Brand Finance Journal Issue 2

BrandFinance Journal
www.brandfinance.com/journal
issue 1 October 2011
SABMillers
Graham Mackay
on why global
brands dont work
Manchester
United victory
vindicates Glazers
strategy
The Campaign
for Independent
Brand Valuation
where do the
numbers come
from?
We have to
change or
we will
be left
behind
Morten Lundal
group chief
commercial officer of
Vodafone
2 | BRANDFINANCE JOURNAL | issue 1october 2011
Contents
18Football: Manchester United

4Vodafone: Morten Lundal
3 EDITORIAL
Brand valuation companies need to be independent and use
transparent methodologies, says Brand Finance CEO David
Haigh.
4 INTERVIEW
Striking a fine balance Vodafone may be big, with modest
overall growth, but it thinks like a medium-sized fast-growing data
company, says group chief commercial officer Morten Lundal.
10 BRAND STRATEGY
Swimming against the global tide Global brands are not all
that Ted Levitt cooked them up to be, argues SABMiller chief
executive Graham Mackay.
15Governance: David Hensley 10SABMiller: Graham Mackay
15 BRAND GOVERNANCE
Keeping a good name In a volatile business climate, the
governance of corporate brands has become a new business
imperative, claims Brand Finance managing director David
Hensley.
24 NATION BRANDS
A game of two halves Against an uncertain economic
backdrop, nation brand values reflect a growing polarisation
between the fortunes of developed and developing markets.
We look at some of the winners and losers.
18 FOOTBALL
Playing in a different league Love them or loathe them,
the Glazers reign at Manchester United has proved an
indisputable success, says Dave Chattaway, head of sports
brand valuation at Brand Finance.
30 CAMPAIGN
Where do the figures come from? Brand Finance CEO
David Haigh analyses the discrepancies between different
consultancies valuations of the same brands, and calls for
more transparency and independence in brand valuation.
The BrandFinance Journal is

the official journal of the
BrandFinance Institute,
published by Brand Finance Plc
Brand Finance plc

3rd Floor, Finland House,
56 Haymarket, London
SW1Y 4RN United Kingdom
Tel: +44 (0) 207 389 9400
Fax: +44 (0) 207 389 9401
www.brandfinance.com
Editor David Haigh, Founder and

CEO of Brand Finance Plc
david.haigh@brandfinance.com
october 2011issue 1 | BRANDFINANCE JOURNAL | 3
Editorial
David Haigh
CEO Brand Finance plc
The ISO standard requires that brand

valuation appraisers must be independent
and be seen to be independent
Brand valuation began life in 1988 when Interbrand
weighed into the bid battle for Ranks Hovis McDougall.
The consultancy invented the discipline of brand valuation
overnight but left many ragged edges in the methodology,
which others have subsequently smoothed out. To its credit
Interbrand made the point that brands are highly valuable
assets that are often invisible and undervalued. But in 1988
Interbrand was entirely independent and everyone listened
to its point of view long live John Murphy, the voice of
independent dissent.
Scroll forward nearly 25 years and Interbrand has been
subsumed into a massive global advertising agency. And
although brands are now widely recognised as massively
important corporate assets, typically representing between
10 and 30 per cent of total corporate value, many boards still
treat them as Cinderella assets and regard brand valuation as a
dark art or a joke.
Brand Finance plc has promoted the discipline of independent
brand valuation for over 15 years. We have created the
BrandFinance Institute, the BrandFinance Journal and
BrandFinance Forums to promote learning and best practice.
We have participated in the development of the International
Valuation Standards Council (IVSC) and International Organisation
for Standardisation (ISO) standards on brand valuation. We
constantly push forward the boundaries of this vitally important
professional activity. Yet we now face a crisis of confidence in the
practice of brand valuation itself, a crisis caused by the publication
of annual brand value league tables that dont appear to comply
with ISO 10668 and that, as a consequence, bring the discipline of
brand valuation into disrepute.
Weve been aware of this phenomenon for several years,
yet, on the principle that you dont foul your own nest we have
remained silent. However, in the face of growing criticism of
brand valuation we believe the time has come to speak up.
Mark Ritsons recent ill-informed comments in Marketing Week
magazine, the gist of which were to question whether brand
values really mean anything at all, were the tipping point.
To this end, we are now launching the Campaign for

