The Annual Report on the Most Valuable Swiss Brands May 2017

Switzerland 50 2017 The annual report on the most valuable Swiss brands May 2017

Foreword. Contents

steady downward spiral of poor communication, Foreword 2 wasted resources and a negative impact on the bottom line. Definitions 4 Methodology 6 Brand Finance bridges the gap between the marketing and financial worlds. Our teams have Executive Summary 8 experience across a wide range of disciplines from market research and visual identity to tax and Full Table (CHFm) 12 accounting. We understand the importance of design, advertising and marketing, but we also Full Table (USDm) 13 believe that the ultimate and overriding purpose of Understand Your Brand’s Value 14 brands is to make money. That is why we connect brands to the bottom line. How We Can Help 16

By valuing brands, we provide a mutually intelligible Contact Details 17 language for marketers and finance teams. David Haigh, CEO, Brand Finance Marketers then have the ability to communicate the significance of what they do and boards can use What is the purpose of a strong brand; to attract the information to chart a course that maximises customers, to build loyalty, to motivate staff? All profits. true, but for a commercial brand at least, the first Without knowing the precise, financial value of an answer must always be ‘to make money’. asset, how can you know if you are maximising your returns? If you are intending to license a brand, how Huge investments are made in the design, launch can you know you are getting a fair price? If you are and ongoing promotion of brands. Given their intending to sell, how do you know what the right potential financial value, this makes sense. time is? How do you decide which brands to Unfortunately, most organisations fail to go beyond discontinue, whether to rebrand and how to arrange that, missing huge opportunities to effectively make your brand architecture? Brand Finance has use of what are often their most important assets. conducted thousands of brand and branded Monitoring of brand performance should be the business valuations to help answer these questions. next step, but is often sporadic. Where it does take place it frequently lacks financial rigour and is Brand Finance’s recently conducted share price heavily reliant on qualitative measures poorly study revealed the compelling link between strong understood by non-marketers. brands and stock market performance. It was found that investing in the most highly branded companies As a result, marketing teams struggle to would lead to a return almost double that of the communicate the value of their work and boards average for the S&P 500 as a whole. then underestimate the significance of their brands Acknowledging and managing a company’s to the business. Skeptical finance teams, intangible assets taps into the hidden value that lies unconvinced by what they perceive as marketing within it. The following report is a first step to mumbo jumbo may fail to agree necessary understanding more about brands, how to value investments. What marketing spend there is can them and how to use that information to benefit the end up poorly directed as marketers are left to business. The team and I look forward to continuing operate with insufficient financial guidance or the conversation with you. accountability. The end result can be a slow but

2. Brand Finance AustraliaGlobalAirlinesSwitzerland 500 30 100 30February 50 MarchFebruary May 2017 20162016 2015 Brand Finance Switzerland 50 May 2017 3. Definitions

Effect of a Brand on Stakeholders E.g. Definitions Swatch + Enterprise Value – the value of the entire enterprise, made up of Directors Group Potential Middle ‘Branded‘Branded multiple branded businesses Customers Managers Enterprise’Enterprise’

Existing All Other ‘Branded‘Branded + Branded Business Value – the Customers Employees Business’ E.g. Business’ Omega value of a single branded business operating under the subject brand ‘Brand’ Contribution’ Influencers Production + Brand Contribution– The total e.g. Media Brand E.g. economic benefit derived by a Omega business from its brand ‘Brand Value’ Trade Sales Channels + Brand Value – the value of the E.g. trade marks (and relating Omega Strategic marketing IP and ‘goodwill’ Debt Allies & providers attached to it) within the branded Suppliers Investors business

