Top 30 brands lose $16 billion in value
The devastation caused by COVID-19 in Spain has left no business unscarred. The country has been one of the hardest hit in Europe by the pandemic, and the effects of the lockdown on local people’s lives and the all-important tourism and hospitality sector are having a deep impact that will be felt for many years.
In this context, a 15 percent drop in the value of the Top 30 Most Valuable Spanish Brands is hardly unexpected. They are now worth a combined total of $88,420 million. But there is a danger here that brands apportion all of the reason for this sharp decline to the virus.
The traumas of 2020 have, without doubt, inflicted significant pain on businesses and brands. Sales this year have crumbled and jobs have been lost as a direct result of COVID-19.
But the outbreak, lockdown and shifts in consumer sentiment have in many cases acted as an accelerant of trends that were threatening to transform the nation’s brandscape anyway. They have sped up the pace of these changes in a way that no one could have foreseen, but the virus has not been the only cause of the situation Spanish brands now find themselves in.
After all, in 2019, when there was no virus in play, the value of the Top 30 Spanish Brands only rose by 1 percent, while the BrandZ Global Top 100 grew by 7 percent. This year, despite the pandemic, global brands still managed to grow by 5.9 percent.
It’s tough at the top
The brands that lead the ranking have been battered as much as most others this year, but are still the most valuable in the country. Only Iberdrola has risen in value among the Top 5, climbing one place to fourth this year, and Endesa is the only other Top 10 brand to have made a gain (up 3 percent to sixth place).
Some of Spain’s biggest and most valuable brands have been among the worst affected, with Movistar losing $5 billion in value, Zara $3 billion, Santander $2 billion and BBVA $2 billion. The scale of the Top 5 relative to the rest of the Top 30 means that when the leaders suffer, so does the whole ranking.
The Top 10 in Spain account for 84 percent of the entire Top 30’s value, and the Top 5 account for just 17 percent of the places in the ranking, but 67 percent of its total value. It is not unusual for value to be concentrated at the top of a BrandZ ranking – it is to some extent inevitable – but the depth of concentration of value in Spain is much higher than in many other markets. In the UK, for instance, 44 percent of the Top 30’s value comes from the Top 5 brands.
But there is some good news
These are dark days for many brands, and not all of them will survive the intense pressures of the moment. For those brands with the reserves and resources to allow them to regroup, they can look upon the pandemic and the post-COVID period as an opportunity. As the time to boldly undertake changes that many of them should have been making years ago. The time to truly digitize and create seamless online and offline consumer experiences. And the time to reexamine what they stand for, what they do, how they do it and how they can continue to play a role in people’s changed lives.
The choice for brands today is stark: dive in, or bow out.
For those that choose to nurture and invest in their brands, the benefits are many. Stronger brands help businesses recover from a crisis, but also because more valuable brands tend to have the attributes that can insulate them for the worst effects of future crises.
The BrandZ value of a brand has been shown globally and over more than a decade to be closely linked to the performance of its parent company; stronger brands grow faster than the stock market, and in challenging times, they don’t fall as far and they pick up more quickly. Of course, the same is true in reverse: weak brands fall further and take longer to recover.
To zoom in on the past few months, we see that this trend holds true for 2020. Between February and March, the MSCI World Index lost 75 percent of its value, the S&P 500 was down 51 percent. The BrandZ Strong Brands portfolio also took a hit, but less of one. Their market cap fell by 42 percent, and the BrandZ Powerful Brands Top 10 portfolio slipped by even less: 37 percent.
Strong brands emerged much more rapidly from the recession of 2008-09, and the early signs suggest history will be repeated in the current climate.
In the pages ahead, we explore what brands need to do in order to redress imbalances in focus and grow their way out of these challenging times.
Time to take a global perspective
This year has illustrated in the most brutal of ways the interconnectedness of all modern life. Supply chains, travel patterns, social movements and even our personal health depend on international links in a globalized world.
This year’s BrandZ data highlights the fact that, compared to other European countries, the proportion of brand value coming from overseas markets is still low in Spain. This dependence on the domestic market puts Spanish brands at risk; by spreading the business across a range of markets, there is a greater likelihood that when consumer demand dips due to local conditions, this is balanced by growth due to local factors elsewhere.
Moving internationally also opens up a huge world of potential. Rather than battle other Spanish brands for a share of the domestic market, why not fight for a share of a much larger, global pie? It’s time to look up and look outward.
What also emerges is that simply having more overseas exposure is not a magic bullet for growth. It is true that brands with moderate overseas exposure have contracted in value to a lesser extent than those that are almost or entirely focused on the home market. But Spanish brands with the highest international exposure have suffered a similar average drop in value to those with very little.
It is beneficial for brands to seek growth internationally, but not just any market will do.
Spanish brands have traditionally moved into Portugal and Latin America when looking for growth opportunities, and these markets have served them well. But global economic power has shifted, with many of the fastest-growing consumer markets in Asia-Pacific. A look at how US, Japanese and Chinese brands have been growing beyond their home markets proves highly instructive.
Brands that have gone truly global, with a focus on fast-growing markets, include Amazon (current brand value almost four times that of the entire Spanish Top 30), and Apple (with a brand value four times the Spanish ranking).
As Spanish brands begin to think about what they can change in order to create growth and do things differently, it would pay to look afresh at the world map, focusing less on what feels familiar and more on where the potential is.