Independent Brand Valuation to promote best practice in
brand valuation techniques, transparency, independence and
professionalism. We hold no grudge against anyone in the
field. But we feel strongly that it is time for those who care
about the integrity of the brand valuation profession to speak
up and speak out.
Transparency and independence (both actual and
perceived) have become major issues. The fact that Interbrand
and Millward Brown publish league tables of purported brand
values, yet fail to define brand, fail to state the valuation
date and persist in using opaque proprietary brand valuation
methods, is a major problem. All brand valuations should,
according to the ISO standard, be completely transparent in
terms of methods, data and assumptions.
In addition, the ISO standard requires that brand
valuation appraisers must be independent and be seen to be
independent. We believe consultancies that are wholly owned
by major brand-building and marketing communications
companies cannot credibly provide arms length brand
valuation opinions on brands that they, or their parent
companies, create and maintain. In seeking to do so, they
inevitably compromise their independence.
Perceived conflicts of interest inevitably taint this newest of
all professional disciplines at a time when intangible assets,
including brands, are making up an ever bigger proportion
of companies total worth. John Stuart, the former CEO of
Quaker Oats, once said: If this business were split up, I would
give you the land and bricks and mortar, and I would take the
brand, and I would fare better than you.
He was right, and this is why organisations need to be able
to rely on credible, independent valuations of these precious
assets. We hope, therefore, that all readers of this editorial
will back our Campaign for Independent Brand Valuation
by arguing the case for independence and transparency to
accounting and valuation standard setters, to governmental
audiences and to the marketing profession.
4 | BRANDFINANCE JOURNAL | issue 1 October 2011
Interview
Striking a fine balance

By JANE SIMMSPhotography Peter searle
Morten Lundal took on the Vodafone brand baton when

he became group chief commercial officer a year ago. He
tells BrandFinance Journal how he is helping to sustain
the companys forward momentum by making the brand
offering simpler and more intimate
BrandFinance Journal: What were
your impressions of the Vodafone
brand when you joined the company
three years ago?
Morten Lundal: The instant impression
I got walking in here was big, global,
red and professional. But the brand
felt like a work colleague, not someone
you would take out for dinner. You
couldnt see the personality. It was more
professional than intimate.
I was amazed by the brands reach it
has resonance from the biggest German
corporations right down to individuals
in rural Ghana and India. Very few
if any brands translate from the
boardroom to the field not even CocaCola. Yet there was also an incredible
consistency to the brand. Theres no
strict policing function at a group level
no brand police. The strength and
consistency of the brand personality has
emerged tacitly, over time.
I was struck by the passion too. The
brand is 25 years old, so you might
expect arrogance, complacency and
cynicism. But I found none of that.
Instead I found incredible passion for
the brand among both employees and
customers. Vodafones success and
strength has been driven and sustained
by force of personality: there have been
enough people in the management
layer over the past five to ten years
who have ensured the brand has
progressed because they have been
passionate about changing it rather than
maintaining it.
It is terribly easy to lean back and
look at history. But Vodafone is a very

forward-leaning company. We are
hopeful about tomorrow: after all,
though we are a large company with
modest overall growth, we think like
a medium-sized fast-growing data
company.
BFJ: In what is a new role in
Vodafone, how have you helped to
change the brand even further?
ML: I joined as a regional CEO, a role
I held for two years. As part of the
process of simplifying and integrating
Vodafone, all group commercial
ambitions and resources were rolled
into one role and I took that role
in November last year. I am now
responsible for consumer and business
products, marketing capabilities,
devices, multinational customers,
innovation and brand.
Big brands are usually hard to change
but the mobile industry is changing
so fast that we have to change or we will
be left behind. We have had 25 years
where voice communication has been
dominant, but the convergence of two
concepts mobile and the internet
around the world adds a whole new
dimension to what we are doing. And
data is a lot more complex than voice.
So my challenge is twofold: to make
the complex simple, and to make
the Vodafone brand loved as well as
respected.
There have been changes already
over the past three years. The operating
companies have become much better
at engaging customers in the brand,

