by Ellis Malovany
- Banks dominate
The combined value of the Top 30 most valuable South African brands is $42.626 billion.
Banks dominate the Top 30 ranking in value, with the top two brands Standard Bank (11%) and First National Bank (9%) representing a fifth of the Top 30’s combined value. Together with the remaining four banks (Absa, Nedbank, Investec, and Capitec Bank) bank brands collectively account for 34% of the Top 30’s value, considerably higher than bank brands in the Top 30 ranked brands in the majority of countries.
- Finance brands lead the ranking; Telecom Providers and Retail brands are also strong
Despite economic hardships plaguing the economy for years and the global risk aversion to South Africa as a difficult place to do business, finance brands represent 43% of the Top 30’s value. In addition to banks, the insurance category (9.9% of total Top 30 value) is well represented by established brands like Discovery and Old Mutual, both ranked in the Top 10 (#9 and #10 respectively). Beyond finance brands, Telecom Providers is strong and features giants like Vodacom (#3) and MTN (#5). Retail is the category leader in number of brands and is ranked as the third most valuable category with Woolworths (#11,), Shoprite (#14), and Mr Price (#17).
- Brand value is mostly driven by local consumption
According to the World Bank’s 2016 data about 70% of South Africa’s GDP was generated by local demand. Not that long ago during the dismal period of global sanctions and economic isolation, local brands relied exclusively on domestic demand. Today, South Africa’s Top 30 brands still derives a whopping 81% of their exposure in the country, leading other countries’ Top 30 brands in local value generation. By comparison, Top 30 brands in developed markets like France, Germany and Italy generate a vast majority of their revenues outside their local countries. But because of their highly developed global footprint other countries’ Top 30 brands are far more limited in incremental expansion relative to South African brands that have plenty of room to grow global revenues.
- South Africa vs. the World
The total brand value of South Africa’s Top 30 brands is the lowest relative to the Top 30 brands from other markets. To some extent this reflects low cost of living, but it’s low even when compared to other underdeveloped markets like Indonesia, India, and LATAM. Both in aggregate and on average, the Top 30 South African brands also fell short of their global Top 30 counterparts in generating revenues outside the country with only MTN, Nando’s, Investec, and South African Airways having majority of its revenues outside South Africa. Additionally, the concentration of value of both the Top 5 and the Top 10 relative to the Top 30 was lower than other markets suggesting that while a few brands dominate, the field is otherwise well distributed.
- Brands still largely functional, not yet emotive
South African brands have largely managed to sell based on utility, price, and functionality, and typically are not inducing consumers to buy on emotional appeal. Category leaders like Nando’s, First National Bank, Vodacom, DStv, OUTsurance, and Pick n Pay all effectively communicate how their brands meet their customers’ needs with only sporadic attempts at engaging emotionally and truly leveraging the power of the brand. As South Africa looks to grow its brands, now may be the right time to consider emotional appeal which will undoubtedly become a key driver as global brands with plenty of experience in creating demand are vying for attention locally.
- Private Healthcare is BIG BUSINESS
One of the surprising results was the uniqueness of South Africa’s hospital brands; three brands appear in the Top 30, more than in any other country. Netcare, Life Healthcare, and Mediclinic each fill an important need which many believe results from a generally weak national health system. At the same time, clever insurers like Discovery are incentivizing policy-holders with discounts and rebates on exercise-related activities and products, healthy eating, and sustained improvements, that collectively are significantly impacting the country’s health system and individual longevity and quality of life. From the country that pioneered heart transplants and launched countless medical innovations over the last 50 years, South Africa’s health-centric brands in private hospitals and insurance is making a difference .
- Technology Integration vs. Innovation
While countries like the U.S. and China lead the world in innovation and technological advancements, South Africa in general lags behind the world average on perceived innovation, which more often than not is a function of technology. In general, the Top 30 brands are only slightly above all South African brands with respect to innovation, and many brands outside the Top 30 that are embracing and investing in innovation are knocking on the door. Many brands in the Top 30 have coasted until now by riding the coattails of years of dominance. However, innovators are springing up all around and Top 30 brands are facing a rapidly changing environment inspired by innovation. Top 30 brands have the opportunity to distinguish themselves from competitors through technological integration but the window is shrinking as the pace of innovation accelerates. Their challenge is going to be truly delivering relevant innovation in ways that resonate with their audiences, which will likely require significant investment.
- Brand Equity drives Value
Brand equity, measured by a brand’s Power and Premium indices and reflected in a brand’s vQ score (along with the component metrics), drive value in the long term. Over the last 12 years, Global brands in the Top 30 with a high Power Index (ability to drive demand and increase volume) have grown 221% vs. brands with a low Power Index which only grew 70%. Similarly, those brands in the Top 30 with a high Premium Index ( justified premium pricing and increased value) are today 288% more valuable than 12 years ago versus brands that scored low in their Premium Index and only grew 89%. South Africa’s Top 30 brand value relative to the Top 30 in other countries is quite low in absolute terms. Brands with strong brand equity are able to withstand difficult economic conditions, while those with weaker brand equity value have and will continue to lag behind and are at risk. So, many South African brands have the opportunity now to grow value to invest in brand building and focus on the key components that drive brand equity and ultimately brand value.
- Trust supports growth, sustains brand longevity
Of the 94 global brands tracked since 2006, those brands trusted most grew nearly five times more relative to brands with low trust, and nearly double those with medium trust. Of the 360 South African brands tracked by BrandZ over the last three years, the Top 30 brands were trusted much more than non-ranking brands. Top 30 brands with the highest degree of trust include Dis-Chem, Clicks, and Pick n Pay. Brands that are well trusted are predominantly food brands like KOO (ranked the highest), Fatti’s & Moni’s, Liqui-Fruit, and All Gold, as well as online retailer Takealot, each of which scored above many Top 30 brands.
- Local brand strength in only a few sectors
Most of the Top 30 are financial, retail, insurance and hospital brands. Only three brands are represented in the FMCG and Fast Food categories (Castle, Nando’s, and Hansa Pilsener) representing just 15% of the total value of the Top 30 brands. Typically, most countries with beloved local brands see well-known names rise to the top across a broader category cross-section. However, amid heavy cross-category competition, many well-known South African brands failed to reach the Top 30 stemming from the fact that they had not effectively established local dominance and differentiation, and many were simply dominated by global competitors. There are multiple categories in which brand building efforts can help companies dramatically improve their position to rise into the top echelon of brands.