Mumbai: The crisis rumbling through the global economy since the start of 2008 has taken its toll on the value of the world’s most iconic brands, besides savaging the financial industry and markets. But Tata , the only Indian brand that ranked among the world’s top 100 in a global league chart, ascended six slots, profiting from its determined marketing push.
The world’s leading brand by value as of August 2008 was retailer Wal-Mart Stores Inc., which rose from the fourth spot to dethrone beverage maker Coca-Cola Co., according to Brand Finance (BF) Global 500, a league chart compiled by Brand Finance Plc., a UK-based consultancy.
Top-notch: Inside a Wal-Mart store. Wal-Mart is the world’s most valuable brand with a value of $42.57 billion. Paul Sakuma/AP
It is an update of the consultancy’s BF Global March 2008 chart, which was based on brand values at the end of 2007. Wal-Mart’s brand value is up 15% from March.
While Coca-Cola moved from the top spot to No.2 with a 34% slump in brand value, software maker Microsoft Corp. slipped one place to three. IBM Corp. moved up a rung to No.4 and Google Inc. fell two places to five.
The updated BF Global 500 shows that General Electric Co., HSBC Holdings Plc., and Hewlett-Packard Co. remain at numbers six, seven and eight, respectively. Vodafone Plc. has moved up from 11 to nine and Nokia Oyj inched down to 10 from nine.
The umbrella Tata brand, which was the only Indian brand among the top 100 by value in BF’s March league chart, jumped to 51 in the updated rankings from 57. Its brand value has risen from $11.79 billion (Rs54,941 crore today) as of 2007 to $11.85 billion as of August 2008.
The Tata brand has overtaken iconic names such as Sony Corp., Ford Motor Co., Nintendo Co. Ltd, Generali Group, Goldman Sachs Group Inc., Carrefour Group and Credit Suisse that were ahead of it in the March 2008 league table.
Unni Krishnan, managing director of Brand Finance India Pvt. Ltd, says this is a signal that the global recessionary environment is a unique opportunity for Indian companies to make a mark on the brand stage by focusing on long-term brand investments as Tata has.
The Tata brand’s ascension would have been helped by sliding global rivals operating in much tougher economies, but it is also a long-term payoff for its continual, synchronized propulsion of brands across sectors—be it hotels, steel, information technology or packaged goods.
Top 100 brands of the world (Graphic)
About 80% of Tata’s brand value actually stems from steel, motors and consulting. For Tata Consulting Services Ltd, or TCS, the group spent huge sums in its “Experience Certainty” campaign, says Unni Krishnan, adding that the Tata story underlines the importance of brands as corporate assets and how leveraging them will enhance their business and shareholder value on a global rostrum.
R. Gopalakrishnan, executive director of the group’s holding company Tata Sons, says the incremental increase in brand value and ascension in the charts could have been due to two factors.
“We have taken a number of steps in the Tata company globally, from mergers and acquisitions, to new operations, brand activity. Second, we are taking measured steps to promote the Tata brand globally,” he says.
The top gainers in brand value from the end of 2007 to August 2008 are: Budweiser (19.8%); ExxonMobil (19.4%); BP (18.3%); Chevron (17.9%); Shell (12.8%); Avon (10.4%); McDonald’s (9.9%); Wal-Mart (9.1%); Johnson & Johnson (8.4%); and Wells Fargo (6.8%).
The top losers in brand value for the same period are: Nokia (19.8%); Dell (16.7%); Cisco (15.4%); AXA (15.2%); L’Oreal (14.2%); BMW (14.1%); Carrefour (13.7%); Citigroup (13.5%); Google (13.0%); and Fox (12.9%).
Advertising may be only one driver of brand value, but what is its role in recessionary times? In a global economic crisis, there is pressure on marketing and brand managers to cut back on advertising. In this recession, this is not happening—at least among the best-run brands, says Unni Krishnan of Brand Finance.
US advertising spending is expected to grow by 3.7% in 2008, to $168 billion, driven by the Olympics, the presidential election and the battle for market share in many consumer sectors, says Unni Krishnan. This is even faster than the 2.8% growth in US advertising spending recorded in 2007.
“Companies maintaining and increasing their ad spends—traditional and non traditional—despite recession have grown both enterprise and brand value significantly (and vice versa),” says Unni Krishnan.
Wal-Mart increased its spending in excess of $600 million in the last 12 months despite the drive for lower cost retailing.
Wal-Mart’s enterprise value grew from $226 billion to $270 billion between January and August 2008, according to Bloomberg. Its brand value increased from $39 billion to $42.6 billion in the same period, according to Brand Finance.
“Wal-Mart is a brand which is riding the crest of the recessionary wave at the expense of packaged goods brands like Coca-Cola, which has been knocked off its perch as the most valuable brand in the world,” says Unni Krishnan.
While Wal-Mart has invested in the recession, Coca-Cola’s US advertising spending dropped from $334 million to $294 million between 2006 and 2007, with a continued downward trend in 2008 (source: AdAge/Brand Finance).
It is hardly surprising that Coca-Cola’s enterprise value dropped from $147 billion to $124 billion between January and August 2008 (source: Bloomberg). Its brand value decreased from $45.4 billion to $41.9 billion in the same period (source: Brand Finance).
Unni Krishnan gives another example. Fast-food chain McDonald’s Corp.’s brand has been resurgent in the last three years as the company boosted its ad spending from $776 million in 2006 to $808 million in 2007 and to an estimated $850 million in 2008.
Its restaurant market share has grown from 7.7% to more than 8% as a result (source: AdAge/Brand Finance). McDonald’s enterprise value has grown from $69 billion to $76.5 billion between January and August 2008 (source: Bloomberg). Its brand value has increased from $21.8 billion to $23.9 billion (source: Brand Finance).
Finally, AT&T Inc. has aggressively boosted its advertising spending from $1.38 billion in 2006 to $1.58 billion in 2007 and an estimated $2 billion in 2008. Its US mobility market share has jumped from 26.9% to more than 27.5%, says the BF study.