Retail 50

2015The annual report on the world’s most valuable retail brands February 2015 Foreword.

David Haigh, CEO, Brand Finance

“The boardroom can sometimes feel like the tower of Babel, with CMOs and CFOs speaking mutually unintelligible languages, damaging the prospects for what should be their shared goals. Brand Finance bridges the gap between marketing and finance.”

What is the purpose of a strong brand; to communicate the value of their work and boards and accounting. We understand the importance of Omaha certainly does extremely well from attract customers, to build loyalty, to motivate then underestimate the significance of their of design, advertising and marketing, but we most of his investments, but could he be doing staff? All true, but for a commercial brand at brands to the business. also believe that the ultimate and overriding better? least, the first answer must always be ‘to purpose of brands is to make money. make money’. Sceptical finance teams, unconvinced by what It is all well and good to want a strong brand that they perceive as marketing mumbo jumbo may That is why we connect brands to the bottom customers connect with, but as with any asset, Huge investments are made in the design, fail to agree necessary investments. What line. By valuing brands we provide a mutually without knowing the precise, financial value, how launch and ongoing promotion of brands. Given marketing spend there is can end up poorly intelligible language for marketers and finance can you know if you are maximising your their potential financial value, this makes sense. directed as marketers are left to operate with teams. Marketers then have the ability to returns? If you are intending to license a brand, Unfortunately most organisations fail to go insufficient financial guidance or accountability. communicate the significance of what they do how can you know you are getting a fair price? If beyond that, missing huge opportunities to The end result can be a slow but steady and boards can use the information to chart a you are intending to sell, how do you know what effectively make use of what are often their most downward spiral of poor communication, wasted course that maximizes profits. the right time is? important assets. resources and a negative impact on the bottom line. Of course not all non-marketers need to be Brand Finance has conducted hundreds of brand Monitoring of brand performance should be convinced that brands are valuable. Warren and branded-business valuations to help answer the next step, but is often sporadic. Where it Brand Finance bridges the gap between the Buffet, renowned for his financial nous and stock these questions. The following report is a first step does take place it frequently lacks financial marketing and financial worlds. Our teams have picking ability, is famously keen on investing in to understanding more about brands, how to rigour and is heavily reliant on qualitative experience across a wide range of disciplines some of the world’s biggest and best-loved value them and how to use that information to measures poorly understood by non-marketers. from market research and visual identity to tax brands such as Heinz and Coca-Cola. The sage benefit the business. The team and I look forward As a result, marketing teams struggle to to continuing the conversation with you.

2. Brand Finance Retail 50 February 2015 Brand Finance Retail 50 February 2015 3. Contents About Brand Finance

About Brand Finance 5 Brand Finance is the world’s leading regulatory bodies around the world. We are one independent brand valuation and strategy of the few companies certified to provide brand Methodology 6 consultancy. Brand Finance was set up in 1996 valuations that are fully compliant with ISO with the aim of ‘bridging the gap between 10668, the global standard on monetary brand Sector Analysis 8 marketing and finance’. For almost 20 years we valuations. Understand Your Brand’s Value 12 have helped companies to connect their brands to the bottom line, building robust business cases Transparency How We Can Help 14 for brand decisions, strategies and investments. There are no black boxes. Our approach is to In doing so, we have helped finance people to work openly, collaboratively and flexibly with Contact Details 15 evaluate marketing programmes and marketing clients and we will always reveal the details of people to present their case in the Board Room. our modelling and analysis. This means our clients always understand what lies behind ‘the Independence number’. Brand Finance is impartial and independent. We assess and help to manage Expertise brands, but we do not create or own them. We We possess a unique combination of skills are therefore able to give objective, unbiased and experience. We employ functional experts advice because we have no vested interest in with marketing, research and financial particular outcomes of a project and our backgrounds, as well as ex-client-side senior recommendations are entirely independent. We management who are used to ‘making things are agency agnostic and work collaboratively happen’. This gives us the mindset to think with many other agencies and consultancies. beyond the analysis and to consider the likely impact on day-to-day operations. We like to think Technical credibility this differentiates us because our team has real Brand Finance has high technical operational experience. standards. Our work is frequently peer- reviewed by the big four audit practices and our For more information, please visit our website: work has been accepted by tax authorities and brandfinance.com

Brand Finance puts thousands of the world’s biggest brands to the test every year, evaluating which are the most powerful and most valuable. The Global 500 covers the top 500 from all sectors and is just one of many annual reports produced by Brand Finance. Visit www.brandfinance.com to discover more.

