The Best Global Brands Interim Report How leading brands are navigating challenging market scenarios
Throughout all the coverage, comment, and conjecture on the economic crisis we have been constantly answering questions about the Best Global Brands and what lessons can be supplied for creating and managing brand value in these turbulent times. This considerable interest has prompted us to create this report. Weâ€™ve realized that we can provide tremendous insight for all marketers on how these brands are performing amidst the turmoil and offer perspective on the world of branding before our full report of Best Global Brands 2009 is published in September.
The Best Global Brands Interim Report 2009â€‚ 4
The Best Global Brands Interim Report: How leading brands are navigating challenging market scenarios We are clearly living through a time of unprecedented change. The economic landscape is the unavoidable subject on everyone’s mind. Within this context of the unknown we have seen businesses scale back costs, resources, and investments in order to face the challenges ahead. It’s an understandable and prudent action within such a volatile market, but what happens when you’ve cut as far as you can? What happens when you switch focus to consider the revenues the business creates rather than the costs you can save? Brands will either weather or wither in the storm. Surely the next phase of the economic cycle needs to focus on demand creation, not just cost reduction. Too often demand creation seems too ambitious when consumers have locked their wallets and purses shut. But as we’re constantly seeing, consumers won’t buy what they don’t want, and without demand there’s no revenue coming in to fund even the most prudent cost base. As such, we’ll see brands that create demand and sustainable value for their businesses, even in these lean times. With corporate value increasingly driven by intangibles, like brands, companies should first look to reduce nonstrategic assets. For businesses with more than 50 percent of their value in intangible assets, namely the brand, reductions in marketing and innovation cut directly into the strategic muscle of their organization.
5 The Best Global Brands Interim Report 2009
ith corporate value increasingly W driven by intangibles, like brands, companies should first look to reduce non-strategic assets. Our Best Global Brands report has shown time and time again that a brand is often an organization’s most valuable asset. But then how do you manage such an asset in these turbulent times? Ultimately, the difference between winning and losing – the difference between staying in business and being out of business and between a brand living or dying – is understanding the role a brand plays and how it derives its strengths. This is absolutely crucial in navigating today’s market. (Read more on the Role of Brand and Interbrand’s process of brand valuation in the sidebar “Calculating brand value.”)
Calculating brand value
Interbrand pioneered the methodology for valuing brands some 20 years ago. In that time we’ve valued over 5,000 brands around the world, and our methodology has been used in courts of law, taught in business schools, and applied by tax authorities. We value brands using the same principles that analysts use to value other business assets – by considering how much brands are likely to earn in the future. There are three components to our methodology:
01 Financial analysis We forecast current and future earnings specifically attributable to the branded products. We subtract operating costs from revenue to calculate branded operating profit. We then apply a charge to the branded profit for capital employed, giving us the brand’s economic earnings. For our public studies, our financial analyses are based on publicly available data culled from a range of analysts’ reports to build a consensus estimate for financial reporting. At this time, analysts are clearly finding it very difficult to forecast earnings with any degree of conviction or accuracy. Everyone wants to know when markets will bottom out, but in reality no one knows when the green shoots will appear.
For our own purposes of valuing brands in a public forum, at this time, it feels counterintuitive to apply data with such inherent deviations. So while a financial analysis is integral to a valuation, if we are to consider how to best manage a brand in these circumstances, we should focus on the other two components of a valuation: Role of Brand and Brand Strength Score.
02 Role of Brand Index
The Role of Brand Index is a measure of how much of the customer demand was dependent on the brand at the point of purchase and is applied to the economic earnings to arrive at Branded Earnings. By this assessment, the brand’s contribution to the earnings of the business is isolated. For this study, industry benchmark analysis
for the Role of Brand Index is derived from Interbrand’s database of more than 5,000 prior valuations conducted over the course of 20 years. In-house market research is used to establish individual brand scores against our industry benchmarks.