Branded Business Value Brand Contribution Brand Value Brand Strength

A brand should be viewed in the context of the The brand values contained in our league tables In the very broadest sense, a brand is the focus Brand Strength is the part of our analysis most business in which it operates. For this reason are those of the potentially transferable brand for all the expectations and opinions held by directly and easily influenced by those Brand Finance always conducts a Branded asset only, but for marketers and managers customers, staff and other stakeholders about an responsible for marketing and brand Business Valuation as part of any brand valuation. alike. An assessment of overall brand organisation and its products and services. management. In order to determine the strength Where a company has a purely mono-branded contribution to a business provides powerful However, when looking at brands as business of a brand we have developed the Brand architecture, the business value is the same as insights to help optimise performance. assets that can be bought, sold and licensed, a Strength Index (BSI). We analyse marketing the overall company value or ‘enterprise value’. more technical definition is required. investment, brand equity (the goodwill Brand Contribution represents the overall uplift accumulated with customers, staff and other In the more usual situation where a company in shareholder value that the business derives Brand Finance helped to craft the internationally stakeholders) and finally the impact of those on owns multiple brands, business value refers to from owning the brand rather than operating a recognised standard on Brand Valuation, ISO business performance. the value of the assets and revenue stream of the generic brand. 10668. That defines a brand as “a marketing- business line attached to that brand specifically. related intangible asset including, but not limited Following this analysis, each brand is assigned We evaluate the full brand value chain in order to Brands affect a variety of stakeholders, not just to, names, terms, signs, symbols, logos and a BSI score out of 100, which is fed into the understand the links between marketing customers but also staff, strategic partners, designs, or a combination of these, intended to brand value calculation. Based on the score, investment, brand tracking data, stakeholder regulators, investors and more, having a identify goods, services or entities, or a each brand in the league table is assigned a behaviour and business value to maximise the significant impact on financial value beyond combination of these, creating distinctive images rating between AAA+ and D in a format similar returns business owners can obtain from their what can be bought or sold in a transaction. and associations in the minds of stakeholders, to a credit rating. AAA+ brands are exceptionally brands. thereby generating economic benefits/value”. strong and well managed while a failing brand would be assigned a D grade.

4. Brand Finance Switzerland 50 May 2017 Brand Finance Switzerland 50 May 2017 5. Methodology League Table Valuation Methodology Brand Finance Typical Project Approach Brand Finance calculates the values of the 2 Determine the royalty rate range for the respective brands in its league tables using the ‘Royalty brand sectors. This is done by reviewing comparable Relief approach’. This approach involves licensing agreements sourced from Brand Finance’s estimating the likely future sales that are extensive database of license agreements and other attributable to a brand and calculating a royalty online databases. Brand Equity Stakeholder Brand Inputs Performance rate that would be charged for the use of the 3 Calculate royalty rate. The brand strength score is Value Drivers Behaviour Contribution brand, i.e. what the owner would have to pay for applied to the royalty rate range to arrive at a royalty the use of the brand—assuming it were not rate. For example, if the royalty rate range in a brand’s already owned. sector is 1-5% and a brand has a brand strength score of 80 out of 100, then an appropriate royalty 1 2 3 4 The steps in this process are as follows: rate for the use of this brand in the given sector will Brand Audit Trial & Preference Acquisition & Valuation Modelling be 4.2%. Retention 1 Calculate brand strength on a scale of 0 to 100 based 4 Determine brand specific revenues estimating a on a number of attributes such as emotional proportion of parent company revenues attributable Audit the impact Run analytics to Link stakeholder Model the impact of behaviour on connection, financial performance and sustainability, to a specific brand. of brand understand how behaviour with core financial performance and among others. This score is known as the Brand key financial isolating the value of the brand 5 Determine forecast brand specific revenues using a management and perceptions link to Strength Index, and is calculated using brand data investment on behaviour value drivers contribution function of historic revenues, equity analyst forecasts from the BrandAsset® Valuator database, the world’s brand equity and economic growth rates. largest database of brands, which measures brand 6 Apply the royalty rate to the forecast revenues to equity, consideration and emotional imagery derive brand revenues. attributes to assess brand personality in a category 7 Brand revenues are discounted post tax to a net agnostic manner. present value which equals the brand value. Brand strength Brand Brand revenues Brand value index ‘Royalty rate’ How We Help to Maximise Value (BSI)

6. Build scale through licensing/franchising/partnerships Brand Strong brand investment 5. Build core business through market expansion

4. Build core business through product development Brand

equity Maximising a strong brand 3. Portfolio management/rebranding Group companies

2. Optimise brand positioning and strength Brand Weak brand performance Forecast revenues 1. Base-case brand and business valuation (using internal data), growth strategy Evaluate ongoing performance formulation, target-setting, scorecard and Brand strength BSI score applied to an Royalty rate applied to Post-tax brand tracker set-up expressed as a BSI appropriate sector forecast revenues to revenues are score out of 100. royalty rate range. derive brand values. discounted to a net Current brand and Target brand and present value (NPV) business value business value which equals the brand value.

