The Annual Report on the Most Valuable Finnish Brands May 2018 Foreword

Finland 10 2018 The annual report on the most valuable Finnish brands May 2018 Foreword.

What is the purpose of a strong brand: to attract customers, to build loyalty, to motivate staff? All true, but for a commercial brand at least, the first answer must always be ‘to make money’.

Huge investments are made in the design, launch, and ongoing promotion of brands. Given their potential financial value, this makes sense. Unfortunately, most organisations fail to go beyond that, missing huge opportunities to effectively make use of what are often their most important assets. Monitoring of brand performance should be the next step, but is often sporadic. Where it does take place, it frequently lacks financial rigour and is heavily reliant on qualitative measures, poorly understood by non-marketers.

David Haigh As a result, marketing teams struggle to communicate the value of their work and CEO, Brand Finance boards then underestimate the significance of their brands to the business. Sceptical finance teams, unconvinced by what they perceive as marketing mumbo jumbo, may fail to agree necessary investments. What marketing spend there is, can end up poorly directed as marketers are left to operate with insufficient financial guidance or accountability. The end result can be a slow but steady downward spiral of poor communication, wasted resources, and a negative impact on the bottom line.

Brand Finance bridges the gap between marketing and finance. Our teams have experience across a wide range of disciplines from market research and visual identity to tax and accounting. We understand the importance of design, advertising, and marketing, but we also believe that the ultimate and overriding purpose of brands is to make money. That is why we connect brands to the bottom line.

By valuing brands, we provide a mutually intelligible language for marketing and finance teams. Marketers then have the ability to communicate the significance of what they do, and boards can use the information to chart a course that maximises profits. Without knowing the precise, financial value of an asset, how can you know if you are maximising your returns? If you are intending to license a brand, how can you know you are getting a fair price? If you are intending to sell, how do you know what the right time is? How do you decide which brands to discontinue, whether to rebrand and how to arrange your brand architecture? Brand Finance has conducted thousands of brand and branded business valuations to help answer these questions.

Brand Finance’s research revealed the compelling link between strong brands and stock market performance. It was found that investing in highly-branded companies would lead to a return almost double that of the average for the S&P 500 as a whole.

Acknowledging and managing a company’s intangible assets taps into the hidden value that lies within it. The following report is a first step to understanding more about brands, how to value them and how to use that information to benefit the business.

The team and I look forward to continuing the conversation with you.

Brand Finance Finland 10 May 2018 3. About Brand Finance. Contents.

Brand Finance is the world’s leading independent Foreword 3 brand valuation and strategy consultancy. About Brand Finance 4 Brand Finance was set up in 1996 with the aim of ‘bridging the gap between marketing and finance’. Contact Details 4 For more than 20 years, we have helped companies and organisations of all types to connect their brands Definitions 6 to the bottom line. Executive Summary 8 We pride ourselves on four key strengths: • Independence Methodology 12 • Technical Credibility • Transparency Understand Your Brand’s Value 13 • Expertise. Consuting Services 14 Brand Finance puts thousands of the world’s biggest Communications Services 15 brands to the test every year, evaluating which are the strongest and most valuable.

For more information, please visit our website: www.brandfinance.com

Contact Details.