03 Brand Strength Score
This is a measure of the brand’s ability to drive choice and secure ongoing customer demand, and it is used to assess the riskiness of forecasted Brand Earnings. The Brand Strength Score is translated into a discount rate, which is applied to Brand Earnings to derive the Net Present Value of the brand. This assessment is a structured way of isolating the specific risk of the brand in the context of the business. We compare the brand against common factors of brand strength in its marketplace.
The Best Global Brands Interim Report 2009 6
Understanding Role of Brand and Brand Strength to understand the future of your market
Every business involves a promise (brand) and the fulfillment of that promise (businessâ€™s abilities). Thus, creating and managing brand value requires an optimization of the interaction between the brand and the business. The Role of Brand defines the degree to which demand is dependent on the brand, while Brand Strength is the ability of the brand to generate and sustain demand. The two factors are essential for increasing business value; while Brand Strength is subject to the law of diminishing returns, a change in the business model (and subsequently in the Role of Brand) will pave the way for further growth. The following two-by-two diagram provides a useful framework to consider the relationship between Role of Brand and Brand Strength.
7 The Best Global Brands Interim Report 2009â€‚
Consider where your brand lies within this framework. This will help you understand the role brand plays within your business as well as the strength your brand has in competing in its market. Both the Role of Brand and Brand Strength should be regarded as active levers of the brand. They can be pulled or pushed to drive the brand to a different place within the matrix. However, you need an accurate understanding of how the brand adds value to the current business and how it is positioned in the market. A. In Quadrant A (top right), we can see brands with a high Role of Brand and high Brand Strength. While this may outwardly seem like the perfect spot, in many ways this is the most challenging position. What every market has in common is the level of change that has taken place. In turn, customersâ€™ attitudes and economic circumstances have changed in reponse to the shifts. How can these brands therefore ensure that they continue to maintain their Brand Strength and Role of Brand when the dynamics and competitive game of the market are in flux? Positively, they have the ideal conditions to allow them to pull away from their
A competitors. Negatively, they risk losing f eo A hfor Roltangible value as customers look returns h g g Hi d, hi gth n tren focus on price on their purchase decision Bra d Sand an Br“tangible” and other verifiable or drivers. No brand can be taking a timeout right now; cutting into strategic assets like the brand can have negative short- and long-term of C Ifh Ryou’re d ole in Quadrant A, you need B h Bthe effects. ran w w g i o l H d, g th, lo th i g H n n g and right strategies Bra Stre to stay there. r ren nd
of ole hR h Hig d, hig gth n n Bra d Stre n Bra
St of B ole
R B. The brands found in Quadrant B have high Brand Strength and low Role of Brand, meaning the brand is well positioned in a of D Rcontribution market where the brand’s to ole w w o o h l L The t , g d demand is rather small. classic advantage n n Bra d Stre an of this quadrant is theBrfreedom to experiment Ro h lewith ngt of B new ways to grow the business.trStrong S e ran d n Bra and a lower brandsdhave a strong foundation, Role of Brand in your category means a lower risk of exposure or lower risk of stretching your brand out. There is less vulnerability
The brands that create the most value are the ones that are the most relevant to the customers’ choice. to letting it run and seeing if the category drivers can be tipped in your favor or using the brand in other segments. However, the juxtaposition between Brand Strength and Role of Brand could also allow a brand to become seen as “nice to have” rather than essential. For these brand owners, the brand is overdelivering for the business in a market where brand could be conceived as being unimportant. In such circumstances the challenge is to utilize the brand’s strengths to increase the role that the brand plays in the market. The opportunity here is the ability to change the relevance of the demand drivers and increase the weight on those that are most dependent on the brand. A change in the Role of Brand in a category requires innovation: new business models, delivery infrastructure, and radical product benefit intensification. If brand plays a low
d ran w hB o Hig gth, l d n n Stre of Bra e Rol
of ole hR Hig d, low gth n n Bra d Stre n Bra
D e of Rol Low d, low gth n n Bra d Stre n Bra Ro
role in customers’ current decision-making process, a little more communication or a refreshed touchpoint probably won’t change much. But if businesses can innovate and meaningfully change the parameters of choice, then they can raise Role of Brand in their category and create a disadvantage among competing brands. Brands that have done this successfully include Zara, Southwest Airlines, Amazon.com, and iPod. C. In Quadrant C we find brands that have a high Role of Brand but low Brand Strength score. This is a critical spot on the matrix. In this scenario the brand has an important influence on purchase decisions but fails to drive ongoing demand. This means your brand is important but risky, and your competitors tend to win the battle each time the product offering is similar. Brand building is required, and fast, as the category structures will punish weak brands. If these brand owners want to ensure the brand improves its ability to generate demand, strategies are required to improve the brand’s performance. To increase Brand Strength, the performance of the brand on those criteria most relevant to the customer must be improved relative to that of competitors. This requires improving the attractiveness of brand attributes (positioning) and/or the contact quantity with the customers (increase touchpoint investments).