6. Brand Finance Switzerland 50 May 2017 Brand Finance Switzerland 50 May 2017 7.

Executive Summary

Rank 2017: 1 2016: 1 Rank 2017: 6 2016: 5 BV 2017: CHF 18,819m BV 2017: CHF 6,429m 1 -20% 6 -7% BV 2016: CHF 23,440m BV 2016: CHF 6,880m Brand Rating: AAA- Brand Rating: AAA

Switzerland Rank 2017: 2 2016: 2 Rank 2017: 7 2016: 4 BV 2017: CHF 5,911m 2 BV 2017: CHF 9,086m +2% 7 -19% BV 2016: CHF 8,936m BV 2016: CHF 7,318m Brand Rating: AA+ Brand Rating: AA

Rank 2017: 3 2016: 6 Rank 2017: 8 2016: 14 3 BV 2017: CHF 6,981m 8 BV 2017: CHF 5,902m 50 +11% BV 2016: CHF 3,895m +52% BV 2016: CHF 6,300m Brand Rating: AA- Brand Rating: AA

Rank 2017: 4 2016: 8 Rank 2017: 9 2016: 7 BV 2017: CHF 5,199m 4 BV 2017: CHF 6,774m +14% 9 -16% BV 2016: CHF 5,931m BV 2016: CHF 6,174m Brand Rating: AAA Brand Rating: AAA-

Rank 2017: 5 2016: 9 Rank 2017: 10 2016: 11 BV 2017: CHF 6,586m 5 +17% 10 BV 2017: CHF 4,585m BV 2016: CHF 5,636m BV 2016: CHF 4,587m +0% Brand Rating: AA+ Brand Rating: AA

The falling brand values of Tissot (down 18%), the brand the fi rst Swiss watchmaker to offer Brand Value Over Time Omega (17%), Longines (12%) and Swatch smartwatches. The main challenge Swiss watch 25 (11%) refl ect the current decline in the Swiss makers currently face is the rise of technology. ABB watch industry. The industry has suffered more TAG Heuer recently opened an offi ce in Silicon than two years of declining sales, which were Valley to solidify its smartwatch alliance with 20 down 9% in the fi rst fi ve months of 2016 due to Google and Intel Corps. It is clear that TAG Heuer Rolex weaker demand from China and emerging has embraced the need for change and its markets. Brands like Apple and Samsung, who growing brand value reinforces the importance are well established in the tech space, have of innovation. Zurich introduced smartwatches, threatening the 15 necessity for an old-fashioned watch. Time is Rolex is the most powerful Swiss brand this year ticking for traditional watch brands to invent new with a Brand Strength Index score of 89.2. UBS products that incorporate technology or they risk Compared with the more affordable Swatch and 10 losing market share. mid-market Tissot, Rolex’s renown and premium

status seem to allow it to bypass the industry’s Brand value (CHFbn) Nestlé Interestingly, TAG Heuer’s brand value grew 39% market conditions. Rolex’s brand value is up 14% to CHF 3 billion. Amidst a 10% decline in Swiss to CHF 6.8 billion. 5 watch exports, TAG Heuer reported more than 10% revenue growth in 2016. The revival is Despite a 20% drop in brand value to CHF 18.8 attributed mainly to new models and the launch billion, Nestlé remains Switzerland’s most of its ‘TAG Heuer Connected’ line, which makes valuable brand and the world’s most valuable 0 2011 2012 2013 2014 2015 2016 2017 8. Brand Finance Switzerland 50 May 2017 Brand Finance Switzerland 50 May 2017 9.

