Brand Finance® Global 500 The annual report on the world’s most valuable brands March 2010 David Haigh, Chief Executive, Brand Finance plc “Brands are the most valuable intangible assets in business today. They drive demand, motivate staff, secure business partners and reassure financial markets. Leading edge organisations recognise the need to understand brand equity and brand value when making strategic decisions” David Haigh, CEO, Brand Finance plc © Brand Finance plc 2010 Foreword Since it was released in 2007, the Brand Finance® Global 500 has been the most comprehensive table of published brands values. Each brand is awarded a Brand Rating: a benchmarking study of the strength, risk and future potential of a brand relative to its competitor set and a Brand Value: a summary measure of the financial strength of the brand. In contrast to last year’s dismal performance in which the total brand value of the 500 most valuable brands dropped by a staggering US$707 billion, the top 500 brands have shown tangible signs of recovery, growing by 27% in terms of total brand value. This improved performance is largely caused by the resurgence within the banking sector and the steady growth in the telecommunications sector. It is worth also noting that those brands that focus on providing value-oriented goods or services have fared well during the recession. Bearing this in mind, I am delighted to announce that for the second year running, Walmart is the most valuable brand in the world growing in brand value by 2% to US$41.4 billion. Within the Global 500, we continue to see the rise of emerging market brands. South America is the fastest growing region, increasing in brand value by 117%, which has been largely driven by the growth of the booming Brazilian market. In addition, Asia continues to perform well, growing in brand value by 26%. North America continues to contribute the highest proportion of brand value to the Global 500 at 21% despite the fact that fourteen US brands fell out of the study this year. Ten European brands enter the Global 500 in 2010. This report provides an opinion regarding the point in time valuations of the most valuable global brands at 31st December 2009. It suggests how the methodology and findings can be used to determine the impact of brand equity on business performance, as well as discussing the impact of the new ISO 10668 brand valuation standard and what it means for global brands. David Haigh, Chief Executive, Brand Finance plc © Brand Finance plc 2010 1 2 © Brand Finance plc 2010 Executive Summary Top line findings • The top 500 most valuable brands in the world have grown in value by 27% to US$2,897 billion • The Enterprise Value of the top 500 has grown by 16% to US$18,664 billion • Walmart is the most valuable brand in the world for the second year running, increasing its brand value by 2% to US$41.4 billion • Santander is the fastest growing brand in the top 50, increasing its brand value by 136% to become the thirteenth most valuable brand in the world, rising from 41st place last year. Banking and Telecoms sectors thrive whilst non-essentials suffer in the recession... • The banking sector has seen the largest increase in brand value growing by US$142 billion, a swift resurgence following a near systemic failure • The largest individual brand value increases are all banks: Santander, Wells Fargo, Sberbank and Goldman Sachs’ brands underpinning the recovery of the banking sector in 2010 • The telecoms sector has also experienced growth, increasing in brand value by US$97 billion • The Airlines, Tobacco, and Fashion sectors have all seen significant losses in 2010 with drops in brand value of US$7 billion, US$6 billion and US$3 billion respectively. This is a direct reflection of consumer behaviour during the recession with a drop in international travel and high value non-essential purchases. Emerging markets continue to boom whilst the west shows recovery... • Despite contributing only 1% to the Global 500, South America’s total brand value increased significantly by 117% making it the fastest growing region. This year, four brands (including one from Chile) were newly introduced into the Global 500. • The European region is the second fastest growing region increasing in brand value by 37% and contributing 19% to the overall Global 500. Ten new European brands enter the Global 500 this year including Zara from Spain, and T-Home in Germany. By contrast, the United Kingdom is one of the only European countries to have performed badly with eleven brands dropping out the study. • North American brands have begun to rebound growing in value by 16% and contributing 21% to the total Global 500. Thirteen US and one Canadian brand dropped out this year including Black & Decker and Southwest Airlines. • Asia continues to perform well, growing in brand value by 26% and contributing 8% to the overall Global 500. Four new brands enter the Global 500 from Asia. • Both the Pacific and African regions have grown in brand value by 23% and 21% respectively largely spurred on by a strong performance of the banking industry in the Pacific and the telecoms industry in Africa. © Brand Finance plc 2010 3 4 © Brand Finance plc 2010 Contents 1. Foreword ................................................ 