D. Brands in Quadrant D are perilously full of opportunities. It would be easy to feel brand is redundant if you sit in a business that focuses on demand drivers, which are not strongly dependent on brand (the competitive advantage comes from other tangible or intangible assets), and your brand fails to drive demand. However, if competitive pressure increases, the brand becomes a needed point of difference. Increasing the Role of Brand or increasing the Brand Strength (or ideally doing both) is the key to competitive advantage. Doing nothing allows the brand to wallow with the tide. Quite simply, brand owners need to make something happen - and fast. Understanding the combined effect of the role your brand plays and the strength it has are pivotal to your future in a marketplace in which demand is decreasing. The brand is closely linked with the business model, which is evident in the interplay between the provided customer benefits and their dependence on the brand. Once the brand’s position in a market has reached a level of diminishing returns, a change in the brand’s role in the business requires the consideration of the business’s entire capabilities and is an opportunity to create value. The brands that ultimately create the most value are the ones that are relevant to the customer choice and understood as superior in their market.
The Best Global Brands Interim Report 2009 8
The markets of the downturn
Ever since the economy began its demise in the summer of 2008, we have watched new market scenarios emerge. These market scenarios provide unique challenges for brand owners, regardless of which quadrant a brand falls into. Some of the scenarios are interrelated and may well escalate into the next sequential stage. All require different techniques and strategies for managing the brandâ€™s safe passage through the ensuing turbulence.
01 Market scenario The Hurricane This is the market that has grabbed the headlines of the credit crunch and the ensuing recession. While it steals the show, it’s actually confined to a limited number of sectors - at least for the time being. The financial services market has received the brunt of the hurricane. Before the crisis, financial services brands were often predictable, undifferentiated, and not infrequently boring. Consider the client environment before the hurricane.
01 Sidebar Brands in The Hurricane Banks were once synonymous with public trust and confidence. But for many, the current global meltdown in financial markets had led to a recalibration of their relationship both with their own money and with the banks that look after it. Consumers no longer trust the financial sector. The global meltdown and the financial industry’s risky investments with consumers’ money have left stakeholders shaken to the core. The hurricane has hit – so how do banks regain consumers’ trust and how can corporate branding contribute to this effort? Citigroup, once the world’s biggest bank by assets, and ranked number 19 on Best Global Brands 2008, lost US$ 253 billion of its market value in two years. The government is taking a stake in the bank of 40 percent. While last year its high exposure to subprime mortgages, high costs, and unfocused growth through badly integrated merger and acquisition activities established that
Demand drivers were consistent year over year, and considering the global complexity of the segment, customer needs were fairly common across both geographies and segments (insurance, private banking, consumer, and corporate). With customer choice narrowly fixed, and with core products and people varying very little from one player to the next, financial services players turned the product innovation engines to full tilt, precipitating the financial storm of a century.