Executive Summary

The 10 Most Powerful Brands food brand. Its brand value is more than double Brand Value Change 2016-2017 (CHFm) Brand Value Change 2016-2017 (%) that of Switzerland’s second most valuable brand, These are the most powerful Swiss brands, whose rating is RocheRoche 2,0072,007 RocheRoche 52%52% UBS. In spite of its incredible feat, Nestlé has been based on Brand Finance’s Brand Strength Index (BSI). ABBABB 950950 SchindlerSchindler 44%44% hit by the pervasive trend for healthier, more natural RolexRolex 843843 JuliusJulius Baer Baer 41%41% food, which has reduced demand for Nestlé’s TAGTAG Heuer Heuer 833833 TAGTAG Heuer Heuer 39%39% BSI Score crucial confectionary brands. Nestlé operates ZurichZurich 681681 GeberitGeberit 32%32% dozens of individual product brands such as KitKat SchindlerSchindler 435435 ZKBZKB 30%30% and Butterfinger, however, the Nestlé brand acts as 89.2 JuliusJulius Baer Baer 425425 BaloiseBaloise 24%24% an endorser, visible on all packaging - a decline in NovartisNovartis 375375 LindtLindt 18%18% BSI Score these product brands hits the value of the Nestlé GeberitGeberit 255255 ABBABB 17%17% brand too. LindtLindt 235235 DufryDufry 15%15% -278-278 LonzaLonza -14%-14% AdeccoAdecco 85.6 In contrast, Lindt’s brand value has risen 18% to -418-418 AdeccoAdecco -16%-16% NescafeNescafe BSI Score CHF 1.5 billion, making it the fastest growing Swiss -419-419 HolcimHolcim -17%-17% OmegaOmega food brand in the table this year. The chocolate -437-437 TE TEConnectivity Connectivity -18%-18% TissotTissot industry has been plagued with higher raw material 83.1 -451-451 SwisscomSwisscom -19%-19% GlencoreGlencore Xstrata Xstrata prices and weak consumer sentiment, yet, Lindt -636-636 OmegaOmega -19%-19% CreditCredit Suisse Suisse BSI Score bucks the trend. The brand reported higher profits -933-933 GlencoreGlencore Xstrata Xstrata -19%-19% TE TEConnectivity Connectivity and grew at a faster pace than the overall chocolate -975-975 NescafeNescafe -20%-20% NestléNestlé market in 2016. Results in Japan and Brazil were 82.9 -1,407-1,407 CreditCredit Suisse Suisse -28%-28% NespressoNespresso particularly impressive with high double-digit sales -4,621-4,621 NestléNestlé -41%-41% LonzaLonza BSI Score growth mainly due to the opening of the company’s -5000.000000-5000.000000-3928.571429-3928.571429-2857.142857-2857.142857-1785.714286-1785.714286-714.285714-714.285714357.142857357.1428571428.5714291428.5714292500.0000002500.000000 -65.0-65.0-51.5-51.5-38.0-38.0-24.5-24.5-11.0-11.02.52.516.016.029.529.543.043.056.556.570.070.0 own shops and cafes. Furthermore, in line with its 80.9 global expansion strategy, Lindt has opened new stores in Wales and Australia, boosting its network Total Brand Value by Sector 2017 to close to 400 stores. Thanks to seasonal and BSI Score Colour Industry Total Brand Proportion premium products such as Lindor chocolate balls Value (CHFm) and gold foil-wrapped Easter bunnies, Lindt has Food 29,059 23% 80.2 grown sales in stagnant markets; organic sales growth increased 2.6% as a result of Christmas Banks 17,375 14% BSI Score Food season promotions. With its growing network and 23% Watchmaking 17,186 13% product lines, Lindt manages to escape the 80.0 declining industry, and it will be interesting to see Insurance 16,034 12% whether the brand bolsters its value further next Engineering & BSI Score Construction 12,423 10% year. Pharma 10,375 8%

79.3 Pharmaceutical giant, Roche, is Switzerland’s Telecoms 7,089 6% fastest growing brand and eighth most valuable. Banks BSI Score Roche’s brand value has grown 52% in value to 14% Mining 4,046 3% Commercial CHF 5.9 billion and has overtaken Pfizer to become Services 3,859 3% 78.4 the world’s most valuable pharmaceutical brand. Watchmaking Technology 3,005 2% New immune-oncology drug, Tecentriq, achieved Insurance BSI Score 13% FDA approval for lung cancer and Roche expects 12% Others 8,162 6% almost €4.5 billion in revenues by 2021 as a result. Total 128,611 100% 75.8 A trio of breast-cancer therapies boosted earnings, which offsets sluggish sales of some older drugs.

10. Brand Finance Switzerland 50 May 2017 Brand Finance Switzerland 50 May 2017 11. Brand Finance Brand Finance Switzerland 50 (CHFm) Switzerland 50 (USDm)

Top 50 most valuable Swiss brands 1 - 50. Top 50 most valuable Swiss brands 1 - 50.