Bridging the gap between marketing and finance

4. Brand Finance Retail 50 February 2015 Brand Finance Retail 50 February 2015 5. Methodology

What do we mean by ‘brand’? Brand strength Brand Brand revenues Brand value index ‘Royalty rate’ Definitions (BSI) + Enterprise Value – the value of the E.g. entire enterprise, made up of ‘Branded VW Group multiple branded businesses Brand Strong brand Enterprise’ investment ‘Branded Business’ Brand + Branded Business Value – the equity value of a single branded business ‘Brand’ E.g. operating under the subject brand Bentley Brand Weak brand performance Forecast revenues

+ Brand Value – the value of the Brand strength BSI score applied to an Royalty rate applied to Post-tax brand trade marks (and relating expressed as a BSI appropriate sector forecast revenues to revenues are Bentley Brand marketing IP and ‘goodwill’ score out of 100. royalty rate range. derive brand values. discounted to a net attached to it) within the branded present value (NPV) business which equals the brand value.

Definition of ‘Brand’ Brand Strength Brand Finance calculates the values of the sourced from Brand Finance’s extensive brands in its league tables using the database of license agreements and other In the very broadest sense, a brand is the focus Brand Strength is the part of our analysis most ‘Royalty Relief approach’. This approach online databases. for all the expectations and opinions held by directly and easily influenced by those involves estimating the likely future sales that are 3 Calculate royalty rate. The brand strength score customers, staff and other stakeholders about an responsible for marketing and brand attributable to a brand and calculating a royalty is applied to the royalty rate range to arrive at a organisation and its products and services. management. In order to determine the strength rate that would be charged for the use of the royalty rate. For example, if the royalty rate However when looking at brands as business of a brand we have developed the Brand brand, i.e. what the owner would have to pay for range in a brand’s sector is 1-5% and a brand assets that can be bought, sold and licensed, a Strength Index (BSI). We analyse marketing the use of the brand—assuming it were not has a brand strength score of 80 out of 100, more technical definition is required. Brand investment, brand equity (the goodwill already owned. then an appropriate royalty rate for the use of Finance helped to craft the internationally accumulated with customers, staff and other this brand in the given sector will be 4.2%. recognised standard on Brand Valuation, ISO stakeholders) and finally the impact of those on The steps in this process are as follows: 4 Determine brand specific revenues estimating a 10668. That defines a brand as “a marketing- business performance. Following this analysis, proportion of parent company revenues related intangible asset including, but not limited each brand is assigned a BSI score out of 100, 1 Calculate brand strength on a scale of 0 to 100 attributable to a specific brand. to, names, terms, signs, symbols, logos and which is fed into the brand value calculation. based on a number of attributes such as 5 Determine forecast brand specific revenues designs, or a combination of these, intended to Based on the score, each brand in the league emotional connection, financial performance using a function of historic revenues, equity identify goods, services or entities, or a table is assigned a rating between AAA+ and D and sustainability, among others. This score is analyst forecasts and economic growth rates. combination of these, creating distinctive images in a format similar to a credit rating. AAA+ known as the Brand Strength Index. 6 Apply the royalty rate to the forecast revenues and associations in the minds of stakeholders, brands are exceptionally strong and well 2 Determine the royalty rate range for the to derive brand revenues. thereby generating economic benefits/value” managed while a failing brand would be respective brand sectors. This is done by 7 Brand revenues are discounted post tax to a assigned a D grade. reviewing comparable licensing agreements net present value which equals the brand value.

6. Brand Finance Retail 50 February 2015 Brand Finance Retail 50 February 2015 7.

Sector Analysis – Retail

Rank 2015: 1 2014: 1 Rank 2015: 6 2014: 8 BV 2015: $16,157m 1 BV 2015: $56,124m +24% 6 +5% BV 2014: $45,147m BV 2014: $15,350m Brand Rating: AAA- Brand Rating: AA+

Rank 2015: 2 2014: 2 Rank 2015: 7 2014: 6 BV 2015: $15,381m 2 BV 2015: $46,737m +4% 7 -15% BV 2014: $44,779m BV 2014: $18,084m Retail Brand Rating: AA+ Brand Rating: AA

