Australia 100 2017 The annual report on the world’s most valuable Australian brands February 2017 Foreword Contents Foreword 2 Definitions 4 Methodology 6 Analysis - Australia 100 8 Full Table (AUDm) 12 Full Table (USDm) 14 Understand Your Brand’s Value 16 How We Can Help 18 Contact Details 19 Mark Crowe, MD, Brand Finance David Haigh, CEO, Brand Finance Australia By valuing brands and understanding the drivers Most organisations miss huge opportunities to of value, the contribution of marketing can be effectively make use of their most important measured beyond conventional metrics such as assets. Where it does happen it often lacks market share, attracting customers and building financial rigour and is heavily reliant on poorly loyalty, to how investment drives business understood qualitative measures. As a result, performance along with maximising profits and marketing teams struggle to communicate the increasing shareholder value. value of their work, finance teams - unconvinced by marketing ‘mumbo jumbo’, may fail to agree By placing a financial value on such a powerful necessary investments, and marketing spend value creating asset, boards and management directed with insufficient financial guidance may are compelled to recognise the need to have an result in a downward spiral. effective brand investment strategy. Brand Finance believes that the ultimate purpose The Brand Finance Australia 100, which of brands is to make money. By valuing brands, accounts for more than $143 billion in brand we provide a mutually intelligible language for value, highlights the important role of brand and marketers and finance teams in order to how it contributes to the bottom line for maximise profits. Our recently conducted share organisations. price study revealed that investing in the most 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 brands and how to value them to benefit the business. The team and I look forward to continuing the conversation with you. 2. Brand Finance AustraliaGlobalAirlines 500 30 100 30February MarchFebruaryFebruary 20162016 20172015 Brand Finance Australia 100 February 2017 3. Definitions Effect of a Brand on Stakeholders Definitions E.g. + Enterprise Value – the value of the Unilever entire enterprise, made up of Directors 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’ Persil 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 Persil business from its brand ‘Brand Value’ Trade Sales Channels + Brand Value – the value of the Persil trade marks (and relating 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 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 tables are those of the potentially transferable for all the expectations and opinions held by directly and easily influenced by those Brand Finance always conducts a Branded brand asset only, but for marketers and customers, staff and other stakeholders about responsible for marketing and brand Business Valuation as part of any brand managers alike. An assessment of overall an organisation and its products and services. management. In order to determine the valuation. Where a company has a purely mono- brand contribution to a business provides However, when looking at brands as business strength of a brand we have developed the branded architecture, the business value is the powerful insights to help optimise performance. assets that can be bought, sold and licensed, a Brand Strength Index (BSI). We analyse same as the overall company value or more technical definition is required. marketing investment, brand equity (the ‘enterprise value’. Brand Contribution represents the overall uplift goodwill accumulated with customers, staff and in shareholder value that the business derives Brand Finance helped to craft the internationally other stakeholders) and finally the impact of In the more usual situation where a company from owning the brand rather than operating a recognised standard on Brand Valuation, ISO those on business performance. owns multiple brands, business value refers to generic brand. 10668. That defines a brand as “a marketing- the value of the assets and revenue stream of related intangible asset including, but not limited Following this analysis, each brand is assigned the business line attached to that brand 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 specifically. We evaluate the full brand value customers but also staff, strategic partners, designs, or a combination of these, intended to brand value calculation. Based on the score, chain in order to understand the links between regulators, investors and more, having a identify goods, services or entities, or a each brand in the league table is assigned a marketing investment, brand tracking data, significant impact on financial value beyond combination of these, creating distinctive rating between AAA+ and D in a format similar stakeholder behaviour and business value to what can be bought or sold in a transaction. images and associations in the minds of to a credit rating. AAA+ brands are maximise the returns business owners can stakeholders, thereby generating economic exceptionally strong and well managed while a obtain from their brands. benefits/value” failing brand would be assigned a D grade. 4. Brand Finance Australia 100 February 2017 Brand Finance Australia 100 February 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 brand sectors. This is done by reviewing ‘Royalty Relief approach’. This approach comparable licensing agreements sourced from involves estimating the likely future sales that are Brand Finance’s extensive database of license attributable to a brand and calculating a royalty agreements and other 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 already owned. brand’s sector is 1-5% and a brand has a brand The steps in this process are as follows: strength score of 80 out of 100, then an appropriate 1 2 3 4 royalty rate for the use of this brand in the given Brand Audit Trial & Preference Acquisition & Valuation Modelling 1 Calculate brand strength on a scale of 0 to 100 sector will be 4.2%. Retention based on a number of attributes such as emotional 4 Determine brand specific revenues estimating a connection, financial performance and sustainability, proportion of parent company revenues attributable Audit the impact Run analytics to Link stakeholder Model the impact of behaviour on 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 from the BrandAsset® Valuator database, the function of historic revenues, equity analyst brand equity world’s largest database of brands, which measures forecasts and economic growth rates. brand equity, consideration and emotional imagery 6 Apply the royalty rate to the forecast revenues to attributes to assess brand personality in a category derive brand revenues. agnostic manner. 7 Brand revenues are discounted post tax to a net 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 Current brand and Target brand and score out of 100. royalty rate range. derive brand values. discounted