Once a year, Interbrand publishes a list of the “Best Global Brands”. The 2008 list was released last September. The next list will probably be out in about two months.
The change in value is some of the top brands is predictable, at least based on the Interbrand calculations. The firm says its “methodology evaluates brand value in the same way any other corporate asset is valued—on the basis of how much it is likely to earn for the company in the future. Interbrand uses a combination of analysts’ projections, company financial documents, and its own qualitative and quantitative analysis to arrive at a net present value of those earnings.” While that formula cannot be entirely recreated, using the same rules, it is possible to look ahead at 2009 values. It is also worth noting that the worth of the top brands on the Interbrand list moves very little. Last year, Citigroup’s (C) valuation dropped only 14%. The average movement in the top twenty brands was in a range of +/-6%.
The Interbrand survey is also subject to “brand inflation”. Even though 2008 was a hard year for most companies, of the leading 100 brands, only eighteen dropped in value with a large number of these being financial services firms.
The most valuable brand in 2008 was Coca-Cola (KO) with a value of $66.7 billion, an increase of 2% over 2007. Based on Coke’s earnings from its soda business and forecasts of the firm’s earnings, the value of the brand will probably drop very modestly, perhaps 3%, to $64.7 billion.
IBM (IBM) is the second most valuable brand on the list. The company has done extremely well and based on earnings and estimates for future quarters, IBM’s brand value should rise as much as 6% to $62.5 billion.
Microsoft (MSFT) is the third most valuable brand with a 2008 valuation of $59 billion. Both earnings and estimates going forward are weak. The money being made on the firm’s core products is down and that may not improve until Windows 7 is launched with no guarantee that earnings will move up if the new product does poorly. Microsoft’s brand value should drop about 8% to $54.3 billion.
GE (GE) is the fourth brand on the list with a valuation of $53.1 billion. Based on earnings and forecasts in addition to the negative sentiment that the company has on Wall St., the value of the GE brand should be down about 10% to $47.8 billion.
Nokia (NOK) is the fifth brand on the list with a valuation of $35.9 billion. Very few global companies outside the financial industry have had as rough a year as Nokia. It is predicting that its core global market will continue to fall. Its earnings have been battered and forecasts for the company are weak. Nokia’s brand value will drop 8% to $33 billion.
The No. 6 company on the list has also done poorly. Toyota (TM) may be the strongest company in the global car industry, but both its profits and forward looking estimates have been decimated. The firm’s brand value of $34.1 billion should drop by 12% to $30 billion.
The seventh brand based on total value is Intel (INTC) which has struggled with sales and earnings as the worldwide PC and server markets have fallen apart. Analysts don’t see a recovery this year, but expect better numbers in 2010. Intel’s brand will take a 3% cut to $30.3 billion.
The No. 8 name on the Interbrand list is McDonald’s (MCD). Among the top ten brands it ought to fare the best in valuation based on its global earnings, forecasts, and market share. McDonald’s value should be up 8% to $33.5 billion.
Disney (DIS), the No. 9 brand, had a flat valuation in 2008 at $29.3 billion. Earnings have been down modestly but are expected to improve within a quarter or two. Disney’s value should be flat again.
Google (GOOG), the No.10 brand, increased in value 43% last year. Since then, its market share gains have slowed considerably and earnings have been weak. Perhaps most important of all, its remarkable revenue growth has slowed. Analysts expect the company to have only modest growth going forward. The value of the brand should be up 7% in 2009 to $27.4 billion.
Among the balance of the names on the Interbrand list there are a few brands that should move up or down substantially. Citigroup (C) should lose more ground, at least as much as last year when it dropped 14%. That would take it down to $17.4 billion. The value of Apple’s (AAPL) brand is likely to move up as much as 20% in 2009 to $16.44 billion. Sony’s (SNE) brand should continue to slip, based on its financial performance and problems with its major product lines including screens, digital cameras, and the PS3. Its value will drop 10% to $12.2 billion.
The brand that will loss the most value in 2009–AIG (AIG). Its brand value should move down at least 50% to $3.5 billion, and that is generous. Merrill Lynch and Motorola (MOT) should also be among the largest losers.
Douglas A. McIntyre
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