Islands in a storm
Top Canadian brands prove resilient during the global crisis
In early 2020, Canadian insurance giant Great-West Co. merged three separate insurance brands — London Life, Great-West Life, and Canada Life — into a single entity. In similar cases, the parent company often taps itself for the overall brand name, but instead it chose the smaller Canada Life. The new name demonstrates a feeling that has been growing among Canadians and the world at large over the last decade: Brand Canada is extremely strong.
On a wide range of cultural issues — not least among them diversity, social justice, and popular music — Canada now punches massively above its weight. A recent survey rated it as the world’s second-best country, behind only Switzerland. And people are voting with their feet too, with the country expecting to welcome 1 million new immigrants by 2022 (a number which may be affected by pandemic-related closures).
Needless to say, Brand Canada is also facing difficult times. In recent years, the country has been an island of stability in a storm-tossed world, but even it was not able to escape the global pandemic that has shattered economies and cost so many lives. In the most recent quarter, the nation’s GDP shrank 11.5 percent for a staggering annualized rate of -38.7 percent, which is easily the worst showing since Statistics Canada began tracking GDP in 1961. Employment, manufacturer’s sales, retail sales, sales at restaurants, aircraft movements, and railway car loadings all plunged precipitously.
Against all this, you might have expected the BrandZ™ 40 Most Valuable Canadian Brands 2020 to have faced steep declines. But Canada’s brands were buoyed especially by strong showings from the country’s top retail and apparel brands, and the total brand of the Top 40 value fell a modest 6 percent year-over-year, roughly in line with the country’s resource-dependent and thus resilient stock market. Several brands even managed to show strong growth.
By the numbers
The BrandZ™ Top 40 Most Valuable Canadian Brands 2020 are worth an aggregate $134.8 billion (please note: in order to facilitate cross-country comparisons, BrandZ™ valuations are reported in United States dollars). Banking brand RBC held on to its number one ranking, a position it still holds by a comfortable margin. The brand is currently valued at $21.7 billion, more than $4.5 billion more than its closest rival, TD Bank.
The second headline is that apparel brand Lululemon had an outstanding year, growing its value by an astonishing 60 percent, much of it due to overseas expansion and a steep increase in its stock price. In normal times, this would make it among the fastest growing brands in any ranking, but in 2020, its performance is extraordinary.
Lululemon also shows what has emerged as a key theme from this year’s data. While not a particularly Salient (or well known) brand, it scores extremely well on Difference, a metric that shows whether a brand is offering something unique in the marketplace.
Kantar research has shown that when consumers are forced to tighten their belts, they do not necessarily go for the cheapest option, but the one that delivers the best value. Although Canadians may have less to spend, they are still drawn to brands that offer them something that they cannot get anywhere else.
Overall, however, Canadian brands do not score particularly well on Difference. This is likely because 72 percent of the Top 40’s value comes from highly regulated and lightly differentiated categories: banks, insurance, and telecom providers. Many of the 13 retailers in the ranking are also well-liked, but consumers find them difficult to tell apart, not least because some of them are deliberate copies of the others.
Good news and bad
Performance in 2020 has largely been category-driven. For example, retailers showed considerable strength in the ranking. Part of the reason is that they contain many brands that offer essentials, like groceries and pharmacy, and not a few that are deep discounters. This reflects a climate in which Canadians are increasingly avoiding restaurants, cooking at home, and seeking the best possible value for their dollars.
Other categories are bearing the brunt of the pandemic. Top beer brands are facing severe headwinds as bars, sporting events, and other venues remain closed. As a result, an iconic Canadian brand like Molson Canadian fell 6 places, the most of any brand in the ranking, and finds itself hanging on to number 40 by a fingernail. Luxury goods are also not in high demand, with the category falling sharply in 2020.
A new world?
In May 2020, Canadian company Shopify, which enables ecommerce transactions, passed RBC in May 2020 to become the most valuable company in Canada (as a B2B brand, it is not included in the ranking). This development is somewhat ironic because Canadians in general have been slow to adopt online buying. Although 80 percent of them reported having purchased something online in 2019, e-commerce accounted for only 3 percent of retail sales in Canada. Across the border in the US, the number was nearly 10 percent, while in the UK, online shopping accounted for over 25 percent of holiday sales that year.
But Canadians’ preference for physical stores seems set to change. According to Statistics Canada, during the pandemic overall retail sales fell 17.9 percent, but online sales soared nearly 100 percent. As an executive at a major retailer privately put it, COVID-19 has kicked forward that company’s e-commerce plans by 10 years.
As a result, Canadian brands are increasingly promoting convenient, digital experiences, such as online ordering, click-and-collect, and mobile payment services. Whether consumers will embrace these options over the long term is an open question, but clearly an infrastructure is being put into place, and they are having experiences that have proved popular elsewhere. Such services have also correlated strongly with higher scores across a range of brand metrics. Perhaps, Canadian brands can look to them to increase value in the future.
The future? A guessing game.
Like much of the rest of the world today, Canada sits in a position where the key factors that will influence the future are known, but the timeline isn’t. When will a vaccine be found? Can trade wars be resolved? How will the much-watched United States election go? Will the pandemic unify countries or further strain their social fabrics? Is it possible for the Canadian economy, which is heavily dependent on a steady stream of immigrants, to grow amidst travel restrictions?
The philosopher Isaiah Berlin once wrote an essay called “The Hedgehog and the Fox,” in which he divided people into those who had a single clear idea of how things are going to go — and those who believe that experience cannot be boiled down to a single direction. There are plenty of hedgehogs around today who have clear ideas on the future of Canada and its brands.
With respect, it’s probably smarter to be a fox, aware that multiple constraints are pushing in different directions, and the outcome could go any number of ways. But if time and experience have shown anything, building strong brands is one of the best investments a company can make. In the most recent crisis, the 2008/2009 financial crisis, strong brands grew nine times as fast as the average brand globally. So, while the future itself poses more questions than answers, the path forward and the way to deal with unsettled times remains clear – at least for brands.