For business enquiries, For further information on Brand Finance®’s services and valuation experience, please contact: please contact your local representative: Richard Haigh Managing Director Country Contact Email Address [email protected] Asia Pacific Samir Dixit [email protected] +65 906 98 651 Australia Mark Crowe [email protected] +61 282 498 320 Canada Charles Scarlett-Smith [email protected] +1 647 3437 266 For media enquiries, Caribbean Nigel Cooper [email protected] +1 876 8256 598 please contact: China Scott Chen [email protected] +86 1860 118 8821 Konrad Jagodzinski East Africa Jawad Jaffer [email protected] +254 204 440 053 Germany Holger Mühlbauer [email protected] +49 1515 474 9834 Communications Director India Savio D’Souza [email protected] +44 207 389 9400 [email protected] Indonesia Jimmy Halim [email protected] +62 215 3678 064 Ireland Simon Haigh [email protected] +353 087 6695 881 For all other enquiries, Italy Massimo Pizzo [email protected] +39 230 312 5105 Japan Jun Tanaka [email protected] +8190 7116 1881 please contact: Mexico & LatAm Laurence Newell [email protected] +52 1559 197 1925 [email protected] Middle East Andrew Campbell [email protected] +971 508 113 341 +44 (0)207 389 9400 Nigeria Babatunde Odumeru [email protected] +234 012 911 988 Romania Mihai Bogdan [email protected] +40 728 702 705 Spain Teresa de Lemus [email protected] +34 654 481 043 linkedin.com/company/ South Africa Jeremy Sampson [email protected] +27 828 857 300 Sri Lanka Ruchi Gunewardene [email protected] +94 114 941 670 brand-finance Turkey Muhterem Ilgüner [email protected] +90 216 3526 729 UK Richard Haigh [email protected] +44 207 389 9400 facebook.com/brandfinance USA Laurence Newell [email protected] +1 917 794 3249 Vietnam Lai Tien Manh [email protected] +84 473 004 468 twitter.com/brandfinance

4. Brand Finance Finland 10 May 2018 Brand Finance Finland 10 May 2018 5. Definitions.

Definitions.

Brand Value Brand Strength

+ Enterprise Value Brand Strength is the efficacy of a brand’s Each brand is assigned a Brand Strength Index (BSI) The value of the entire enterprise, made performance on intangible measures, relative to its score out of 100, which feeds into the brand value up of multiple branded businesses. competitors. calculation. Based on the score, each brand is assigned a [Sampo Group] corresponding rating up to AAA+ in a format similar to a Where a company has a purely mono- In order to determine the strength of a brand, we look at credit rating. branded architecture, the ‘enterprise value’ is the same as ‘branded business value’. Marketing Investment, Stakeholder Equity, and the impact Enterp of those on Business Performance. Analysing the three brand strength measures helps inform rise Va managers of a brand’s potential for future success. lue + Branded Business Value The value of a single branded business Bra operating under the subject brand. nded Bu si [If] A brand should be viewed in the context of Widely recognised factors deployed by marketers to create brand loyalty and ne Marketing ss the business in which it operates. Brand market share. V Investment B a Finance always conducts a branded rand lu C e business valuation as part of any brand on tr valuation. We evaluate the full brand value ib u t chain in order to understand the links io n between marketing investment, brand- Stakeholder Perceptions of the brand among different stakeholder groups, with customers tracking data, and stakeholder behaviour. Equity being the most important.

+ Brand Contribution The overall uplift in shareholder value Brand Quantitative market and financial measures representing the success of the Value that the business derives from owning Business the brand rather than operating a Brand Strength Index Performance brand in achieving price and volume premium. [If] generic brand.

The brand values contained in our league tables are those of the potentially transferable brand assets only, making ‘brand contribution’ a wider concept. An Marketing Investment assessment of overall ‘brand contribution’ to • A brand that has high Marketing Investment but low Stakeholder Equity may be on a a business provides additional insights to path to growth. This high investment is likely to lead to future performance in Stakeholder Equity which would in turn lead to better Business Performance in the future. help optimise performance. Investment • However, high Marketing Investment over an extended period with little improvement in Stakeholder Equity would imply that the brand is unable to shape customers’ preference. + Brand Value The value of the trade mark and Stakeholder Equity associated marketing IP within the • The same is true for Stakeholder Equity. If a company has high Stakeholder Equity, it is branded business. Equity likely that Business Performance will improve in the future. [If] • However, if the brand’s poor Business Performance persists, it would suggest that the Brand Finance helped to craft the brand is inefficient compared to its competitors in transferring stakeholder sentiment internationally recognised standard on to a volume or price premium. Brand Valuation – ISO 10668. It defines brand as a marketing-related intangible Performance Business Performance asset including, but not limited to, names, • Finally, if a brand has a strong Business Performance but scores poorly on Stakeholder terms, signs, symbols, logos, and designs, Equity, it would imply that, in the future, the brand’s ability to drive value will diminish. intended to identify goods, services or • However, if it is able to sustain these higher outputs, it shows that the brand is entities, creating distinctive images and particularly efficient at creating value from sentiment compared to its competitors. associations in the minds of stakeholders, thereby generating economic benefits.