As in nature, market hurricanes are transfiguring events. They don’t just dump water, take out the power, and raise a few shingles. Hurricanes possess a power capable of reshaping coast lines, claiming entire cities, and changing lives forever. For businesses, like any real hurricane survivor, there will be no status quo to return to when the storm finally subsides. The cellar is flooded, the crops have gone to spoil, and the customers are on higher ground, weary and wary of heading home.
it was in poor shape, no one could have predicted its dramatic descent and ensuing nationalization. Overall, Citigroup’s fall has signaled frightening warning call to consumers: No bank is safe.
they were either regional or too small have benefited from the erosion of trust in bigger competitors. While it would be a stretch to say it is a great time for these brands, these banks have successfully reassured the markets and are less vulnerable in the longterm because they have regained or held on to consumer trust. This is another effect of “The Hurricane.”
While Citigroup’s CEO’s announcement that he would take a token pay of $US 1 until the company returns to profitability is a step toward rebuilding shareholder and leaders’ trust, much more needs to be done to rebuild trust internally and externally. It must take measures to consistently build trust by ensuring that the brand strategy and business strategy are aligned. A further understanding of its brand value, management for the long-term, and a grassroots and human effort to engage with stakeholders can all help Citigroup and other financial services businesses navigate this terrain. The brands that display their leadership by taking active control, explaining why we’re in the mess, and offering solutions will demonstrate that they are serious about real organizational changes and accountability. The fluctuations of Citigroup, in particular, reflect the confusion and volatile emotions consumers feel toward financial brands at this time. Meanwhile, banks that did not appear on the Best Global Brands 2008 list because
Santander is a good example of a regional bank that is persevering despite the crisis. Santander is Europe’s second bank by market value and is number one in Eurozone. While Merrill Lynch (ranked 34 in 2008), and JP Morgan (ranked 37 in 2008) once greatly profited from their focus on brokering and investment banking, Santander’s strong focus on retail banking has left it in a much stronger position now. The bank has even withstood a blow from the Madoff incident; although Santander was one of the institutions most affected by the scandal, it has also been one of the first to offer to return some of the money lost by clients in the fraud. This measure has been imperative in regaining consumer trust. Santander is also using its newly advantageous position to gain access to liquidity and market share in core markets such as Spain and the U.K. Both measures suggest that Santander will emerge stronger from the storm in the long-term.
The Best Global Brands Interim Report 2009 10
A recent study proves this case. In February and March 2009 we helped a bank conduct global research with clients across corporate and private banking segments. These customers described a Category 5 market hurricane. They don’t trust anyone and they don’t believe anything. Their hierarchy of needs has been turned completely on its axis. The absolute basics are now the highest-order drivers of demand (solvency, stability, open for lending). It is a customer environment that has been truly transfigured. Where is the value in the hurricane? What’s the forecast? And can anyone turn it to his or her advantage? The short answer: near, term inevitability followed by longer-term opportunities. The Swiss market is the perfect example of the near term. The largest Swiss bank, UBS, has been one of the hardest hit during the hurricane. It is literally hemorrhaging assets, many of which are flowing into the statebacked Cantonal bank, and smaller, regional banks like Credit Suisse and Raiffeisen. Like the hotel operator outside town, regional banks are profiting as customers flee the site of the storm in search of safety. But this is a reaction among customers to businesses that existed before but have now become more attractive because of these extraordinary conditions. The larger, longer-term
The same wind that shook the foundation can also raise the sails. opportunity for brand owners is to capitalize on the sea of change and build new brands. This is easier said than done but could include: • Renovate - If you’re a brand with valuable consumer affinity, this market could be a new opportunity for you. For example, Sandoval is using its strong focus on retail banking and legacy of trust to steal market share from competitors. • Reinvigorate - Dig deeper into customer drivers of attachment and use the transformative nature of the market to affect broad and lasting business and brand strategy changes within your organization, as one global financial services client is doing.
