Global Forces Impact Brand Value
But long-term growth balances year’s decline
After years of uninterrupted growth, Brazil's most valuable brands declined in value by 24 percent.
The value decrease in the 2012 BrandZ™ Top 50 Most Valuable Brazilian Brands followed two enormous successive increases—55 percent in 2011 and 53 percent in 2010.
Despite the recent decline, most brands remain significantly higher in value today compared with 2010. Several factors account for the value loss:
- The slowdown in the world economy impacted the demand for commodities, a particular problem for commodity-rich Brazil;
- The rise in the value of the Brazilian real, up about 13 percent against the dollar, made exports more expensive
- Market capitalization of many companies declined with an 18 percent drop in Brazilian stock exchange, the BOVESPA; and
- Certain government policies aimed at stimulating spending troubled investors.
Brazil learned that the designation BRIC earns a lot of the world's attention, but not immunity from its problems. In 2011, Brazil's GDP growth slowed to below 3 percent compared with 2010, when GDP grew 7.5 percent.
Despite the overall drop in brand value, the level of Brand Contribution grew 2 percent among the 2012 Brand™ Top 50. Brand Contribution measures the prospect of future earnings based on brand alone, exclusive of financials and other factors. Brand strength helped lessen the impact of the economic slowdown.
National policy affects brand value
The Brazilian government substantially owns publicly traded Banco do Brasil bank. To infuse more money into the economy and stimulate spending the bank dramatically lowered interest rates on loans. This action pleased borrowers but upset investors concerned about potential profit decline. Brand value, which had spiked to $8.3 billion in 2011 from $5.5 billion in 2010, decreased to $4.6 billion in 2012, more than 80 percent below the 2010 level.
In contrast, Bradesco became Brazil's second most valuable brand in the 2012 Brand ranking, passing, Itaú another leading financial brand. Bradesco scores somewhat higher than Itaú in Brand Contribution.
Bradesco did well in a troubled category because it diversified into insurance and aggressively widened its customer base among the growing middle class. The Bradesco brand declined 22 percent in value. Despite the decline, the brand remained more valuable in 2012 than it was in 2010.
Brands retain value as exports feel pressure
The strength of the Brazilian real, which made Brazilian exports more costly, affected brands across categories from basic industry to popular fashion. The global food exporter Sadia, for example, which exports to more than 65 countries, declined 24 percent in brand value in 2011, following a 142 percent rise a year earlier.
Even with the decline in the 2012 ranking, Sadia is valued at $1.5 billion compared with $814 million in 2010, which means the brand value is 83 percent greater today than it was just two years ago.
The fashion brand Havaianas, producer of flip flop sandals that evoke the freedom and style associated with Brazil, was off by 35 percent in brand value in 2012. Having appreciated 86 percent in brand value in 2011, the brand value of Havaianas remains more than 20 percent above its 2010 level.
Brand Contribution keeps category bubbling
In the case of beer, brand strength added resiliency to an entire category. Global beer marketing leader AB-InBev includes four Brazilian brands in its brand portfolio: Skol, Brahma, Antarctica and Bohemia. They all scored high in Brand Contribution and ranked in the Top 15 Most Valuable Brazilian Brands.
And the four brands each appreciated in value. Bohemia debuted in the ranking this year. Brahma increased 18 percent in brand value. Antarctica grew 6 percent and Skol by 3 percent. Strong both in financial performance and Brand Contribution, Skol moved up to Number 4 in the BrandZ™ Brazilian ranking, a position more typically occupied by a major financial brand.
In addition, the four brands rank in the BrandZ™ Top 50 Most Valuable Latin American Brands.
Brand value grows in many categories
Of all the brands in the 2012 BrandZ™ Top 50 Most Valuable Brazilian Brands, Odontoprev achieved the greatest increase in brand value. Its 29 percent increase moved Brazil's largest dental benefits company up 14 places in the BrandZ™ ranking to Number 32.
The brand attempts to reach people in the underserved rising middle class. The strong brand value performance of a healthcare brand may point to the evolution of a more diversified economy in Brazil, one less dependent on commodities. Two of the country's commodity giants, the energy brand Petrobras and Vale, a mining brand, declined somewhat in value last year.
Brands like Odontoprev may be driven in part by commercial opportunities for meeting of the social challenges facing Brazilian society, including the improvement of health care and education. In a somewhat different way, two other brands appreciated in value by addressing the needs of a more affluent society.
Both newcomers to the Brand ranking, Arezzo is a leading retailer of women's fashion footwear and Magazine Luiza is one of Brazil's largest appliance retailers. The brands earned the confidence of both consumers and investors. They each competed a successful IPO (Initial Public Offering), gaining funds necessary to accelerate store expansion.
Fundamentals for brand building in Brazil
- Reach out digitally
Brazilians are among the most wired people on the planet. This interconnectivity helps cross the social and economic divides, which are narrowing but sill exist.
- Be prepared for competition
International brands entering or expanding in Brazil are likely to encounter both eager and welcoming consumers and increasingly tough local competitors.
- Recognize distinctive cultures
Because Brazil is a geographically large and demographically diverse country, successful brands recognize that making an impact on consumers requires adapting to many local cultures.
- Be emotional
Brazilians respond positively to brands that create an emotional bond. While rational reasons for purchasing products and services remain important to Brazilian consumers, they are especially loyal to brands that earn their affection.
- Help build Brazil
Becoming a genuine and active participant in the effort to raise living standards and reduce inequities will ultimately benefit the brand.