brand
Lynx is Britain’s fastest growing brand, up 91% to £2.1 billion. Unilever decided to ditch the increasingly anachronistic ‘Lynx Effect’ campaign that was seen to be out of touch with the modern male. It has performed an almost complete reversal of its previous identity, with a series of new campaigns designed to portray a “radical and progressive view on masculinity”. Despite initial cynicism from marketing pundits, the approach appears to be paying off.