6. Brand Finance Finland 10 May 2018 Brand Finance Finland 10 May 2018 7. Executive Summary.

Executive Summary.

Nokia now has a refocused corporate strategy Top 10 Most Valuable Brands concentrated on four key areas: high-performance end-to-end networks for communication service Rank 2018: 1 2017: 1 providers; network equipment and services for BV 2018: ¤ 7,138m 1 +63% enterprises; building a standalone software business; BV 2017: ¤ 4,374m and finally, consumer-facing business and licensing Brand Rating: AA+ based upon its strong IP portfolio. In that context, Nokia’s solid performance has put it in an excellent position to Rank 2018: 2 2017: 2 BV 2018: ¤ 1,463m lead the global transition to 5G that is now underway. 2 0% BV 2017: ¤ 1,465m Brand Rating: AA- Fortum Grows Strongly Rank 2018: 3 2017: 4 Energy company Fortum (up 28% to €0.7 billion) was BV 2018: ¤ 879m 3 +3% the second-fastest growing brand amongst Finland’s top BV 2017: ¤857m ten most valuable brands. During 2017, Fortum made Brand Rating: AA investments in new businesses and geographical areas. In addition, improved market conditions increased Rank 2018: 4 2017: 3 BV 2018: ¤ 819m revenues in Fortum’s power production. Looking 4 -7% forward, Fortum’s planned takeover of Uniper and other BV 2017: ¤ 880m growth projects will be a key issue for the brand to Brand Rating: A manage. Rank 2018: 5 2017: NEW 5 BV 2018: ¤ 802m Nokia is Finland’s Top Brand Brand Rating: AA- Nokia’s brand value has grown by 63% over the last Nokia has focused the brand on Rank 2018: 6 2017: 5 Brand Value Change 2017-2018 (%) BV 2018: ¤ 789m year to €7.1 billion, extending its leadership as 6 -8% Finland’s most valuable brand. After reaching a nadir in its core networks activities as well BV 2017: ¤ 853m 2014 due to several years of significant brand as extending into new licensing Brand Rating: A+ struggles, Nokia’s brand value has sustained strong brand growth ever since. areas over the last year. It is a Nokia 63% Rank 2018: 7 2017: 7 BV 2018: ¤ 683m 7 +28% perfect example of how BV 2017: ¤ 533m Nokia’s brand value peaked in 2008 at over €22 billion, Fortum 28% Brand Rating: AA making it the world’s 9th most valuable brand at the reinvigorating a well-loved brand time. The subsequent rise of smartphones at the through licensing can be a route Elisa 3% Rank 2018: 8 2017: 6 expense of feature phones – a sector dominated by BV 2018: ¤ 661m to success. We expect to see 8 -5% Nokia – caused the Finnish brand value leader to decline BV 2017: ¤ 693m Kone 0% to just €1.5 billion in 2014. significant growth of Nokia’s Brand Rating: A brand value in the future as the After involvement in various corporate ownership -5% Valio Rank 2018: 9 2017: NEW changes, the Nokia brand has rebounded strongly, and implementation of the new 9 BV 2018: ¤ 502m now, in 2018, it has led Finland in all three categories of strategy accelerates. -5% Pohjola Bank most valuable, fastest-growing, and strongest brand for Brand Rating: A two consecutive years. It is the only Finnish brand to David Haigh attain an AA+ brand strength rating. CEO, Brand Finance -7% Kesko Rank 2018: 10 2017: 8 BV 2018: ¤ 408m 10 -5% -8% If BV 2017: ¤ 431m Brand Rating: A+