Rank Rank Brand Value Brand Value Brand Brand Rank Rank Brand Value Brand Value Brand Brand Brand name Sector % Brand name Sector % 2017 2016 (CHFm) (CHFm) rating rating 2017 2016 (USDm) (USDm) rating rating change change 2017 2016 2017 2016 2017 2016 2017 2016 1 1 Nestle Food 18,819 -20% 23,440 AAA- AAA 1 1 Nestle Food 19,416 -17% 23,426 AAA- AAA 2 2 UBS Banks 9,086 2% 8,936 AA+ AA- 2 2 UBS Banks 9,375 5% 8,931 AA+ AA- 3 6 Zurich Insurance 6,981 11% 6,300 AA- AA 3 6 Zurich Insurance 7,202 14% 6,297 AA- AA 4 8 Rolex Watchmaking 6,774 14% 5,931 AAA AAA 4 8 Rolex Watchmaking 6,988 18% 5,927 AAA AAA 5 9 ABB Engineering & Construction 6,586 17% 5,636 AA+ AA 5 9 ABB Engineering & Construction 6,795 21% 5,632 AA+ AA 6 5 Swisscom Telecoms 6,429 -7% 6,880 AAA AAA- 6 5 Swisscom Telecoms 6,633 -4% 6,876 AAA AAA- 7 4 Credit Suisse Banks 5,911 -19% 7,318 AA AA 7 4 Credit Suisse Banks 6,098 -17% 7,314 AA AA 8 14 Roche Pharma 5,902 52% 3,895 AA AA+ 8 14 Roche Pharma 6,089 56% 3,892 AA AA+ 9 7 Nescafe Food 5,199 -16% 6,174 AAA- AAA- 9 7 Nescafe Food 5,364 -13% 6,171 AAA- AAA- 10 11 Swiss Re Insurance 4,585 0% 4,587 AA AA- 10 11 Swiss Re Insurance 4,730 3% 4,584 AA AA- 11 12 Novartis 11 12 Novartis 12 10 Glencore Xstrata 12 10 Glencore Xstrata 13 15 Omega 13 15 Omega 14 New TAG Heuer 14 New TAG Heuer 15 16 Holcim 15 16 Holcim 16 17 Adecco 16 17 Adecco 17 19 Swiss Life 17 19 Swiss Life 18 18 TE Connectivity 18 18 TE Connectivity 19 20 Swatch 19 20 Swatch 20 24 Dufry 20 24 Dufry 21 21 Kuehne + Nagel 21 21 Kuehne + Nagel 22 26 Lindt 22 26 Lindt 23 29 Julius Baer 23 29 Julius Baer 24 30 Schindler 24 30 Schindler 25 27 Barry Callebaut 25 27 Barry Callebaut 26 New SGS 26 New SGS 27 25 Helvetia 27 25 Helvetia 28 23 Tissot 28 23 Tissot 29 36 Geberit 29 36 Geberit 30 34 Syngenta 30 34 Syngenta 31 39 ZKB 31 39 ZKB 32 33 Emmi 32 33 Emmi 33 38 Maggi 33 38 Maggi 34 45 Baloise 34 45 Baloise 35 37 Sika 35 37 Sika 36 44 Sunrise 36 44 Sunrise 37 New Luxoft 37 New Luxoft 38 35 Nespresso 38 35 Nespresso 39 New Lindor 39 New Lindor 40 New Logitech 40 New Logitech 41 43 Longines 41 43 Longines 42 49 Davidoff 42 49 Davidoff 43 50 Swiss 43 50 Swiss 44 47 Nesquik 44 47 Nesquik 45 New Alpiq 45 New Alpiq 46 New Clariant 46 New Clariant 47 New SIX Swiss Exchange 47 New SIX Swiss Exchange 48 New Jaeger-LeCoultre 48 New Jaeger-LeCoultre 49 New IWC 49 New IWC 50 41 Lonza 50 41 Lonza