1 2. Executive Summary ................................... 3 3. Introduction ................................................ 7 4. Top 20 Most Valuable Global Brands ... 8 5. ‘New International Standards on Brand Value’ by David Haigh, CEO Brand Fiance plc ... 30 6. Winners and Losers 2010 ............................ 38 7. Battle of Global Giants ............................. 40 8. Regional Analysis ........................................ 54 9. Global Intangible Finance Tracker .................. 64 10. Explanation of Methodology .......................... 68 11. About Brand Finance ................................... 70 12. Glossary of Terms ....................................... 75 13. Disclaimer .................................................. 77 14. Contact details ........................................ 78 Appendix: Top 500 Most Valuable Global Brands ............... 79 © Brand Finance plc 2010 5 6 © Brand Finance plc 2010 Introduction This is Brand Finance’s third iteration of our analysis focusing on the world’s most valuable brands. Whilst the identity of the top brands remains familiar and relatively consistent, the actual ranking of these brands has been shuffled, reflecting the volatility of the world economy over the last few years. The debate concerning the validity and applicability of brand valuation analysis continues. Differing methodologies and significant variations in brand values published in league tables have contributed to a lack of detailed understanding amongst decision makers. However, in Q2 of 2010, the International Organization for Standardisation (‘ISO’), an international federation of standard setting bodies, will release IS 10668 – a standard relating to brand valuation. This standard should serve to provide brand valuation analysis with the institutional credibility that it lacked before and, as a result, professionalise brand management. This standard is discussed in detail in Section 4 – ISO Standard. The Brand Finance® Global 500 shows that the total value of the world’s 500 most valuable brands has increased by 27%. Although the downturn in the macro-economy has severely affected businesses all over the world, those that were able to adapt to the new world order, whether it was partly due to a less competitive playing field (investment banking) or attracting consumers less willing to spend on premium products (retail), have thrived. The winners (i.e. the branded businesses that recorded the best performance in 2008-09) are shown in Section 6. Section 7 analyses the battle of global giants within their industry groups. Several brands from emerging markets have also recorded large gains in value. Their relative underperformance over the last decade, competitive cost bases and improved brand management have all contributed to their rise. The regional analysis contained in Section 8 provides more detail. As yet, none of the top 20 brands are domiciled or originate from emerging markets. Based on historical growth rates and IMF economic forecasts, Brand Finance predicts that, within the next five years, one of the BRIC (Brazil, Russia, India and China) countries will either acquire or develop a brand that ranks in the global top 20. © Brand Finance plc 2010 7 888 © Brand Finance plc 2010 Top 20 Most Valuable Global Brands © Brand Finance plc 2010 9 Walmart Stores Inc. (Walmart) is the world’s largest 1. public corporation by revenue, according to the Fortune Global 500 ranking. Walmart serves customers and club members more than 200 million times per week at more 2010 2009 than 8,000 retail units under 53 different banners in 15 Brand Ranking 1st 1st countries. The company operates in three business Brand Value (US$) 41,365 40,616 segments: Walmart U.S. and Sam’s Club in the United Brand rating AA AA Enterprise Value 190,803 165,823 States, and Walmart International in 14 countries and Domicile United States Puerto Rico. Industry group Retail The brand value of Walmart has risen marginally by 1.8%. Although there is a fall in the benchmarking score 50,000 Brand Value and the royalty rate which has a negative effect on brand 40,000 value, the discount rate has fallen which has helped 30,000 negate the previous factor 20,000 US$ millions 10,000 Walmart is the world’s most valuable brand for the 0 second year running, despite occasionally polarizing 2008 2009 2010 public opinion. But in uncertain economic times, its 250,000 Enterprise Value 200,000 constant emphasis on offering value to its consumers 150,000 has resulted in buoyant sales, thereby repositioning itself 100,000 as a consumer champion. The company continues to US$ millions 50,000 dominate the US retail landscape, providing employment 0 to more than two million people. It is also developing a 2008 2009 2010 laudable reputation for corporate philanthropy and is 250 Share price pioneering sustainable practices across its supply chain.