8. Brand Finance Finland 10 May 2018 Brand Finance Finland 10 May 2018 9. 10. Brand Value bySector Brand Value OverTime Executive Summary. Brand Finance Brand Value (EUR m)

Finland 10 May 2018 Year ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— Colour

Total Others Utilities Insurance Retail Telecoms Construction Engineering & Tech Sector

14.1 1.6 0.7 0.8 0.8 0.9 2.3 7.1 (EUR bn) Brand Value

100% 11% 5% 6% 6% 6% 16% 50% % oftotal the future. better positionedtofocusgrowingitsmainbrandin have beenconvertedintoK-Markets, Kesko willbe that thelastremainingSiwaandValintatalo stores consumption offoodanddrink.Inaddition,now food serviceinrestaurantsandawayfromhome- long-term customerbehaviourchangestowards sales arewell-positionedtopickupfromany strong yearforthegrocerytrade,andbusiness retail stores.Kesko’s brandshavebenefited froma new brandalignmentacrosstheirlargechainof continue theirtransformationprojecttointroducea sales growingincomparabletermsby1.8%asthey Meanwhile, Kesko’s brandsubsideddespitenet customer subscriptions. with Vodafone andTelenor, andasmallincreasein 2017. Thiswasachievedthroughclosecooperation increased from€1.6billionin2016to€1.8 reductions byalmost90%,Elisa’srevenue into forceandleadingtodataroamingprice €0.8 billion).DespiteEUroamingchangescoming swapping positionswithretailerKesko (down7%to Brand FinanceFinland10leaguetablethisyear, billion) movedfromfourthplacetothirdinthe Telecommunications companyElisa(up3%to€0.9 Elisa andKesko SwapRankings modernisation ofexistingbuildings. equipment, aswellmaintenanceand minded emphasisonconstructionofnew customer focus.Thiswillleadtoaparticularservice- significant branddifferentiationbyimproving urbanise, Kone’s strategicdirectionistoachieve previous year. Astheglobalpopulationcontinuesto during lastyear, asmallincreasefrom€8.8billionthe a globalleaderinthesector, withsalesof€8.9billion Finnish rankingagain.Theliftandescalatorbrandis billion lastyear, securingsecondplaceonthe Kone maintaineditsbrandvalueatjustunder€1.5 Kone SteadyonSecondFloor Top 5StrongestBrands Brand Finance 65.9 67.8 71.3 73.1 76.2 BSI Score BSI Score BSI Score BSI Score BSI Score Executive Summary.

Finland 10 May 2018 11. Methodology. Understand Your Brand’s Value.