12. Brand Finance Switzerland 50 May 2017 Brand Finance Switzerland 50 May 2017 13. Understand Your Brand’s Value

Drivers of Change Brand Strength Index 2016 An ideal balanced scorecard of fundamental brand related measures Brand Value Dashboard Three key areas impact Brand Value (EURm) Brand Valuation Assumptions Effective BSI Weighting Attributes 18 131 Underlying economic assumptions used in valuation 34 $707m $882m $10,216m 6.25% Product: R&D expenditure, Widely recognised factors deployed by Brand Capital expenditure Strong brand (EUR) (EUR) Marketers to create brand loyalty and Brand [XXX] Brand Value Brand Value (EUR) Brand value (EURm) Investment Enterprise Value AA+ Investment 25% 6.25% Place: Website Ranking 729 729 Inputs market share. We therefore benchmark 78/100 616 616 650 6.25% People: Number of Employees, €650m €729m €9,399m Employee Growth brands against relevant input measures by Brand 25% Equity X 6.25% Promotion: Marketing expenditure sector against each of these factors. % = Historic brand value performance (EURm) Peer Group Comparison (USDm) $650 Brand Performance Forecast revenues $6,265 2015 Brand Strength Business Performance External Changes 2016 5.00% Familiarity 800 729 Weak brand $ $3,031 7.50% Consideration How do stakeholders feel about the brand 650 $2,328 $1,913 $707 700 607 7.50% Preference vs. competitors? Brand Strength Business Outlook Economic Outlook Customer 35% 7.50% Satisfaction 600 [XXX] [XXX]’s brand strength has increased compared to last year. Brands drive higher revenues. An investor would therefore All future returns are subject to risk. If the risk of not 7.50% Recommendation/NPS • Brand equity accounts for 50% to reflect Revenue Long Term Growth Rate Tax Rate Discount Rate 500 pay more for a brand that makes more money. receiving the forecast returns is higher (increasing the Brand the importance of stakeholder As the brand continues its sustainability drive, [XXX] has discount rate), the brand’s market is not growing as quickly Equity 5.00% Employee Score Licensing payments for the use of a After the explicit forecasts, the brand Forecasted royalties are reduced by Earnings in the future are worth less 320 Staff 5% perceptions to behaviour 400 Brand Value by Product Segment been improving across all CSR scores. It now has the [XXX]’s revenue base and the 5 year forecast growth have as expected (lower long term growth rate) or the tax rate in brand are derived from revenue. will continue to grow. However, it is the tax rate to reflect the actual than consumption now. This rate is 275 highest CSR scores it has had in the last four years across fallen this year, resulting in a loss of $177m USD to total the brand’s regions of operation is higher, then the brand’s 300 Increases or decreases in forecasted unlikely that the company will sustain amount that would be received by therefore used to reduce future 213 Environment, Employees and Governance. brand value. value is reduced and vice versa. 50% 2.50% Credit Rating • Brand Equity is important to all 37% Financial 5% revenue increase or decrease the extraordinary returns into the future the brand owner after tax. earnings to their value today. Nutrition 2.50% Analyst Recommendation stakeholder groups with customers being 200 The premium approach is also leading to significant margin However, it is important to note that this has arisen as a final valuation. so forecast industry growth rates are advantages – positively affecting “performance”. result of the company divesting a number of divisions. the most important 100 Performance Materials 1.67% Environment Score applied. 58% External 5% 1.67% Community Score 0 Other Activities 4% 1.67% Governance Score 2011 2012 2013 2014 2015 2016 2016 2015 2016 2015 2016 2015 5 year Compound Annual Growth Rate Long Term Growth Rate Tax Rate Discount Rate Brand 5 Year Forecast 6.25% Revenue (CAGR) 78 76 2.6% 3.4% Discount Rate 9.1% 8.6% Brand Strength Index Strength Growth Quantitative market, market share and 7% Brand 6.25% % Margin financial measures resulting from the Long Term Growth 3.2% 2.6% 2015 2014 2015 2014 2015 2014 2015 2014 Base Year 8,205 9,570 Performance Outputs 25% 6.25% % Forecast Margin Revenue (EURm) strength of the brand. 6.25% % Forecast Revenue Growth Tax 28.9% 30.2% 25% 2.6% 3.4% -0.8% 3.2% 2.6% +0.6% 29% 30% -1.3% 9.1% 8.6% +0.5%