by tailoring messages to the local
market rather than relying on the
group to broadcast them from the
centre. The Zuzu advertising campaign
in India, for example, has been
phenomenally successful and embraced
enthusiastically by the local population.
It is full of personality and humour
and shows deep respect for the local
context. A more traditional corporation
wouldnt allow that level of deviation
from brand mechanisms.
Our experience with the company we
bought in Turkey in 2006 exemplifies
the benefits to be derived from a
combination of good local brand
management and a strong group
platform. The company, which became
Vodafone Turkey in 2007, was one of
our more challenging acquisitions. It
was operationally in very bad shape,
and its brand was the worst thing
about it. Within two years we have
turned the company around, changing
operational factors such as network,
IT and distribution. But what has led
the turnaround is the brand, which has
become the businesss key strength.
Vodafone Turkey is now the fastestgrowing company in the group. More
than most places, brand in Turkey is
not just a communication exercise but
also a management philosophy.
Not only do the operating companies
now have more opportunities to engage
customers, but the tone of what we do
is changing too to reveal more about
what goes on behind the faade. Our
October 2011issue 1 | BRANDFINANCE JOURNAL | 5
Morten Lundal
My
challenge is
twofold: to
make the
complex
simple and
to make the
Vodafone
brand loved
as well as
respected
Interview
In the past,
perhaps, we
were a bit
too
prescriptive
in terms of
how local
markets
should
interpret
the brand
VODAFONE
FAST
FACTS
Vodafone is the most valuable
British brand, with a market value of
$30.7bn
according to the BrandFinance Global 500.
Vodafone, along with HSBC, are the
only British brands in a top ten otherwise
comprising US titans including Google,
Microsoft, Wal-Mart and IBM.
According to Brand Finance, it is the sixth
most valuable brand in the world, the most
valuable telecoms company in the world, and
made profits last year of around
8.8bn
46bn
Annual revenues last year were
relationship with the McLaren Formula

One racing team, whom we sponsor,
illustrates that shift. In its first years
it was very corporate, and was based
on traditional broadcasting and bigbrand affinity. We recently extended
the Vodafone McLaren Mercedes
sponsorship until the end of the 2013
season, and our focus now is on making
it more intimate and engaging in order
to reach beyond the Formula One fan
base to our customers and non-racing
fanatics. Our drivers Lewis Hamilton
and Jenson Button meet customers
in surprising ways racing them on
airfields or competing with them in
strange vehicles around circuits, for
example. This adds to both Vodafones
and McLarens personality.
And when we launched our new
2011 season car in Berlin earlier this
year, instead of pulling off the cloth to
reveal the car, as we have traditionally
done, we had customers and employees
carrying different parts of the car to an
assembly point, where Lewis, Jenson
and the mechanics put it all together.
That sort of thing is designed to forge
closer connections between us and our
customers by making us seem much
more approachable.
BFJ: How do you manage the
Vodafone brand in a way that
reconciles the need for global
consistency with the need to
accommodate local cultural
differences?
ML: Getting the balance between
global and local is important, but the
pendulum swings back and forth.
Vodafone is the sum of its acquisitions.
We would not be where we are today if
we had kept local names because, for
customers, employees and partners,
the brand acts as a sort of glue, or as a
common language or shorthand for who
we are and what makes us who we are.
But while we have a clear framework,
we have heartfelt respect for what is
best locally. Our key promise is Power
to you and we position ourselves
as the approachable empowerment
expert wherever we do business.
There are three pillars to this: more
confidently connected customers; an
unmatched customer experience; and

always competitive. But the operating
companies can interpret that in ways
that feel right for their particular
market, and may choose to emphasise
the different claims as they see fit. We
provide the instruments; it is up to them
what sort of music they play provided
it meets our quality standard.
However, the balance companies
strike between local and global brands
depends to a large extent on the
Morten Lundal
LUNDAL
AT A
GLANCE
Current job: Group chief commercial officer, Vodafone (since November 2010) his first
functional role
Joined Vodafone: June 2008, joining the executive committee five months later
Previous job in Vodafone: Regional CEO Africa and Central Europe
Previous jobs before Vodafone: First job was financial controller at the Norwegian
international explosives group Dyno. He then spent six years in consultancy before landing
his first senior job, at the age of 33, as CEO of Nordic mobile operator Telenors internet
business. He held several CEO positions within Telenor, his last role being CEO of Telenors
Malaysian subsidiary, DiGi Telecommunications.
Age: 46
Education: General business education at university in Norway, followed by an MBA at
IMD in Lausanne.
Favourite film: Comet in Moominland, based on the book by Tove Janssen very
important to me and to my children.
Favourite book: A Fine Balance, by Rohinton Mistry. I read it twice, in quick succession,
once to find out what happens, and the second time to savour the writing.
Favourite pastime: I play in a band with my two kids. I play a bit of everything, badly, and
my kids do the same, but well.
Favourite brands: Patek Philippe, for its longevity and the craftsmanship that goes into
its watches; H&M and Ikea, because they are such well-managed brands; and BMW for its
consistent brand positioning over the past 40 to 50 years.
nature of the business. Taste in beer,