Rank 2015: 3 2014: 3 Rank 2015: 8 2014: 9 BV 2015: $14,453m 3 BV 2015: $24,471m +1% 8 +6% BV 2014: $24,323m BV 2014: $13,667m Brand Rating: AA+ Brand Rating: AA

Rank 2015: 4 2014: 5 Rank 2015: 9 2014: 11 50 4 BV 2015: $20,267m 9 BV 2015: $14,301m +11% +11% BV 2014: $18,283m BV 2014: $12,917m Brand Rating: AA+ Brand Rating: AA-

Rank 2015: 5 2014: 4 Rank 2015: 10 2014: 10 BV 2015: $14,070m 5 BV 2015: $18,540m +0% 10 +5% BV 2014: $18,471m BV 2014: $13,379m Brand Rating: AA- Brand Rating: AA+

Amazon leads the way in the retail sector by a with US$350 billion sales, in an industry going the challenge to the industry as a whole posed More recently it has been hit by a huge significant margin, and the brand continues to through a period of intense competition, it by new technology. Walmart has taken steps in accounting scandal, with profits overstated by grow. The online retailer overtook Walmart in represents a solid performance. New CEO Doug the right direction, having set up tech labs in hundreds of millions. Its latest setback is the brand value terms in early 2014 and has pulled McMillan is charting a stable course for the Silicon Valley and acquiring e-commerce announcements of an the first ever investigation further ahead this year, rising 24% to US$56 brand. A wage hike for half a million employees, businesses Adchemy and Styler in 2014. by the grocery ombudsman over unfair billion, highlighting the challenge to the with an increase in minimum pay to $9/hour However it is a long road back to regain ground treatment of suppliers. Tesco will be hoping that industry as a whole posed by new technology. ($10/hour from February 2015), will benefit the lost to Amazon. this year’s 37% drop in brand value brings it to a business and the brand. The publicity low point from which it can now begin to recover. Alibaba is the fastest growing brand in the surrounding the announcement alone will Target’s is suffering from the fallout of last year’s sector. Its brand value has increased 90% in a improve Walmart’s brand image. The boost to massive online data breach, when 40 million Almost all UK retailers are struggling however. year to US$11.4 billion. There is still significant staff morale should see improved productivity customer credit card numbers were M&S is down 1%, Sainsbury’s brand value is scope to grow domestically with only half the and customer service, both of which are compromised, harming its reputation. As a result down 16% and Morrisons is down 25%. All are Chinese population currently online. Allied with important inputs into Brand Finance’s Brand Target has lost 15% of its brand value in a year, struggling as a result of the price war that has this, following its IPO Alibaba has US$25 billion Strength Index. which sees it drop behind Walgreens. developed. Competition from discounters is also of new capital to challenge Amazon. putting on the pressure. Lidl and Aldi have As recently as 2010 Walmart was the world’s The worst performance came from Tesco. The rapidly won over once sceptical customers with Walmart’s brand value increased 4% to US$46.7 most valuable brand across all sectors but it has UK’s number one retailer has become a magnet clever advertising to highlight that negative billion. Though this doesn’t match Alibaba or been gradually been overtaken by the bigger for bad news. The setbacks began with brand perceptions are misplaced. Aldi’s brand Amazon, or the brand value growth rates we tech brands such as Microsoft, Apple and unsuccessful US expansion efforts leading to value is up 11% to US$14.3 billion. ASDA has have seen in some other sectors, for a brand Google. Amazon overtook it in 2014, highlighting wasted resources and a loss of focus at home. registered more modest growth of 2%. However

8. Brand Finance Retail 50 February 2015 Brand Finance Retail 50 February 2015 9. Sector – Retail

Top 50 most valuable brands 1-50.