Determining the Royalty Rate Brand Performance Brand Investment In order to apply the Brand Strength Index, a hypothetical royalty rate range needs to be set Competitor Royalty Rates An ideal balanced scorecard of fundamental brand related measures Proven inputs that drive the Brand Equity and financial results Following the OECD guidelines, Brand Finance sets the hypothetical brand royalty rate ranges by reference to three tests: Competitor royalty rates will be different based on different strengths of the brand, having Brand Strength Index Brand Strength Index different operating segments and company-specific long term affordability • Comparable Agreements: A search of comparable licensing agreements for brands in each industry is conducted every year. The margin analyses Brand Investment Brand Performance are then compared against the royalty rates found in these agreements to analyse the importance of brand in the industry and set an appropriate 1.2% average industry royalty rate. 10.0 1.0% 10.0 9.3 • Industry Margins: An analysis of 25% to 40% of margins, generally accepted as rules of thumb for licensing rates for all intangible assets in a 8.9 8.9 8.0 7.7 company. These rates are adjusted to take into account the importance of brand in a given industry. 8.0 8.1 0.8% 0.8% 0.8% 0.8% 6.4 6.0 • Affordability: Thirdly, an analysis of the brand’s specific royalties is conducted. If the brand has been able to sustain extraordinary profits over an 0.7% 6.0 5.3 0.6% extended time it is likely that hypothetical brand owners would be willing to pay closer to the company’s margins than the industry average. In the 0.6% 0.6% 0.6% 5.0 4.0 case of Brand Finance’s League Table models, affordability will be based on the forecast EBIT. 4.0 [XXX]DSM Best in Class Competitor Average 0.5% DSM[XXX] Best in Class Competitor Average 2.0 • Average industry royalty rate ranges can be seen below 2.0 0.0 High 0.0 Effective Effective Weighting 6.25% 6.25% 6.25% 6.25% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Weighting 6.25% 6.25% 6.25% 6.25% DSM BASF Dow Du Pont Akzo Nobel Akzo Nobel Best in Best in Class [XXX] Du Pont Multiple Akzo Nobel Mid Class Akzo Nobel Dow Akzo Nobel Du Pont Product Place People Promotion [XXX] Revenue Margin % Forecast Revenue Growth % Forecast Margin % Low Relative quality of the brand’s investment in Relative quality of a brand’s distribution Relative quality of the human network Relative quality of the brand’s promotions. its products. The measure can include R&D network. It can include the quality of supporting the brand. This may include the Marketing investment, the quality of visual Akzo Nobel – Paints and spend and capital expenditure. logistical infrastructure available to the size of the support network, its likely future identity and the effectiveness of the [XXX] BASF Dow Du Pont Akzo Nobel - Corporate The brand’s ability to drive a The brand’s ability to drive a The brand’s ability to improve Coatings brand, the quality of its online presence, or growth or the investment in workforce brand’s social media is covered by this volume premium. Implied by price premium. Implied by business prospects across the number and quality of its retail outlets. training and human resources. measure. 78 78 80 80 82 82 current and future revenue. current and future margins. various KPIs

A Brand Value Report provides a complete + Internal understanding of brand Royalty Rates Trademark Audit breakdown of the assumptions, data + Brand value tracking sources and calculations used to arrive at + Competitor benchmarking Analysis of competitor royalty rates, industry Analysis of the current level of protection for the your brand’s value. + Historical brand value royalty rate ranges and margin analysis used to brands word marks and trademark iconography Each report includes expert recommendations determine brand specific royalty rate. highlighting areas where the marks are in need for growing brand value to drive business of protection. performance and offers a cost-effective way to Brand Strength Index + Transfer pricing gaining a better understanding of your position + Licensing/ franchising negotiation + Highlight unprotected marks against competitors. A breakdown of how the brand performed on + International licensing + Spot potential infringement various metrics of brand strength, benchmarked + Competitor benchmarking + Trademark registration strategy A full report includes the following sections against competitor brands in a balanced which can also be purchased individually. scorecard framework. For more information regarding our Brand Value Cost of Capital Reports, please contact: + Brand strength tracking Brand Valuation Summary + Brand strength analysis A breakdown of the cost of capital calculation, Alex Haigh + Management KPI’s including risk free rates, brand debt risk Director of League Tables, Brand Finance Overview of the brand valuation including + Competitor benchmarking premiums and the cost of equity through CAPM. executive summary, explanation of changes in [email protected] brand value and historic and peer group + Independent view of cost of capital for internal comparisons. valuations and project appraisal exercises +44 (0)20 7389 9400

14. Brand Finance Switzerland 50 May 2017 Brand Finance Switzerland 50 May 2017 15. How we can help Contact details

1. Valuation: What are my intangible assets 2. Analytics: How can I improve marketing worth? effectiveness? Contact us Our offices Valuations may be conducted for technical purposes Analytical services help to uncover drivers of demand For brand value report and to set a baseline against which potential strategic and insights. Identifying the factors which drive enquiries, please contact: brand scenarios can be evaluated. consumer behaviour allow an understanding N 2. IO AN of how brands create bottom-line impact. Alex Haigh T A A L Director of League Tables U Y L T Brand Finance A I V C • Branded Business Valuation • Trademark Valuation [email protected] . S • Market Research Analytics • Brand Audits 1 • Intangible Asset Valuation • Brand Contribution Brand & • Brand Scorecard Tracking • Return on Marketing Investment

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4. Transactions: Is it a good 3 3. Strategy: How can I increase

Robert Haigh deal? Can I leverage my S the value of my branded business? T

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intangible assets? R Marketing & Communications

