Mumbai: Despite the global financial meltdown that saw the top 500 global brands lose about one-fourth of their value in 2008, the Tata brand held up relatively well, eroding by less than 16%, a report by Brand Finance Plc. has shown.
The only Indian brand in the Top 100, Tata actually moved up the league table to 51 for 2009, up six places from its ranking for 2008, the UK-based independent brand valuation consultancy said.
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Since the ranking of brands are made on an effective valuation date of 31 December, the ranking value holds for the subsequent year.
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The annual study found that the Tata brand was worth $9.9 billion (Rs49,500 crore today), down from $11.8 billion a year ago. Even though the brand’s enterprise value dropped to $63.45 billion from $77.87 billion in 2007, its brand strength advanced to AAA- (defined as extremely strong) from AA+ (very strong), the report said.
The Tata brand’s 16% decline in the second half of 2008, at the height of the economic crisis, was moderate against the huge 40-60% slump in brand value of many iconic brands over the same period. Brand Citi recorded a 59% erosion in value, Dell 60%, Mercedes-Benz 48%, AIG 62%, Avon 47%, Allianz 34%, BNP Paribas 33%, and Chase 40%.
While the Global 500 scorecard is an annual report, Brand Finance released an interim report six months ago in September to gauge the impact of the global crisis on brand values for January through August, which allows for this comparison.
Although uncertainty in sectors such as automotive and steel have played a role in the erosion of brand value, Tata’s performance compared with its global peers is a testament of its resilience and strength, said Unni Krishnan, managing director of Brand Finance India.
“While there is debate in the current economic environment about the value created by acquisitions such as Land Rover, Jaguar, Corus, etc., the intangible assets, which range from potent brands to loyal customer base, distribution network, R&D (research and development) and IPR (intellectual property rights), represent a fortress of long-term value, which will deliver outstanding return on investment,” he said.
The underlying economic substance in these acquired brands and intangible assets is relatively intact and will catalyze future security and speed of earnings despite prevailing sentiments, Krishnan added.
R. Gopalakrishnan, executive director of the group’s holding company Tata Sons Ltd, said that the brand didn’t take a hard hit in relative terms for various reasons. “The brand has been built on a platform of a century of ethical behaviour.”
Gopalakrishnan also said the international marquee auto and steel acquisitions definitely played a part, added to the group’s more visible product innovation symbolized by the Nano small car, which has grabbed global attention since it was showcased at an auto expo in New Delhi in January 2008.
Krishnan, however, cautioned that though Tata’s buyout strategy and vision was based on leveraging the value of its intangible assets that reside in its brand, this has yet to be fully accounted for by the stock markets and would be the challenge the group will face in the coming months.
The global slowdown saw the world’s leading 500 brands lose $708 billion in brand value in 2008, a 24% decline from $2,996 billion to $2,289 billion, Brand Finance said.
US companies contributed 58%, or as much as $411 billion, of the $707.8 billion of overall fall in worth among the top 500 brands.
The year saw Wal-Mart emerging as the world’s top-ranked brand, rising three places with a worth of $40.6 billion, up from $39 billion a year earlier.
The world’s biggest retailer displaced Coca-Cola, which saw its brand value decline to $32.7 billion from $45.4 billion in 2007.
Brand IBM rose to the third from the fifth spot, despite losing value to $31.5 billion, from $38 billion a year earlier.
Graphics by Ahmed Raza Khan / Mint