open for new lateral movers and new entrants. On March 30, Tesco announced it would open 30 branches of what is reported to be called Tesco Bank, a model it had been testing. (“Tesco to Open 30 instore ‘bank branches.’” Financial Times. March 3, 2009, p. 19) • Rebuild - Leverage the moment to rebuild a new brand. It is too early to know who will do this successfully. If you’re managing a brand in the midst of a hurricane, recognize that the old ways of doing business have now changed. Create future scenarios based upon consumers’ anticipated needs and start to maneuver yourself in this direction as quickly as you can. Remember, the same wind that shook the foundation (Lehman, Bear Sterns) can also raise the sails. Indeed, a March 2009 Interbrand North American banking sector study not surprisingly shows that the role of brand in this sector has increased significantly. For brand owners in financial services, this means the return on branding innovation and investment has likely never been greater. (Read about these brands and more in the “Brands in The Hurricane” sidebar on the previous page.)
• Relocate - The simultaneous rise in Role of Brand and decline of trust and reputation among incumbents leaves the door wide
02 Market scenario The Depression This is perhaps the most typical market of these times. Demand once flowed with consistency but has since taken a downturn that’s in tune with the economic conditions. Demand has slowed as consumer spending has restrained. Whether this downturn is “U” shaped, bath shaped, or “L” shaped is difficult to determine. What we do know is that the trajectory of demand drivers will change according to the market. The auto industry is a typical example of this market 11 The Best Global Brands Interim Report 2009
– although The Depression can be see across all categories, from cosmetics to electronics. In the case of the auto industry, brands like Honda and Ford have seen purchases postponed as consumers are in a “wait and see” mindset about their spending on major purchases. They will eventually return, but who knows precisely when or what it is that buyers will want. Brands need to stay in the game and ensure that they have the flexibility to move with the market.
Managing a brand in such circumstances means that you really need to have your finger on the pulse of the marketplace. Key questions brand owners should ask include: • What are the game-changing innovations? • What tactics can unlock demand?
02 Sidebar Brands in The Depression Many leading brands that once had consistent demand for their products are now experiencing a depression. Indeed, The Depression scenario is the most common result of the global economic crisis. This scenario is, of course, most evident in the auto industry. Ford and GM have seen stocks tumble, with bailouts imminent. While Ford is combating layoffs and production cuts by aggressively focusing on the launch of a new Ford Taurus to uplift the brand’s reputation in the U.S. as well as focusing on the Chinese market, it is hard to tell if this will provide the real boost the brand needs. The question is: Given Ford’s situation, is this game-changing enough? Meanwhile, Honda, which has proven to be a far more stable brand over the last few years, is also in The Depression scenario. While we predicted a revenue increase of eight percent in 2008 and two percent in 2009 for Honda in Best Global Brands 2008, given the current economic situation, we now expect a decline of 12 percent in 2008 and six percent in 2009. Honda has also been forced to cut back on production to bring down
inventory levels in the U.S., Europe, and Japan. And yet, despite a decline in demand, Honda is doing some things right to stay on top of the situation. While it is dialing down some aspects of its brand, it has aggressively focused on the new, innovative, hybrid car “Insight,” which it just started selling in Japan and which will be available in Europe and the U.S. in April. The small, stylish, compact eco car is priced around $US 20,000 (20 percent cheaper than the price of a Prius) and improves fuel efficiency with an Eco Assist feature that gives drivers feedback and assigns scores on the efficiency of his or her acceleration and braking practices. Honda’s plan was to introduce the car to capture the middle-class consumer that wants to be eco friendly and can’t spend money in this economic situation. While it is hard to know if the car will be cheap enough to attract Gen Xers in the U.S. and Europe as well, the current economy could very well prove to be what ultimately shifts the perception of hybrid cars from an environmentally-conscious trinket to an intelligent, value-formoney purchase. If so, Honda is well prepared to capture share, with even more hybrids in the work over the next five years. While the auto industry may have been the hardest hit by The Depression scenario, it is not the only