for example, has always been a very
local matter, so SAB Millers more
local approach is entirely sensible [see
Swimming against the global tide
on page 14]. At the other end of the
spectrum, products like Coca-Cola or
BMW or Apple have the same appeal
the world over, so their global brand
positioning is appropriate for them.
A company like Vodafone, however,
doesnt have a tangible product
to sell: we are selling the ability to

communicate over the air. So while a
consistent company positioning and
core promise is as important to us as
consistent product quality is to the likes
of Apple, local operating companies
need to be able to adapt our core
offering to their particular markets.
In the past, perhaps, we were a bit too
prescriptive in terms of how local markets
should interpret the brand. But that not
only demotivated local management,
the results had no resonance with local

consumers either. So, for example, we
couldnt have turned the Turkish business
around so successfully by applying our
traditional global formula. It wouldnt
have worked. It is hard to write an advert
in Paddington aimed at consumers in
Istanbul.
But there is strong consensus for this
model global platform, local flexibility
at the moment. We describe ourselves
as one company with local roots. Each
Interview
VODAFONE
FAST
FACTS
Its market capitalisation is around
$146.2bn
371m
30
Vodafone has 85,000 staff and serves
subscribers
It has operations in
countries across five continents and works

alongside partners in 40 more.
Set up by Chris Gent and Gerry Whent

in 1985 it grew rapidly on the back of some
daring acquisitions. When it couldnt take
over the leading network provider in a country
it bought a minority stake, some of which it
still holds including its 45 per cent (recently
valued at 58 billion) stake in Verizon Wireless
in the US.
Vodafone wants to be a key player in the
move to data, and, under new chief executive
Vittorio Colao, is in the process of simplifying
the structure of its minority holdings and noncontrolled businesses including selling off
minority interests.
It is undergoing a cultural transformation
from a process- and compliance-oriented
organisation towards one that is more
customer focused and effective. To that end,
senior management is more streamlined,
network-based, empowered and accountable.
operating company is a big company in

itself, so it is seen as local, even though
it is called Vodafone.
BFJ: Why is brand measurement
important to you?
ML: We are one of the worlds biggest
advertisers, and because we invest a lot
in our brand we have to take it seriously.
We are also big believers in sharing best
practice around the group as much as
we can.
We have gone beyond brand
consideration and preference towards
the brand equity model. There are five
components to brand equity: depth of
awareness, performance/experience,
uniqueness/differentiation, emotion and
value, and we follow them all in detail,
diligently, at a local and group level, and
discuss them frequently. Formally we
measure brand performance quarterly,
for every country, in depth, including
against the competition. At local level
the brand is assessed monthly, and
marketing is assessed weekly.
And we dont leave it to the
marketers. Measurement is done
by general management at both
local and group level. Measurement
is also much more operations and
marketing-oriented rather than financial
management-orientated, a shift that
has happened over the past five years
and that is consistent with the greater
commercial focus introduced by Vittorio
Colao when he became CEO in 2008.
We also seek to quantify return
on investment as far as possible, so
we can see the relative impact of the
various things we do. Whats more,
the level of scrutiny and transparency
this requires makes for more aware
marketers. So measurement is a great
discipline on marketers, and we share
best practice around the group in
order to continuously improve our
measurement performance and brand
performance. A year ago we decided to
include relative brand performance in
the performance criteria of the top 200
people in the company.
But success in brand measurement
depends on the amount of attention
management gives to it. Management
has to care and we do.
BFJ: Do you think brand valuation

