Top 50’s total value flat – but strong brands are in rude health
The total value of the BrandZ Top 50 Most Valuable German Brands in 2020 is US$335,996 million. This is 1 percent lower than the value of last year’s Top 50 and comes against a backdrop of an economy that is strong by global standards but showing some signs of pressure.
The first thing to say about this decline is that it may not be a real decline at all. In the 12 months between the two rankings being compiled, the value of the Euro compared to the US dollar slipped by 4 percent; in that context, a drop of 1 percent might actually be seen as growth. And it follows an 11 percent jump in the value of the Top 50 in 2019, so some course-correction is not unexpected.
While some brands have seen real drops in their brand value over the past year, many of these are a result of a significant shake-up that is affecting their entire category. This is affecting their financial value and their standing in the minds of consumers – two factors that combine to determine BrandZ brand value. The automotive sector – which includes cars, tires and car rental – is one of those, as is travel services, which includes travel agents and cruise lines.
The overall decline in brand value has made entry into the German Top 50 no less competitive than it was a year ago. In fact, the 50th brand in the ranking in 2020 is worth $1,017 million; last year, the lowest-ranked brand was worth $976 million.
The 1 percent decline in brand value overall masks some sizable swings by individual brands. Among the 50 brands in the 2020 ranking, 17 brands increased in value by at least 3 percent (and by an average of 9 percent), while 24 lost at least 3 percent of their 2019 value (declining by an average of 13 percent). The other seven brands were fairly stable.
German brands are faring well compared to those in other markets.
When we compare the Top 30 German brands to those in other markets (we use 30 rather than 50 because some BrandZ rankings only include 30 brands), we find that Germany is home to the most valuable group of brands in Europe, ahead of France, the UK and Spain.
When the scale of Germany’s GDP compared to that of other European markets is factored in, the German BrandZ ranking still leads the way. And, in the context of global political, social and environmental uncertainty, staying still is starting to feel like getting ahead.
Strong brands are valuable to businesses for two reasons – both of which link directly to the bottom line.
Firstly, strong brands generate superior returns for shareholders. Over the past 13 years, a portfolio of strong BrandZ brands from around the world has grown in value by 196 percent; the S&P 500 has grown 128 percent in that time, and the MSCI World Index by only 59 percent.
Secondly, and of particular importance to German brands at the moment, is that strong brands help insulate a business during times of difficulty. This applies whether that trouble is of a brand’s own making or is part of a category-wide or even country-wide decline. During the 2008 global financial crisis, the BrandZ strong brands portfolio of shares suffered a less-sharp drop in value than the MSCI World Index and recovered far more quickly.
A glance at the automotive brands in the German Top 50 this year is a reminder of this; while all brands have taken a hit to some extent, some of the strongest brands have been better protected from the storm affecting the whole sector.
BRAND VALUE BY CATEGORY
Carmakers and tech brands lead ranking
The German Top 50 is one of the most varied rankings of any BrandZ country. The brands featuring this year reflect the diverse strengths of German business. Technology, telecoms, apparel, retail, cars, logistics and financial services all appear in the Top 10, and there are 18 categories in the Top 50, spanning all of German life, from banks and beer to apparel and insurance cover.
Many countries’ rankings are dominated by one sector, which often contributes around half the value of the entire Top 50. In Germany, the value of the Top 50 brands is more evenly distributed.
The biggest category – automotive – accounts for only 22 percent of the ranking’s entire dollar value. Technology and telecoms providers are the next-biggest contributors of value to the ranking.
The Top 5 brands in the German ranking together account for 51 percent of the value of the Top 30. This is a much smaller proportion than in many other European markets, including the Netherlands (where the Top 5 contribute 69 percent of the value of the Top 30), Spain, France and Italy.
In parallel with a trend we are observing globally, brands in experience-driven categories have tended to outperform the others this year.
Apparel – a category that has been growing internationally – has been one of the big winners in Germany in 2020, as has retailing, thanks to some much loved and very strong local shopping brands. There are three apparel brands and 12 retailers in the 2020 Top 50.
Losses in brand value by German banks have brought about a decline in the broader financial services category, as has been the case in other markets, and the automotive sector that is so important to Germany has been under severe pressure worldwide. (See our “Sector Spotlight” )
Germany’s leading brands stand out for taking full advantage of the international opportunity available to them. There is great respect for “Made in Germany” brands all over the world. They are rarely seen as a cheap option – with the exception, of course, of the discount supermarket brands that have made their fortunes on the basis of catering for shoppers on a budget. German brands are synonymous with quality, design and precision manufacturing.
Almost three-quarters of the German Top 50’s brand value comes from overseas exposure; brands with a strong international presence can not only take advantage of consumer demand in fast-growing markets, but also provide themselves with a buffer in the event of a slowdown in the domestic market.