Rank Rank Brand name Domicile Brand value % Brand value Brand rating Brand rating 2015 2014 ($m) 2015 change ($m) 2014 2015 2014 1 1 Amazon.com United States 56,124 24% 45,147 AAA- AAA- 2 2 Walmart United States 46,737 4% 44,779 AA+ AA+ 3 3 Home Depot United States 24,471 1% 24,323 AA+ AA- 4 5 CVS Caremark United States 20,267 11% 18,283 AA+ AA 5 4 IKEA Sweden 18,540 0% 18,471 AA- AA+ 6 8 Walgreens United States 16,157 5% 15,350 AA+ AA 7 6 Target United States 15,381 -15% 18,084 AA AA 8 9 Sam's Club United States 14,453 6% 13,667 AA AA+ 9 11 ALDI Germany 14,301 11% 12,917 AA- AA- 10 10 eBay United States 14,070 5% 13,379 AA+ AAA- 11 12 Lowe's United States 12 23 Alibaba China 13 7 Tesco UK 14 14 Costco United States 15 15 Carrefour France 16 13 Woolworths Australia 17 18 ASDA United States 18 16 Macy's United States 19 JD.com China 20 17 Sainsbury's UK 21 19 Cartier Switzerland 22 26 Nordstrom United States 23 22 Kroger United States 24 21 Coles Australia 25 42 Sherwin-Williams United States 26 25 Aeon Japan 27 29 Rolex Switzerland there are signs that the $8 billion brand may 28 28 Publix United States soon disappear. The recent adoption of 29 27 E Leclerc France Walmart’s ‘Save Money, Live Better’ slogan and 30 24 Groupe Casino France integration of its ‘sunshine’ logo could 31 30 Marks & Spencer UK foreshadow a full scale retirement of the ASDA 32 20 Morrisons UK 33 34 Edeka Germany brand. 34 36 Magnit Russia 35 32 Metro Germany Further down the table, Tiffany and Victoria’s 36 33 Chow Tai Fook Hong Kong Secret are notable strong performers. Victoria’s 37 48 Tiffany & Co. United States 38 44 Victoria's Secret United States Secret’s marketing is supported by its iconic 39 31 7-Eleven Japan shows featuring the ‘Angels’. They are the 40 39 Omega Switzerland ultimate brand ambassadors and have included 41 41 Whole Foods United States some of the world’s most famous and 42 40 Kohl's United States photographed women such as Tyra Banks, 43 35 Safeway United States 44 45 Dollar General United States Helena Christensen, Claudia Schiffer, Adriana 45 38 Auchan France Lima and Miranda Kerr. CEO Sharen Jester 46 43 Best Buy United States Turney continues to expand the brand 47 47 AutoZone United States internationally, with new stores opening in the 48 52 Carmax United States UK and China in 2014. 49 54 Bed Bath & Beyond United States 50 37 QVC United States

10. Brand Finance Retail 50 February 2015 Brand Finance Retail 50 February 2015 11. Understand Your Brand’s Value

A League Table Report provides a + Internal understanding of brand Royalty Rates Trademark Audit complete breakdown of the assumptions, + Brand value tracking data sources and calculations used to Analysis of competitor royalty rates, industry Analysis of the current level of protection for the arrive at your brand’s value. Each report + Competitor benchmarking royalty rate ranges and margin analysis used to brands word marks and trademark iconography includes expert recommendations for growing + Historical brand value determine brand specific royalty rate. highlighting areas where the marks are in need brand value to drive business performance and + Transfer pricing of protection. offers a cost-effective way to gaining a better + Highlight unprotected marks understanding of your position against Brand Strength Index + Licensing/ franchising negotiation competitors. + International licensing + Spot potential infringement A breakdown of how the brand performed on + Trademark registration strategy A full report includes the following sections various metrics of brand strength, benchmarked + Competitor benchmarking against competitor brands in a balanced which can also be purchased individually. For more information regarding our League scorecard framework. Cost of Capital Table Reports, please contact: Brand Valuation Summary + Brand strength tracking A breakdown of the cost of capital calculation, + Brand strength analysis including risk free rates, brand debt risk Sean Connell Overview of the brand valuation including Client Services Manager, Brand Finance executive summary, explanation of changes in + Management KPI’s premiums and the cost of equity through CAPM. brand value and historic and peer group + Competitor benchmarking + Independent view of cost of capital for internal [email protected] comparisons. valuations and project appraisal exercises +44 (0)207 389 9400

12. Brand Finance Retail 50 February 2015 Brand Finance Retail 50 February 2015 13. How we can help. Contact details.

Contact us. Our offices.