analysis can help marketers raise
their game?
ML: Brand valuation provides an
objective view of a brands worth, along
with a view on relative brand health.
So it gives you two additional ways
of looking at your brands which is
valuable in itself. When you franchise
your brand, as we do, its doubly
important: knowing the impact our
brand has on the bottom line of one of
our partner markets helps us to set a
fair partnership fee. True, there is no
one accepted methodology to brand
valuation it is all a bit messy and arty,
rather than scientific. But thats OK.
BFJ: Whats your view on social
media a triumph of hype over
substance, or a critical way to
interact with customers?
ML: No one predicted its tearaway
success, nor, indeed, could have
predicted it. But social media has
met a need in people to connect in
dramatically different and effective
ways, and it will evolve in the next five
to 15 years and become increasingly
strong. Generally, I think people
over-estimate the short-term and
underestimate the long-term impact. So
there is a bit of hype, but you have to
take it seriously. Its a bet you probably
wont go wrong with. You have to
engage with young people, and for the
young social media is the preferred
way of communicating. But it will
increasingly permeate other age groups
over the coming decade, and for most
people will become second nature.
There are, inevitably, lots of dads at
the disco keen to get on down with the
young things. But getting into it early,
and experimenting while there are no
rules, is a good thing. Its about trying,
failing, failing and trying again.
BFJ: What do you enjoy most about
your job?
ML: I enjoy working for a company that
sells such a desirable product the
ability to connect people over distances,
irrespective of where they are. What
was once a lifestyle product is rapidly
becoming a lifeline, and it is fascinating
Morten Lundal
to be part of that. I also really enjoy the
international dimension to my job.
The impact of some of the things we do
especially in India and Africa is also
very motivating. I am responsible for the
M-PESA product, which allows people
who have no access or limited access to
a bank account to send or receive money
via their mobiles. It has transformed
communities in places like Kenya.
BFJ: What do you find most
challenging about your job?
ML: Striking the balance between
standardisation for consistencys sake,
and respect for the local. It is not an
easy balance to find, and it probably
should shift back and forth. But I am
very conscious of my responsibility
to manage that balance. It is also
intellectually very stimulating. You cant
copy what others are doing, because
what we do is inextricably linked with
our DNA, our history and our logic.
It is interesting to see what others do,
but what we do has to work in our own
corporate context.
BFJ: If you had to make three
predictions about the future of the
global telecoms market, what would
they be?
ML: We will eventually within the
next ten years probably see data
connections where we have voice
connections today. That will be a
revolution because voice has penetrated
Europe and emerging markets. If you
can do the same with data allow
people to work on the move, listen
to music, surf the web for news,
entertainment and information that
can take you into the stratosphere. And
were getting there. Data grew by
26 per cent to over 5 billion in 2010/11,
and will continue to grow. The greatest
potential is in emerging markets, where
the data uptake today is relatively small.
My second prediction is that, just
as we have connected people for the
past 25 years, the next 25 years will
be about connecting devices. There
are already some applications today.
For example, fleet tracking allows a
delivery organisation to know where its
vehicles are and to route deliveries more
efficiently. Increasingly, connecting

devices will encompass more smart
machines, from cars to kitchens.
For example, vehicles will have
increased automation allowing them
to communicate with each other and
with traffic signals, improving safety,
reducing congestion and boosting
performance as a result. And in the
home youll be able to do things like
adjust your heating and turn lights
and appliances on and off remotely,
improving efficiency and reducing
waste. This will be a major trend that we
have not yet seen the implications of.
And third, enterprises will work
differently. One-third of our European
revenue comes from organisations (as
opposed to consumers) at the moment.
Mobile internet will increasingly allow
individuals to work in places other than
the office, again increasing productivity,
reducing costs and so on.
BFJ: To what extent has the
marketing industry changed since
you started working?
ML: The biggest shift has been
towards more aware and empowered
consumers, facilitated by the internet.
They are less automatically respectful
because they know more including
about the alternatives. So consumers are
in the driving seat and marketers have
still not fully accepted that reality yet
witness their continuing reliance on
broadcast messages.
Brand
valuation
provides an
objective view
of a brands
worth, along
with a view on
relative brand
health things
that are
valuable in
themselves
BRAND FINANCE VERDICT