category to see a decline in demand. Although Nintendo’s Wii benefits from the trend for consumers to stay at home and spend time with their family it may be affected in the short-term by a number of factors. First, a deepening recession in Japan has slowed demand. As the country slides into a downturn, Nintendo has already reacted by cutting its sales target by one million Wii consoles to 26.5 million for the year. Likewise, a soaring yen cuts profits on products they sell overseas. The yen has been hitting three-year highs against the dollar. Still, despite the worsening bottom line, the company claims to be “recession proof,” citing the fun and innovation of its products. It still expects record, high revenue and operating profit due to its focus on consoles that appeal to people who do not usually play video games. So far, this strategy has proven successful. Whereas rival Sony, which catered to the overseas market and real game player, is bracing for its biggest-ever loss this year, Nintendo has performed relatively well. However, while sticking with what works is a strong strategy that should prove Nintendo well in the long run, unless Nintendo also focuses on maximizing customer relationships and more game-changing innovations, it may see demand slow even more.
The Best Global Brands Interim Report 2009 12
• How do I maximize my customer relationships? • What’s the right portfolio to allow me flexibility for the future I can’t see? • What aspects of my brand do I need to dial up and dial down? (Read about these brands and more in the “Brands in The Depression” sidebar on the previous page.)
03 Market scenario The Fairer Winds Someone has always got to win. In this market, the winners are the low-budget brands that either by design or circumstance have found themselves in the right place at the right time. Low, cost, value retailers are typical examples here, as are fast food outlets that steal share from eating out occasions that cater to sit down, family meals. Or, in McDonald’s case, directly stealing share from Starbucks by presenting itself as a more affordable coffee option. As economic hardships become more apparent to consumers they seek out value, and that’s just what these brands offer. They currently benefit from the gravitational pull of value. This is evident from fast fashion retailer Zara’s successful profit despite the downturn, particularly in markets like Japan where it has gained share. The challenge for these brands is to hold on to their new customers once the economy recovers.
13 The Best Global Brands Interim Report 2009
The questions Fairer Winds brands should consider include: • How can I ensure that I hold on to my market share even after the crisis? • How can I innovate and cater to a new audience? • How do I leverage my advantageous position in a cost-effective way? • Where can I diversify? (Read about these brands and more in the “Brands in Fairer Winds” sidebar on the next page.)
03 Sidebar Brands in Fairer Winds The winds have knocked many brands left and right. But for some, the winds seem relatively fair. Low-budget brands like McDonald’s, for instance, have found themselves in the right place at the right time. McDonald’s had already strengthened its offering over the past few years to update the brand by focusing on more healthy offerings. This update has helped to give it a head start on capturing a new, middle-class audience now looking for a low-cost alternative to dining out at more expensive eateries. McDonald’s was also smart to seize an additional opportunity by stealing new audience share from Starbucks. When consumers cited that Starbucks coffee prices were now too high to indulge daily, McDonald’s leveraged its already, established coffee offering, positioning it as a low-budget but premium alternative. So far, its efforts have paid off. Similarly, while all retail has suffered, fast fashion brand Zara has suffered less due to its low-cost to quality quotient. Zara, which has become a truly global force over the last few years, has a particularly rock-solid business model, with a weekly rollout of new stock and truly customerdriven design that is based on input from market specialists, buyers, and designers. Zara has stayed committed to its effort and has seen an increase in sales, particularly in Japan, where luxury brands once flourished. It hasn’t taken a breather either, with plans to extend into Zara Home and to collaborate with MTV on a clothing line. The challenge for both, however, will be ensuring that they hold on to their new customers once the economy recovers. This means that they need to work harder than ever before on their products and services, drawing shoppers beyond just cost. The Best Global Brands Interim Report 2009 14
04 Market scenario The Fog Despite the market downturn putting a fog in front of certain brands, these brands continue to benefit from a constancy of demand. Still, it’s difficult to see through The Fog, peering through to see what obstacles are real and relevant and what obstacles may be anticipated but proven untrue. This is a risky position because if you bet on hanging on to the fundamentals (i.e., identifying and reacting to more structural market changes), then you may win. But if the downturn is stronger than expected, the brand could fail. This position requires constant vigilance, frequent insight refreshing, and the flexibility to quickly adapt to changes. These brands need to continue on course with conviction but must constantly have all their sensors on to see what dangers lurk around them. Many of the FMCG companies and the utility companies sit within this scenario. Demand drivers for brands like Coca-Cola are largely unchanged, and purchases can’t be postponed. As such, Coca-Cola’s strategy is to continue as usual, hoping to come out stronger in the long-term. Meanwhile, luxury brands like Louis Vuitton and Ferrari are stable, but are cutting costs to plan for obstacles ahead.
