The current economic downturn is fuelling an increase in the global valuation of petrochemical brands, despite an overall drop of $67bn (£36bn) in brand value, according to a report published this week.
The research, conducted by US brand consultancy Brand Finance, examines the top 100 global and US brands between January and September this year, taking commodity price rises, credit crunch, rising unemployment and falling share prices into consideration.
The report shows that four of the top five brands to increase in brand value are from the petrochemical industry, a direct result of rising oil prices. Exxon Mobil has risen 19.4 per cent, while BP has risen 18.3 per cent over the period.
The healthcare sector has increased in overall brand value. This is a consequence of consumers spending more on health, despite an overall decrease in spending in other sectors, says the report.
The enterprise value – a measure of a company’s value, calculated as its market capital plus debt – of globally branded businesses has decreased by 13.3 per cent, a drop of $1600bn (£860bn), while the value of global brands has dropped 4.2 per cent, falling $67bn (£36bn).
Brand Finance claims that the retail sector’s enterprise value has risen 9.1 per cent, partly as a result of retailers offering bargain goods. Wal-Mart is one such company with cut-price credentials to increase its brand values, by 23.5 per cent, leapfrogging Coca-Cola in the process. The report marks out that so-called discretionary brands like Coca-Cola and Starbucks have lost brand value.
Brand Finance applied the ‘royalty from relief’ methodology, which assumes that a company does not own its own brand name and calculates how much it would cost to license it from a third party.
Design specialists are divided on what all of this means for the industry. Ticegroup chairman Ian Cochrane discourages specialist design consultancies from following new business opportunities in unfamiliar brand sectors. He recognises that, while consultancies need to ‘learn lessons on a new business front’, they should target more robust sectors such as healthcare, Government, travel and transport, while steering clear of the drinks industry.
London Design Festival chairman Sir John Sorrell disagrees. He predicts that shifting brand values will diversify consultancies. ‘You have to sniff out new areas,’ he says. ‘Design does best when times are hardest. The design community will come through.’
Esther Carder, a partner at accountant Willott Kingston Smith, doesn’t believe the landscape of brands has changed permanently, and thinks that there will always be sectors that buck the trend.
She says, ‘A decrease in share price, and therefore enterprise value, does not mean a brand is necessarily worth less in the long term.’
Carder suggests the brand value losses indicate a short-term dip and, as confidence returns, so will share price and enterprise value.
She forecasts that the more dynamic companies will invest in their brands, to improve perception and increase sales – as in the retail sector – rather than just cutting back. ‘Design groups should be looking at how they can demonstrate to marketers that clever spending now could protect and help grow brands in the longer term,’ says Carder.