David Haigh, CEO
Vodafone is the only truly global brand in the mobile telecom sector, with global
advertising and sponsorships driving its position as number one. But the brand
is riding a maelstrom of change: fixed and mobile services are colliding, data
is rapidly overtaking voice as the core service, prices are under regulatory and
market pressure, growth has shifted from the developed to the developing world,
applications, software and content are now critical success factors and access
devices are dominating the future of mobile networks. The battle between Apple,
Google, BlackBerry, Samsung and Nokia is brutal.
Against this background Morten Lundal advocates a global approach with greater
local flexibility, a shift from a corporate to a more personal positioning, and an
emphasis on content to drive data traffic. Anyone who thought Vodafones market
was stable and mature should think again. Morten has taken the Vodafone brand
mantle at a difficult time. However, he displays the good sense, flexibility and
ambition to maintain Vodafone as the global leader of this still rapidly growing sector.
Brand strategy
Swimming against the global tide

SAB Miller chief executive Graham Mackay challenges
Ted Levitts hypothesis that the rise of global brands
is inevitable and inexorable. The highly emotional
characteristics of beer brands will keep beer, at least,
resolutely local, he believes
Twenty-eight years ago last May,
Ted Levitt, editor of the Harvard
Business Review, wrote one of the very
first articles to popularise the concept
of globalisation. He asserted that a
global proposition would ultimately
always win over the local proposition,
and that the superiority of a global offer
both the product and the marketing
would eclipse the cultural variants that
country managers always asked for. He
also predicted that a centrist corporate
movement would prevail based on a
creed of one product, one brand, one
voice, one ad campaign.
There seem to be, in essence, two
interlinked arguments behind this
proposition: one based on emotional
association, or aspiration, and the
other on management practicalities.
The first asserts that consumers will
naturally aspire to, and drift over time
towards, international brands simply
because they are international. They
are self-evidently better because people
all over the world have sought them
out. The second argument is that it is
practically impossible unmanageable
or unaffordable to replicate at a local
level the quality, look and feel of global
brands so the local brands dont look as
good or perform as well.
In the course of my career in
consumer goods I have encountered
many examples of individuals and
companies that believe Levitts
thesis explicitly. Successful products,
companies and careers have been
built on it. An example of the first
driver would be in cigarettes where

international brands such as Marlboro
have delivered a better quality
originally, anyway and a higher cachet
through sophisticated marketing when
compared to local alternatives. Another
obvious example is Coca-Cola. The
second driver would be illustrated by
household and personal care categories
where consumers lack much emotional
connection for instance to cleaning
products but welcome global brands
with a more sophisticated look and
better functionality.
Why beer is different
But beer is different. Alcohol is a moodaltering substance and beer in particular

has a history as old as civilization. The
highly emotional characteristics of beer
brands themselves and their long history
and association with place will always
dictate a high degree of localism that sets
beer brands apart in the FMCG universe.
This is reinforced by the economics of
producing and distributing what is a
bulky, perishable product.
Thats not to say that the brewing
industry has been immune to the forces
of globalisation. At the turn of this
century, the top ten brewers around the
world accounted for just over one-third
of beer sales volumes. Since then a
mass of local and regional brewers
many of them still family owned have
been subsumed into four big players
namely SABMiller, Anheuser-Busch
Inbev, Heineken and Carlsberg. These
four now account for almost half of
global beer sales volumes, and about

three-quarters of the profit pool.
This period of intense consolidation
has undoubtedly driven the adoption
of global best practice in many areas
from brewing production, to packaging
and distribution. But when it comes to
brand marketing, each of the brewers
has a different take on where they stand
in the global versus local debate. To
fully understand SABMillers perspective
and why it differs from the consensus,
its necessary to understand where we,
as a company, have come from.
SABMillers evolution
Today we are the biggest drinks business

on the London Stock Exchange, with
interests in 75 countries across six
continents and over 200 brands. Youll
recognise some of them, such as Grolsch,
Peroni Nastro Azzurro, Pilsner Urquell,
Miller Genuine Draft and, after our
recent acquisition, Fosters, but many
more of them will be unfamiliar to you
despite being powerful local brands in
their respective home markets.
Since coming to London in 1999, our
sales and revenues have grown by over
seven times to $26.3 billion and our
market capitalisation has increased
eight-fold. Undoubtedly the global
success of SABMiller today is built
upon the firm foundations and sound
business principles that were laid down
many years ago in South Africa.
The springboard for our expansion
was the advent of democracy in South
Africa, a cause actively supported by
SAB. This freed us up to invest outside
the country just at the moment when
wider geopolitical changes were
throwing up new opportunities across
Eastern Europe, Asia and Africa.
In the early days, we acquired
breweries from governments wanting
to privatise. These assets had often
SABMiller
Brands
consumed
outside their
country of
origin
actually still
account for
only about
five per cent
of world beer
volumes
PhotographS SABMILLER
been badly neglected under public