15 The Best Global Brands Interim Report 2009
While in reality the business remains solid, brands in The Fog market scenario need to: • Stay vigilant and prepare for any oncoming shifts. • Remain in tune with consumers’ attitudes and demonstrate empathy with what they are going through. • Stay on course while also remaining flexible to adapt quickly to changes. • Look to where you can streamline without significant risk to your strategy. (Read about these brands and more in the “Brands in the Fog” sidebar on the next page.)
04 Sidebar Brands in The Fog While brands like Amazon, Ferrari, and Louis Vuitton continue to benefit from a constancy of demand, the uncertainty of the future puts a cloud over their situation. Although Amazon’s better-thanexpected profits in the fourth quarter could easily put it in “The Fairer Winds” scenario, a few factors make its situation foggy. The site’s ability to search out the lowest price offering for products and aggressive promotion and discounts proved attractive to long-time customers as well as customers new to Internet shopping. The U.S. launch of its Kindle 2.0 in February 2009 also resulted in better-than-expected returns. And yet, while it seems clear that we may have undervalued Amazon’s brand in our ranking, Amazon still needs to stay on its toes. Without another Kindle launch to carry it through a tough year, will it be able to perform as well? Also, after the storm, will the newly attracted
audience still want to shop online? Amazon needs to watch its market closely and continue to stay in tune with consumers’ attitudes. Similarly, Coca-Cola has maintained stability, with projections of growth of six percent from 2010 onwards. The results presented in the fourth quarter 2008 are strong, with six percent growth in Latin America and double-digit growth in China and India. Such results in a challenging environment suggest that the brand was undervalued in Best Global Brands 2008 as well. And yet, while Coca-Cola is on track with the same strategy that has served it well in the past, the potential fallout in emerging markets (its biggest growth area) may impact the brand in the following months. If that proves to be the case, Coca-Cola needs to be ready to adapt to a changing marketplace. Some brands that are already beginning to prepare for an uncertain future include luxury brands Louis Vuitton and Ferrari. Despite a surprisingly higher than expected sales in 2008, LVMH is likely to decrease in value. Japan’s economic situation is likely to impact the brand
with a 10 percent decrease in profits, LVMH has already started strictly controlling its costs, scrapping plans for a new 10-story Ginza flagship store due to open in 2010. It has also lowered prices on all its products by seven percent to spur demand. Still, it continues to move forward with creative line collaborations and Neverfull, a lower-cost line. While Neverfull has proved to be a best seller, it – and price cuts – may well prove to decrease the brand’s value in the long-term. Also, even when the market turns, it is unclear if consumers will have the same interest in luxury that they once did. Ferrari is in a similar position. Although sales were up in 2008 (particularly in Eastern Europe), and Ferrari has a track record of profiting in even the worst of times (it continued to sell well even during the 1970s fuel crisis), it has plans to shed 10 percent of its workforce. Even though Ferrari President Luca di Montezemolo has been quoted as saying “There will always be people crazy enough to buy a Ferrari,” because the future looks particularly murky for luxury brands in particular, its taking measure to plan accordingly.
