People queue in front of Apple’s new flagship store at Sanlitun on July 17, 2020 in Beijing, China.
When it comes to brand value, it’s hard to topple Big Tech. In Forbes’ 2020 list of the 100 Most Valuable Brands, the top five are the same as last year: Apple, Google, Microsoft, Amazon, and Facebook. And although the first four have maintained or increased their growth rate, Facebook has fallen. In fact, the brand value of the social network decreased by 21% between fiscal year 2018 and fiscal year 2019.
Several brands had notable changes to the annual rankings, which examine financial data from the previous fiscal year. Visa rose from 25 to 18, Adidas went from 61 to 51, and Netflix jumped from 38 to 26. Some luxury brands also saw significant changes, with Chanel from 79 to 52 and Cartier from 64 to 56.
This year’s list includes several newcomers: Nintendo, Hennessy, Burger King, and AXA are in the top 100. Meanwhile, some of the highest-loss companies were legacy tech companies like GE, HP Inc., and IBM, which saw Total values decrease by 14%, 12% and 10% respectively. Phillips, Hewlett Packard Enterprise and Kellogg’s were completely removed from this year’s ranking.
“There is a rigidity in brand value that is quite surprising when we think about it,” said Christie Nordhielm, a professor of marketing at Georgetown University. “So at the same time that technology and new brands are taking off, there is brand adherence, both specific brands and corporate brands. And that goes up to brand ratings, and sometimes that stiffness gives the false sense of security that can go wrong. Like everything we are experiencing now, there is a lag effect. “
Notably higher this year was Walmart. The retailer’s brand value increased 12% year-over-year to $ 29.5 billion while jumping in the ranks from 26 to 19.
“Walmart has been making a great effort to modernize its delivery and try to compete,” said Nordhielm. “They face Amazon, and that’s a tough competitor, but Walmart is not a shrinking violet. They will not go down in silence. In a sense, Amazon is helping Walmart and forcing them to improve their game. “
There were also some big drops, especially in the automotive sector. While Mercedes-Benz fell from 17 to 23 and BMW fell from 21 to 27, Nissan was removed from the list entirely, falling from 81 a year earlier. Other declines in the rankings included Wells Fargo (42 to 69) and KFC (86 to 96).
Forbes
Brand value often falls because companies have a hard time defending brand positioning, according to Tim Calkins, a professor of marketing at the Kellogg School of Management at Northwestern University. As a result, companies can contend with competition, leading to declines that reflect the pressure exerted on them.
“HP (Inc.) is a brand that really struggled to define itself,” Calkins said. “The best brands are really well defined. And when you have a brand that loses its distinctive meaning, it will almost always have problems in the market and then in valuations. ”
Older brands with newer competitors also saw losses in value and ranking. For example, Gillette continues to face mounting pressure from startups like Harry’s, which was acquired last year for $ 1.4 billion by Edgewell Personal Care, Schick’s parent company, and Dollar Shave Club, which Unilever bought in 2016 for $ 1. billion.
Next year’s top 100 may look different than this year’s, as the consequences of the Covid-19 crisis and economic downturn continue to plague both the world’s largest and smallest companies. But for now, big-profit companies in 2019 like Amazon, Netflix, and PayPal also appear to be on their way to being big winners during the pandemic when it comes to trends in e-commerce, streaming, and changes in payments.
“People have long said that brands will fade and that they are not as important to the Internet now,” Calkins said. “You don’t have to trust the brand and just read reviews. But what you see is that brands are still incredibly important and incredibly strong. They create value in different ways now, but there’s no question when you look at these companies that brands have a real value to these companies. ”
Methodology
After evaluating a universe of 200 global brands with a significant presence in the United States, our first step in evaluating each was to determine income and earnings before interest and taxes. We then averaged earnings before interest and taxes (EBIT) over the last three fiscal years (2017 to 2019) and subtracted from the earnings a charge of 8% of the brand’s capital employed, calculating that the average brand should be able to earn at least 8% in this capital Forbes also applied the corporate tax rate in the parent company’s home country to the net profit figure and then assigned a percentage of that profit to the brand based on the role it plays in its industry. For this number of brand net earnings, we apply the average price multiple to earnings over the past three years to arrive at the brand end value. For private teams, we apply profit multiples for comparable public companies.
Brands by the numbers
- Total Value: The 100 most valuable brands in total were worth $ 2.54 billion, compared to $ 2.33 billion last year.
- Countries: US-based companies made up more than 50 of the top 100. Other more represented countries included Japan (6), Germany (10), France (9) and Switzerland (5).
- Industries: The technology sector was the most common in the ranking with 20 companies, followed by 14 in financial services, 11 in automobiles and 8 in retail.