A Strategic marketing services enable brands A

N Director Brand Finance

E to be leveraged to grow businesses. Scenario

Transaction services help buyers, sellers and A

Y T . 4 owners of branded businesses get a better deal modelling will identify the best opportunities, [email protected] by leveraging the value of their intangibles. ensuring resources are allocated to those activities which have the most impact on brand and business value. For all other enquiries, please contact: • M&A Due Diligence • Franchising & Licensing • Brand Governance • Brand Architecture & Portfolio Management • Tax & Transfer Pricing • Expert Witness • Brand Transition • Brand Positioning & Extension [email protected] +44 (0)207 389 9400 For further information on Brand Finance®’s services and valuation experience, please contact your local representative: Country Contact Email address Australia Mark Crowe [email protected] Brazil Pedro Tavares [email protected] MARKETING FINANCE TAX LEGAL linkedin.com/company/ Canada Bill Ratcliffe [email protected] brand-finance China Minnie Fu [email protected]

We help marketers to connect We provide financiers and We help brand owners and We help clients to enforce and Caribbean Nigel Cooper [email protected] their brands to business auditors with an independent fiscal authorities to understand exploit their intellectual East Africa Jawad Jaffer [email protected] performance by evaluating the assessment on all forms of the implications of different property rights by providing France Victoire Ruault [email protected] return on investment (ROI) of brand and intangible asset tax, transfer pricing and brand independent expert advice in- facebook.com/brandfinance Germany Dr. Holger Mühlbauer h.mü[email protected] brand based decisions and valuations. ownership arrangements. and outside of the courtroom. Greece Ioannis Lionis [email protected] strategies. Holland Marc Cloosterman [email protected] India Ajimon Francis [email protected] + Branded Business Valuation + Branded Business Valuation + Branded Business Valuation + Branded Business Valuation twitter.com/brandfinance Indonesia Jimmy Halim [email protected] + Brand Contribution + Brand Contribution + Brand Contribution + Brand Contribution Italy Massimo Pizzo [email protected] + Trademark Valuation + Trademark Valuation + Trademark Valuation + Trademark Valuation Malaysia Samir Dixit [email protected] + Intangible Asset Valuation + Intangible Asset Valuation + Intangible Asset Valuation + Intangible Asset Valuation Disclaimer + Brand Audit + Brand Audit + Brand Audit + Brand Audit Mexico Laurence Newell [email protected] Brand Finance has produced this study LatAm (exc. Brazil) Laurence Newell [email protected] + Market Research Analytics + Market Research Analytics + Market Research Analytics + Tax & Transfer Pricing with an independent and unbiased + Brand Scorecard Tracking + Brand Scorecard Tracking + Franchising & Licensing + Expert Witness analysis. The values derived and Middle East Andrew Campbell [email protected] opinions produced in this study are Nigeria Babatunde Odumeru [email protected] + Return on Marketing + Return on Marketing + Tax & Transfer Pricing based only on publicly available Investment Investment + Expert Witness information and certain assumptions Portugal Pedro Tavares [email protected] + Brand Transition + Brand Transition that Brand Finance used where such Russia Alexander Eremenko [email protected] data was deficient or unclear . Brand + Brand Governance + Brand Governance Finance accepts no responsibility and Scandinavia Alexander Todoran [email protected] + Brand Architecture & + Brand Architecture & will not be liable in the event that the Singapore Samir Dixit [email protected] Portfolio Management Portfolio Management publicly available information relied upon is subsequently found to be South Africa Jeremy Sampson [email protected] + Brand Positioning & + Brand Positioning & inaccurate. Spain Lorena Jorge ramirez [email protected] Extension Extension Sri Lanka Ruchi Gunewardene [email protected] + Franchising & Licensing + Mergers, Acquisitions and The opinions and financial analysis expressed in the report are not to be Switzerland Victoire Ruault [email protected] Finance Raising Due construed as providing investment or Diligence business advice. Brand Finance does Turkey Muhterem Ilgüner [email protected] not intend the report to be relied upon UK Alex Haigh [email protected] + Franchising & Licensing for any reason and excludes all liability + Tax & Transfer Pricing to any body, government or USA Ken Runkel [email protected] + Expert Witness organisation. Vietnam Lai Tien Manh [email protected]

16. Brand Finance Switzerland 50 May 2017 Brand Finance Switzerland 50 May 2017 17. Contact us.

The World’s Leading Independent Branded Business Valuation and Strategy Consultancy T: +44 (0)20 7389 9400 E: v.ruault@brandfi nance.com www.brandfi nance.com

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