ownership, so we focused on bringing
them up to scratch, applying the
disciplines that we had learned in
South Africa to enhance quality, drive
down costs and improve distribution.
Our approach to marketing was, where
possible, to build existing local brands
through strengthening their associations
with local heritage and cultural icons.
Despite the rapid consolidation in
the beer industry over the past ten
years, the beer market has remained
stubbornly diverse.
Beer remains resolutely local
And brewing has remained at its heart

a very local business, steeped in culture
and tradition that from its earliest
beginnings has been associated with
place. Up until not many years ago,
most beer brands were simply the name
of the town where they were brewed. In
many countries that remains the case

notably in Germany, which is why the
German brewing industry is still very
fragmented.
As the industry evolved, brewers
realised that higher-quality beer was
dependent on a particular type of water,
giving rise to great brewing towns such
as Burton-on-Trent, Pilsen in the Czech
Republic or Timisoara in Romania.
Today, however, we can manipulate
water to create whatever conditions
we like. Hops can be processed and
transported across the world. New
barley strains are supporting local
suppliers in markets with no previous
brewing tradition, and we ourselves are
experimenting with a new generation
of beers which rely on an altogether
different set of raw materials and
production techniques.
Yet beer remains resolutely local.
Of course, as consumers become
wealthier and the middle class grows

they look for more sophisticated
products, and some are seeking out
international brands.
We do cater for that with four
distinct international premium
brands which talk to consumers
emotional connections to place or
culture, whether it is the Italians
unquestionable ownership of style
typified by Peroni Nastro Azzurro,
the quality and provenance of Czech
brewing found in Pilsner Urquell, the
charismatic eccentricity of the Dutch
reflected in Grolsch or the American
urban cool of Miller Genuine Draft.
But despite the array of imported beers
which you will see in London, brands
consumed outside their country of origin
actually still account for only about five
per cent of world beer volumes, and that
proportion has changed little over the
past ten years. Truly international brands,
Brand strategy
such as Heineken or Corona, have global
market shares in the low single digits, and
you need to combine more than 60 of
the top beer brands to amass half of total
world volumes.
Aspiring consumers are nowadays just
as likely to turn to local premium beers,
many of which speak to the burgeoning
sense of pride and identity that comes
with social and economic progress and,
particularly in sophisticated western
markets, to craft and speciality beers.
For example, in the US the expansion
of craft brewers, and in the UK the
resurgence of cask-conditioned ale, are
aligned with the same concern for local
provenance that we have seen in the
food industry. But equally it is about
place, identity and belonging.
So why are beer brands so susceptible
to these associations?
LOCAL HEROES
These brand stories reflect
what SABMiller has,
through detailed research,
come to understand about
how different groups of
people relate to their
national identify.
Tyskie Gronie, Poland
Beer is emotional
My explanation is that they are

emotional constructs, far more than
they are physical ones. While there are
undoubtedly some highly important
functional attributes to which one can
appeal in beer refreshment being
the most common in reality the
intrinsic differences between different
lagers of the same alcoholic strength
and temperature are subtle. After a
pint you would be hard pressed to tell
two lagers apart in a blind tasting, but
a consumer will, on most occasions,
have a clear preference. Although they
will generally aver that their chosen
beer is the one that tastes best, this is
simply a rationalisation of an instinctive,
emotional choice.
Most marketers could no doubt write
an advert for a beer brand, and many
of them would emphasise certain
recognisable human motivators, such
as friendship, male bonding or national
pride. But our approach is to dig below
the universal nature of these assumptions.
In our view they cant be accurately
applied from one culture to the next
without reinterpretation, and local
sensitivity and local intimacy are critical
to understanding the unarticulated,
intuitive relationship that people have
with the beer in front of them. For many
men beer is possibly the most important
SABMILLER
FAST
FACTS
Tyskie Gronie in Poland has a market share of
18%
80%
Pilsener is our national brand in Ecuador

with a market share of
Castle accounts
for nearly
one-fifth
of our total portfolio in South Africa
As Polands largest beer brand with a

