Brand Value Rises 3 Percent in Year Marked by Disruption
Results reveal prescriptions for future brand value growth
In a year marked by disruption, the value of the 2016 BrandZ™ Top 100 Most Valuable Global Brands increased 3 percent, to $3.4 trillion.
Six of the 14 categories included in the 2016 ranking declined in value compared with only two last year. One category remained flat. Of the seven categories that increased in value, only two grew by more than 10 percent.
- Apparel rose 14 percent after a flat performance a year ago, followed by fast food, which increased 11 percent in value, on top of a 4 percent improvement last year.
- With a value increase of 59 percent, Amazon led all brands in value growth, followed by Starbucks (49 percent) and Facebook (44 percent).
- Two newcomers to the BrandZ™ Global Top 100 also grew substantially in value: JD.com, China’s second-largest e-commerce brand rose 37 percent, and the business-to-business technology brand Adobe increased 41 percent.
- North America continued to drive the largest proportion of brand value, about 69 percent, followed by Asia. The North America Top 10 brands increased 10 percent in value, while the Asia Top 10 declined 8 percent.
Although the BrandZ™ Global Top 100 increased in value more modestly than in any year since 2011, when the economy was climbing back from recession, the results continue to show the steady appreciation of Top 100 value, up 133 percent over the past 11 years.
Combination of factors
A combination of economic and geopolitical factors influenced this year’s results, including the precipitous drop in the price of crude oil and the economic slowdowns in Brazil, China and Russia. The sanctions against Russia that resulted from its invasion of Ukraine also hurt the Russian economy. And the removal of sanctions against Iran following the nuclear weapons accord impacted oil prices when Iran began adding to the global oversupply.
Beyond these factors, issues related to technology and social values, often influenced by the millennial generation, impacted brand value change. Among the issues were a heightened attention to data protection and privacy and continued consumer concern about personal health, product ingredients, ethical brand behavior and environmental protection.
BrandZ™ Global Top 100 grew 133% since 2006
The BrandZ™ Global Top 100 grew steadily over the past 11 years to $3.4 trillion, never losing value, even during the global recession, and leveling only once, in 2011.
The economic and geopolitical factors especially impacted the oil and gas category, which declined 20 percent in value, and the banks category, with global banks and regional banks down in brand value 11 percent and 12 percent, respectively. Three other categories in the BrandZ™ Global Top 100 declined in value, but only moderately.
Disruption across categories
While disruption afflicted some categories more than others, no category was immune. Consumer concern about healthy ingredients continued to impact fast food, personal care and soft drinks. But personal care and soft drinks grew slightly in value, and the strong value increases of Starbucks, Domino’s Pizza and Burger King drove fast food value growth.
Persistent regulatory infractions hurt bank reputations. And, along with insurance brands, banks faced intensifying competition from startup financial technology companies. The startups especially attracted millennials, a customer group that both bank and insurance brands attempted to cultivate for future growth. Both bank and insurance brands improved customer service and introduced more technological innovation.
Social trends motivated car brands to reconsider the identity of the cars category. Although many car brands experienced a relatively strong sales year, they worried about a future in which consumers would be less dependent on cars. Precipitating factors include greater urbanization and a millennial-driven shift in societal priorities from ownership to sharing. Most major car brands introduced programs that anticipated a time when car manufacturers would also be mobility service providers.
The prospect of category transformation also affected telecom providers and oil and gas brands. Oil and gas brands continued to shift focus from oil to gas, expecting that over time, gas and other cleaner energy alternatives will power the world’s economies. With more acquisitions of content services, the major telecom providers continued to evolve from commodity carriers of voice and data to entertainment and content brands.
Across many FMCG categories, multinational brands contended with increased competition, including the rise of craft products, as some consumers, particularly millennials, preferred brands whose provenance or limited scale implied authenticity. More significantly, several phenomena converged to increase competition in fast-growing country markets. Consumers had become more sophisticated, and local products had improved in quality.
The rise of local brands, which expanded choice, was especially pertinent as growth slowed in Brazil, China and Russia, and consumers sought to save money. But it was also relevant in India, where consumers expressed a growing belief that local brands could better appreciate the nuances of diverse cultures and tastes.
These disruptive forces did not happen in a vacuum, but rather they appeared in the larger context of a year characterized by global geopolitical disruption. Populist dissatisfaction drove the rise of unconventional US presidential candidates in both major political parties. The British public pondered whether to leave the European Union, formed to help heal the divisions of World War II and promote trade interdependence. And ancient religious and tribal forces in the Middle East erased the borders that were created with the dissolution of the Ottoman Empire after World War I.
Lessons for the future
The practices of brands that performed especially well in this period of disruption yield useful lessons:
1. They disrupted before being disrupted.
The three fastest-rising brands – Amazon, Starbucks and Facebook – each came into being as a category disruptor, and they continued to disrupt, often with the use of technology. Amazon, for example, introduced Amazon Dash, the first iteration of a program that reaches the consumer at the exact moment of need, anticipating the world of automatic replenishment promised by the Internet of Things.
2. They excelled in digital and social media.
JD.com benefitted from its strategic partnership with Tencent, China’s giant Internet portal. Because JD.com is present on WeChat, Tencent’s ubiquitous messaging service, users can move easily between texting, e-commerce purchasing and payment without changing platforms.
3. They expressed a clear and consistent brand purpose.
It is possible to have a higher purpose about improving life for humanity, or a narrower purpose about improving life for the consumer. But the purpose needs to be genuine, clearly articulated and consistently executed. Google, which articulates its mission of helping humanity, increased 32 percent in brand value. The Home Depot, which focuses on serving the home improvement needs of consumers and small businesses, also improved 32 percent.
The key conclusions drawn from these results are: First, brands that do not proactively build and protect value can anticipate more disruption; second, the counterpoint, disruption, is the precursor of extraordinary possibilities for brands. In the world of the Internet of Things, for example, brands will compete to be on the consumers’ list of items for automatic replenishment, and brands will also compete to be on the consumers’ list for more considered purchases that may command a premium.
Brands that imagine the future and respond early to the questions it raises have the best chance of sustained success. In that sense, the 2016 BrandZ™ Global Top 100 Most Valuable Brands report provides even more helpful knowledge and insight for brand building than some of the editions produced in years with bluer skies.
Valuable brands deliver superior shareholder returns
BrandZ™ Portfolio outperforms the S&P 500 Index and the MSCI
The value of the BrandZ™ Strong Brands Portfolio increased 105.9 percent between April 2007 and April 2016, outperforming both the S&P 500, which grew 60.7 percent, and the MSCI World Index, which grew 20.1 percent. (The MSCI World Index is a weighted index of global stocks.)
The exceptional performance of the BrandZ™ Strong Brands Portfolio relative to two well-regarded indexes affirms that valuable brands deliver superior returns over time and regardless of market disruptions. It also demonstrates the positive return on money invested to build meaningfully different and salient brands.
In concrete terms, $100 invested in 2006 would be worth $120 today based on the MSCI World Index growth rate, and $161 based on the S&P 500 growth rate. But that $100 invested in the BrandZ™ Strong Brand Portfolio would have more than doubled in value, to $206.
Key takeaways for brand owners and brand marketers are: companies that invest in building valuable brands grow their toplines faster; and organic topline growth is the greatest determinant of total shareholder return.