The Best Global Brands Interim Report 2009 16
Considering the challenges
Brands that find themselves in The Hurricane market scenario need to consider how their brands should deliver in the future and create appropriate strategies. Changing business models create the need for new brand strategies and a clear understanding of the strengths and weaknesses of the existing brand assets. At some point the market will recover, and so the challenge is to determine what will constitute the right brand for that market of the future. We don’t know when that market will rebound, and there will be no grand announcement to signal it is time to start leading again. If you want to be a part of it, you need to get to the front of the queue and define your moment. Brands within The Depression scenario need stamina and resilience. Keep your culture buoyant. Make sure your people are focused on customers. You’ll be fighting against the depression for as long as it takes markets to turn around. Constantly take the pulse of the market. Adapt and flex your offer to ensure that you remain in tune. Stop listening to your customers, and the depression you’re in could escalate into something truly nasty. You need all your wits about you to get through this as quickly as possible without long-term damage to your business. You may well need to redefine your business, so keep an open and informed mind. Things will be in constant flux. Consumers will adapt and evolve. Be the
17 The Best Global Brands Interim Report 2009
first to understand how they will evolve, and you’ll come out ahead. If you’re benefiting from The Fairer Winds scenario, you have no time to enjoy the moment. As fast as this market came to you it can get carried away. Today’s consumers may be feeling the financial pinch, but they are just as demanding as they’ve always been. Low budget will not be a differentiator for long. And for brands lost in The Fog, your mantra should be to keep going with everything you’ve got. Show confidence but keep moving forward with all your sensors on. With so much change occurring, you’re bound to hit the odd bump in the road. Be smart about the real trouble spots and do what you need to do to avoid them. Find the level of adaptation to maintain demand. Best Global Brands has shown time and time again that a brand can be an organization’s most valuable asset. But such assets aren’t just for good times. They also provide a great source of confidence and opportunity as markets go through trials and tribulations. A strong brand is a valuable asset that enables you to tackle the future and the opportunities it brings.
About Interbrand Interbrand began in 1974, when the world still thought of brands as just another word for logo. We have changed the dialogue, defined the meaning of brand management, and continue to lead the debate on understanding brands as valuable business assets.
About Best Global Brands Voted the third-most, influential industry benchmark study by business leaders, Best Global Brands is our annual report on the world’s most valuable brands and the insights that can be drawn from how these global organizations create and manage brand value.
We now have nearly 40 offices and are the world’s largest brand consultancy. Our practice brings together a diverse range of insightful right-and left-brain thinkers, making our business both rigorously analytical and highly creative. Our work creates and manages brand value for clients by making the brand central to the business’s strategic goals.
We pioneered the technique for valuing brands in 1984 and have continued to improve upon the methodology and set the pace for other approaches. Our valuation techniques have long been recognized by business, academics, and regulatory bodies as a uniquely valuable strategic tool. To date, we have conducted over 5,000 valuations for clients to provide guidance in managing their most valuable asset – their brand.
We’re not interested in simply being the world’s biggest brand consultancy. We want to be the most valued.
Contact us General inquiries:
Jez Frampton Global Chief Executive Officer Tel UK: +44 (0)20 7554 1000 Tel US: +1 212 798 7777 email@example.com
Lisa Marsala Global Communications Manager Tel: +1 212 798 7646 firstname.lastname@example.org Additional information on brands www.interbrand.com www.brandchannel.com For reprint permission of this report or its articles, please contact Lisa Marsala.
19 The Best Global Brands Interim Report 2009
Throughout all the coverage, comment, and conjecture on the economic crisis we have been constantly answering questions about the Best Globa...