Brand Finance calculates the values of the A Brand Value Report provides a complete Each report includes expert recommendations for growing brands in its league tables using the Royalty breakdown of the assumptions, data sources, and brand value to drive business performance and offers a Relief approach – a brand valuation method calculations used to arrive at your brand’s value. cost-effective way to gaining a better understanding of compliant with the industry standards set in Brand Strength your position against competitors. ISO 10668. Index (BSI) Brand strength This involves estimating the likely future revenues that expressed as a BSI What is a Brand Value Report? What are the benefits of a Brand are attributable to a brand by calculating a royalty rate score out of 100. that would be charged for its use, to arrive at a ‘brand Brand Valuation Summary Value Report? value’ understood as a net economic benefit that a + Internal understanding of brand licensor would achieve by licensing the brand in the + Brand value tracking Insight open market. + Competitor benchmarking Provide insight as to how the brand is + Historical brand value The steps in this process are as follows: performing vs. key competitors on underlying measures and drivers of Brand Brand Strength Index 1 Calculate brand strength using a balanced scorecard Royalty Rate brand value and brand strength. of metrics assessing Marketing Investment, + Brand strength tracking BSI score applied to an Stakeholder Equity, and Business Performance. Brand + Brand strength analysis appropriate sector Strategy strength is expressed as a Brand Strength Index (BSI) + Management KPIs royalty range. Understand where brand value is being score on a scale of 0 to 100. + Competitor benchmarking generated by region and channel in 2 Determine royalty range for each industry, reflecting order to identify areas of opportunity Royalty Rates the importance of brand to purchasing decisions. In that warrant further investigation. luxury, the maximum percentage is high, in extractive + Transfer pricing industry, where goods are often commoditised, it is + Licensing/franchising negotiation Benchmarking + International licensing lower. This is done by reviewing comparable licensing Track year-on-year changes to brand + Competitor benchmarking agreements sourced from Brand Finance’s extensive value and set long-term objectives database. Brand Revenues against which high-level brand Cost of Capital 3 Calculate royalty rate. The BSI score is applied to the Royalty rate applied to performance can be benchmarked. + Independent view of cost of capital for internal royalty range to arrive at a royalty rate. For example, if forecast revenues to valuations and project appraisal exercises the royalty range in a sector is 0-5% and a brand has derive brand value. Education a BSI score of 80 out of 100, then an appropriate Provide a platform of understanding Customer Research royalty rate for the use of this brand in the given sector which the company can use to educate will be 4%. + Utilities employees on the importance of the + Insurance brand. 4 Determine brand-specific revenues by estimating a + Banks proportion of parent company revenues attributable + Telecoms to a brand. Brand Value Communication Communicate your brand’s success to 5 Determine forecast revenues using a function of Post-tax brand shareholders, customers, and other historic revenues, equity analyst forecasts, and revenues discounted to For more information regarding our Brand Value strategically selected audiences. economic growth rates. a net present value (NPV) Reports, please contact: which equals the brand 6 Apply the royalty rate to the forecast revenues to value. Understanding derive brand revenues. Richard Haigh Understand and appreciate the value of Managing Director, Brand Finance your brand as an asset of the business. 7 Brand revenues are discounted post-tax to a net [email protected] present value which equals the brand value.

Disclaimer Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions produced in this study are based only on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the report are not to be construed as providing investment or business advice. Brand Finance does not intend the report to be relied upon for any reason and excludes all liability to any body, government or organisation.

12. Brand Finance Finland 10 May 2018 Brand Finance Finland 10 May 2018 13. Consulting Services. Communications Services.

We offer a variety of services to help communicate your brand’s success. 1. Valuation: What are my intangible 2. Analytics: How can I improve assets worth? marketing effectiveness? Valuations may be conducted for technical Analytical services help to uncover drivers purposes and to set a baseline against of demand and insights. Identifying the CEO Quote Social Media which potential strategic brand factors which drive consumer behaviour Supply a quote in Coordinate with your scenarios can be evaluated. allows an understanding of how brands recognition of your social media activity N 2. brand’s performance to communicate your IO AN create bottom-line impact. for you to use in brand’s success more + Branded Business Valuation T A A L external and internal effectively. + Trademark Valuation U Y Market Research Analytics + Awards L T communications. + Intangible Asset Valuation A I Return on Marketing Investment + Press Release Produce an accolade V C Assist with the creation plaque and hand-written + Brand Contribution . S Brand Audits + 1 of a press release certificates, personally Brand Scorecard Tracking + communicating your signed by our CEO, to Brand & brand’s success. recognise your brand’s performance.

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MARKETING FINANCE TAX LEGAL

We help marketers to We provide financiers and We help brand owners We help clients to enforce connect their brands to auditors with an and fiscal authorities to and exploit their business performance by independent assessment understand the intellectual property rights evaluating the return on on all forms of brand and implications of different by providing independent investment (ROI) of intangible asset tax, transfer pricing, and expert advice in- and brand-based decisions valuations. brand ownership outside of the courtroom. and strategies. arrangements.

Example digital endorsement stamp for use on your website as well as in investor relations and advertising, to recognise your brand’s performance.

14. Brand Finance Finland 10 May 2018 Brand Finance Finland 10 May 2018 15. Contact us.

The World’s Leading Independent Brand Valuation and Strategy Consultancy T: +44 (0)20 7389 9400 E: [email protected] www.brandfinance.com