By Ian Lavis on behalf of Praxity Global Alliance
Praxity participant firm Brand Finance has revealed the world’s top 500 brands in 2020, with Amazon making history as the first brand to be valued at over US$200 billion.
Brand Finance is the world’s leading brand valuation specialist and the largest consultancy of its kind within Praxity Global Alliance.
The Brand Finance Global 500 report – unveiled at the World Economic Forum in Davos on January 22 – details the world’s most valuable and strongest brands, and those rising fastest.
The report includes the Brand Guardianship Index which rates the world’s top 100 CE0s on how well they measure up as brand managers and ambassadors.
In this year’s Brand Finance Global 500 ranking:
- Amazon – the world’s most valuable brand – has a record-breaking brand value of US$220 billion
- There are mixed fortunes in tech as brand values of Baidu and Uber plummet, while Tesla and Instagram become the world’s fastest-growing brands
- E-commerce is no longer the only path to success as eBay struggles, Walmart re-enters the top 10 and Lidl and Aldi become fastest-growing brands in retail
- Four out of five telecoms brands lose value, with AT&T falling fastest
- Ferrari remains the world’s strongest plan with a Brand Strength Index of 94.1 and elite AAA+ rating
- The largest IPO in history makes Saudi Aramco the most valuable entrant at 24th place
David Haigh, CEO Brand of Finance, says: “A strong brand is vital to develop the relationship between a business and its stakeholders, to establish commercial success. The annual Brand Finance Global 500 report and the Brand Guardianship Index provide the world’s leading brands with key benchmarks and insights into market and sector trends, to showcase what makes a particular brand so successful over another.”
Commenting on the importance of the Brand Finance Global 500 report for Praxity participant firms and their clients, he adds: “We hope that our reports can not only support Praxity in empowering its member firms as champions of global business success, but also allow them to better understand the importance of brand when striving towards their ultimate goal of finding the best solutions for their clients.”
Amazon’s brand value grew from US$187.9 billion last year to US$220.8 billion, over US$60 billion ahead of Google and US$80 billion more than Apple. The world’s largest retailer has branched out into cloud computing, artificial intelligence, consumer electronics, digital streaming and logistics.
“The disrupter of the entire retail ecosystem, the brand that boasts the highest brand value ever, Amazon continues to impress across imperishable consumer truths: value, convenience, and choice,” David Haigh says in the report.
However, the US-based giant faces growing challenges to its core operations, with Nike recently announcing it would no longer be selling its merchandise on the platform to develop its own sales channels. Future growth of the Amazon empire could also be hampered by environmental opposition in Europe, a backlash from local retailers in India, and competition from Alibaba in China, the report warns.
Signs of slowdown
The tech sector has the strongest brand value followed by banking and retail, but the report suggests the brand bubble may be bursting, with clear signs of slowdown.
The combined value of the Brand Finance Global 500 has increased by less than 2% year on year, and while 244 brands have increased their brand value, another 212 are down including Chinese software giant Baidu and Uber. Baidu recorded the largest drop in brand value, down 54% to US$8.9 billion. Revenues were heavily impacted as regulators placed more attention on online advertising, Brand Finance reports.
Notable exceptions include Tesla and Instagram – the world’s fastest growing brands. Tesla is up 64% to US$12.4 billion while Instagram is up 58% to US$26.4 billion.
Bricks and mortar fight back
Some online retailers have started to lose brand value, with eBay down 9% to US$8.2 billion. In contrast, Walmart’s brand value is up 14% to US$77.5 billion, while discount supermarket chain rivals Lidl (US$12.4 billion) and Aldi (US$14.3 billion) are the fastest-growing retail brands and among the top 10 fastest-growing brands overall this year, increasing 40% and 37% respectively.
“Despite the unprecedented disruption caused by e-commerce, the popular assertion that entering digital operations brings instant success while bricks and mortar stores are doomed for extinction is being proved wrong,” David states.
There is also significant growth in brand value in the hotel sector, with Hilton Hotels & Resorts remaining the top brand as well as one of the fastest-growing brands overall (up 35% to US$10.8 billion).
Great brands need great leaders
The top CEO in the Brand Guardianship Index 2020 is Marillyn Hewson, CEO of global security and aerospace company Lockheed Martin.
One of just four women in the top 100 CEOs ranking, Hewson has been at Lockheed Martin for 37 years and CEO for the last 7 years, presiding over a 14% increase in Enterprise Value.
“Great brands need great leaders,” David Haigh says. “They set and direct brand purpose and balance short and long-term financial returns. Their role is to gauge the mood of external stakeholders and ensure that all internal stakeholders behave in a way that is consistent with optimising purpose and profit. They may be technical experts, but the moment they become CEOs they must rise above technical specialism to lead and inspire the whole team.”
Based on the world’s top companies by portfolio brand value, the Brand Guardianship Index rates CEOs to capture how well they measure up as brand managers and ambassadors. The rating is based on multiple inputs reflecting CEOs’ success in investment, guardian equity, and performance. It also accounts for length of tenure.
The second most reputable CE0 is Bernard Arnault of Moët Hennessy Louis Vuitton SE (LVMH), who has headed the French luxury goods conglomerate for over 30 years. In third place is Dell CEO Michael S Dell. Amazon’s Jeff Bezos slid from first place in 2019 to 55th place due to a fall in popularity after a high-profile divorce.
How brand value is calculated
The Brand Finance Global 500 report ranks brands based on calculations using the Royalty Relief Approach as follows:
- The Brand Strength Index (BSI) of between 0 and 100 is calculated by assessing marketing investment, stakeholder equity and business performance
- The royalty range is determined by gauging the importance of brand to purchasing decisions.
- The BSI score is applied to the royalty range to arrive at the royalty rate.
- Brand-specific revenues are determined by estimating a proportion of parent company revenues attributable to a brand.
- Forecast revenues are estimated using a function of historic revenues, equity analyst forecasts, and economic growth rates.
- The royalty rate is applied to the forecast rate to derive brand revenues which are discounted post-tax to a net present value – the brand value.
Click here to download a free preview of the Brand Finance Global 500 report: