BRAND VALUE – The Topline
A Call to Arms
Pressing need to invest in brand building as UK brand values dip
The BrandZ Top 75 Most Valuable UK Brands are together worth $263,275 in 2019. This is a decline of 3 percent compared to the combined total in 2018, and reflects ups and downs among the 72 brands that appear in both rankings. This year, 33 brands increased in value (by an average of 13 percent), one did not change in value, and 38 brands declined (by an average of 12%).
This is well behind the growth rates of both the global economy and BrandZ’s Top 100 Most Valuable Global Brands in 2019, which were up by 7 percent.
And this is not a one-off anomaly; rather, it appears to be part of a disturbing trend. When we look back over three years of BrandZ UK rankings, there has also been a decline. Among the 49 brands that have appeared in the ranking every year, there has been a $1.5 billion loss in brand value.
Consumers changing, caution dominating
These are challenging times for the UK and its brands. Brexit-related uncertainty and policies of austerity have been rumbling on for years, affecting businesses’ appetite to invest in all aspects of their operations.
Marketing is, naturally, being affected, with big brand owners such as Sky, Unilever and P&G all vastly reducing their traditional advertising spend. Brands appear to be more focused on achieving short-term goals, with investment in sales promotions, events and online campaigns on the rise, while more traditional brand-building activity takes a backseat.
This pressure on budgets comes as consumers reappraise the way they live and shop in light of their own budgetary pressures and shifting priorities. Brand loyalty is declining – it has dropped 5 percent in the past decade. And, in the absence of strong brand messaging in many categories, consumers are increasingly making purchase decisions based on price. Around 13 percent more people now say they consider a range of brands and select the cheapest, which means 40 percent of shoppers are now focusing purely on the price tag. That’s seriously bad news for brands, because it leads to a race to the bottom that rarely results in a long-term winner.
Yet there is some respite in this tale of gloom.
There are brands within the Top 75 that are showing what’s possible, and which are building brand value despite all this. Look at the fastest movers and what they have in common.
And remember this: even though the total value of the Top 75 has declined, brand building continues to be a good investment in this market. A portfolio of shares in the UK Top 75 continues to outperform the FTSE 100 by a wide margin.
Investors backing the BrandZ Most valuable UK Brands portfolio in November 2017 achieved a 10.9 percent higher return on their money by May 2019 than those tracking the FTSE 100, which actually dropped in value over that period.
The other piece of good news, particularly with Brexit on the horizon, is that the leading UK brands have an above-average presence on the world stage, which indicates that they remain attractive internationally.
Among the Top 75, 50 have the UK as their main market, six have the European Union as their main market, and for 19 brands, the rest of the world accounts for a greater proportion of their exposure than the UK or EU. This suggests that strong UK brands travel well outside Europe.
Sick man of Europe?
If you’re thinking this malaise is probably something that probably affects all Western economies at the moment, you’re sadly mistaken. Yes, other European markets are also dealing with an ageing population, single-digit economic growth and are grappling with shifts in consumer trends that undermine the durability of many long-established business models. But not everyone’s coming out of it as badly as the UK. And when we compare the Top 30 brands across markets, the UK fares even more poorly.
The UK is one of only three of 11 markets’ Top 30 brands to have experienced a value decline in the last year (Australia and South Africa were the others, and there are market-specific reasons why drops in value were anticipated in both).
The success of leading brands in other markets, which are engineering value growth in spite of challenging circumstances, means UK brands are decreasing in prominence on the world stage. Only three UK brands are now represented in the BrandZ Global Top 100 most valuable brands – Vodafone, HSBC, Shell – down from a peak of eight in 2007 and 2010.
In fact, if the current trend continues, there will be no UK brand in the Global Top 100 within four years. The value of the UK’s leading brand is on a downward flight path, while the bar to entry into the Top 100 is growing every year as brands from around the world grow. The year 2023 is when those two paths intersect – unless something changes, and fast.
You have been warned!
Brands are not the property of the marketing department or even the founder of a business. They reside in the minds of consumers, and as their needs and perspectives change, so must brands. Brands are living, organic things and must be nurtured and encouraged to adapt to their evolving environments. Those that imagine current sales indicate long-term health, or that think yesterday’s strategy will work just as well tomorrow, are in dangerous territory.
The current business climate is uncertain and challenging, but it is not an excuse for inertia. Staying still is like taking the fast track to obsolescence.