For league table enquiries, please contact: MARKETING FINANCE TAX LEGAL Sean Connell Client Services Manager We help marketers to connect We provide financiers and We help brand owners and We help clients to enforce and Brand Finance their brands to business auditors with an independent fiscal authorities to understand exploit their intellectual [email protected] performance by evaluating the assessment on all forms of the implications of different property rights by providing financial impact of brand based brand and intangible asset tax, transfer pricing and brand independent expert advice in- For media enquiries, decisions and strategies. valuations. ownership arrangements. and outside of the courtroom. please contact: Robert Haigh + Brand Valuation + Brand & Branded Business + Brand & Branded Business + Brand & Branded Business Communications Director + Brand Due Diligence Valuation Valuation Valuation Brand Finance + Profit Levers Analysis + Intangible Asset Valuation + Intangible Asset Valuation + Intangible Asset Valuation [email protected] + Scenario Modelling + Fair Value Exercise (IFRS 3 + Patent Valuation + Patent Valuation + Market Research / FAS 141) + Asset Transfer Valuations + Business & Share For all other enquiries, + Brand Identity & Customer + Intangible Asset Impairment + Business & Share Valuations please contact: Experience Audit Reviews (IAS 36 / FAS 142) Valuations + Loss of Profits Calculations [email protected] + Brand Strength Analysis Brand Due Diligence + Transfer Pricing Analysis + Account of Profits +44 (0)207 389 9400 For further information on Brand Finance®’s services and valuation experience, please contact + Brand Equity Analysis + Information Memoranda + Royalty Rate Setting Calculations your local representative: + Perception Mapping + Finance Raising + Brand Franchising & + Damages Assessment + Conjoint & Brand/Price + Insolvency & Administration Licensing + Forensic Accounting Country Contact Email address Trade-off Analysis + Market Research Design + BrandCo & IPCo Strategy + Royalty Rate Setting Argentina Pablo Bolino [email protected] + Return on Investment and Management + Market Research Design + Brand Franchising & Australia Mark Crowe [email protected] + Sponsorship Evaluation + Return on Investment and Management Licensing linkedin.com/company/ Brazil Gilson Nunes [email protected] + Budget Setting + Franchising & Licensing + Brand Tracking + BrandCo & IPCo Strategy brand-finance Canada Edgar Baum [email protected] + Brand Architecture & + BrandCo & IPCo Strategy + Expert Witness Opinion + Market Research Design Caribbean Nigel Cooper [email protected] Portfolio Evaluation + Scenario Modelling & and Management Central America Rajesh Ingle [email protected] + Brand Positioning & Planning + Trademark Registration East Africa Jawad Jaffer [email protected] Extension Evaluation + Transfer Pricing Analysis + Trademark watching service facebook.com/brandfinance Germany Dr. Holger Mühlbauer [email protected] + Brand Migration + Management KPIs and Greece Ioannis Lionis [email protected] + Franchising & Licensing Target-setting + BrandCo Strategy + Competitor Benchmarking Holland Marc Cloosterman [email protected] + Brand Governance Process India Ramesh Saraph [email protected] + Brand Tracking twitter.com/brandfinance Indonesia Michel Budi [email protected] + Management KPIs Middle East Anthony Kendall [email protected] + Competitor Benchmarking Disclaimer. Nigeria Tunde Odumeru [email protected] New Zealand Jai Basrur [email protected] Brand Finance has produced this study Portugal Pedro Taveres [email protected] Brand Valuation Brand Analytics with an independent and unbiased analysis. The values derived and Russia Alex Eremenko [email protected]

Valuations may be conducted for technical RE 2. Analytical services help to uncover drivers of opinions produced in this study are Singapore Samir Dixit [email protected] U M based only on publicly available purposes and to set a baseline against S A demand and insights. Identifying the factors A N information and certain assumptions South Africa Oliver Schmitz [email protected] which potential strategic brand scenarios E A which drive consumer behaviour allow an G that Brand Finance used where such M Sri Lanka Ruchi Gunewardene [email protected] data was deficient or unclear . Brand can be evaluated. . E understanding of how brands create 1 bottom-line impact. Finance accepts no responsibility and Turkey Muhterem Ilguner [email protected] will not be liable in the event that the UK Richard Yoxon [email protected] Brand & publicly available information relied upon is subsequently found to be USA Edgar Baum [email protected] Business Value inaccurate.

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Brand Monitoring 3 Brand Strategy The opinions and financial analysis

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expressed in the report are not to be M O

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management by integrating market I to be leveraged to grow businesses.

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I M not intend the report to be relied upon

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research, investment, market and financial . Scenario modelling will identify the best E 4 for any reason and excludes all liability metrics into a single insightful scorecard opportunities, ensuring resources are to any body, government or model to track performance and inform allocated to those activities which have the organisation. strategic decisions. most impact on brand and business value.

14. Brand Finance Retail 50 February 2015 Brand Finance Retail 50 February 2015 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

Bridging the gap between marketing and finance