market share of 18 per cent and heritage
dating back to 1475, Tyskie is rooted in what
it means to be Polish. But while Polands
history is rich with great artists, composers
and philosophers, it is the 15th century
and not the 21st which is thought to be the
golden age of Polish culture. Instead its
recent history is darker and more troubled,
characterised by a succession of devastating
wars, which means little from the past 150
years stands in its original place.
Consequently, Poles feel they have lost a
link to the heritage of their forefathers. They
feel destined for greatness, but need external
affirmation to feel positive about being
Polish. So they will take an avid interest in the
performance of Polish players in the English
football leagues or hold up Robert Kubica,
the Formula One driver, as a national hero,
because of his success on a global stage. They
want proof validated by a global audience
that Poles can be great.
So Tyskie seeks to create and tell narratives
that allow Poles to feel better about
themselves, providing them with grounds
for genuine pride. One example is when we
changed the livery of the trucks exporting
Tyskie to the UK to demonstrate the brands
status as an export brand and its popularity
overseas.
And in a recent television commercial, we
played on the Czech Republics reputation
as a nation of beer connoisseurs, to give
reflected glory to Tyskie and, by extension,
Poland.
SABMiller
Pilsener, Ecuador
In Ecuador, national identity embraces all
epochs of its history, combining Catholicism,
pagan symbolism and a more secular
ideology. When native inhabitants were forced
to convert to Catholicism by the Spanish, the
conversion was often not entirely pure, with
the result that indigenous elements, such as
a polytheistic belief in spirits, became part
of the new religion. The Spanish conquerors
brought in additional populations from
Bolivia, Guatemala, and ultimately Africa
as slaves, and they too, brought their own
beliefs and traditions.
This combination of influences is most
powerfully exhibited in the many thousands of
fiestas which take place around the country,
from the Fiesta of La Mama Negra, which
aligns the power of a volcano to the mercy
of the Virgin Mary, to the Corpus Christi
celebrations of Pujili, which combine the
Catholic celebration of Holy Communion with
traditional celebrations of the harvest and
offers of thanks to Inti, the Inca sun god.
Pilsener is our national brand in Ecuador,
growing lustily and with an 80 per cent
market share. Its television commercials seek
to reflect the complicated and deep-rooted
connection of the people to their ancestors
and the land.
Castle Lager, South

Africa
With the Soccer World Cup taking
place in South Africa last year we took the
opportunity, not to showcase a global brand
to the watching world, but rather to unite
South Africans behind our flagship local
brand, Castle Lager, and build brand equity
and loyalty with local consumers.
With 11 languages and a multiplicity of
different cultures and political affiliations,
the Rainbow Nation has been trying to forge
a common national identity since the decline
of the apartheid state. While most people
will acknowledge their South African identity
at some level, this still fails to compete
with powerful racial, geographic and tribal
loyalties still very much in evidence today.
South Africa is a country still searching for a
voice that both encapsulates the countrys
diversity and demonstrates a strong sense of
unity to the rest of the world.
Our research found one characteristic that
unites all South Africans regardless of their
background is the enormous pride taken in
their reputation for hospitality and openness.
Castle Lager, sponsor of the national football
team Bafana Bafana, created a commercial
that encapsulated this in the build-up to the
World Cup.
Having been in decline for many years,
Castle has not only stabilised, but is
in double-digit growth long after the
tournament ended. It accounts for nearly
one-fifth of our total portfolio in South Africa.
brand in their repertoire of personal

products, when it comes to defining
who they are. But the male psyche,
how men bond and what they aspire to,
finds radically different expressions in
different parts of the world. In many parts
of Africa, fatherhood and the familial
responsibility that surrounds it is highly
aspirational to young men. But while beer
campaigns in the UK do appeal largely to
men, one which emphasised fatherhood I
fear would be doomed to fail.
We believe that deep, rich and
rigorous consumer insight is critical
to brand building. I am sure many of
our competitors would say precisely
the same, but we take it to a level
of granularity that borders on the
obsessive in order to understand and
assimilate those attitudes towards
beer which are from a consumers
perspective indefinable.
Even understanding, and combating
the drivers of, alcohol misuse force
an appreciation of the highly cultural
nature of drinking. In the UK we have
an undeniable problem among young
people for whom drinking to intoxication
is entirely acceptable if not glamorous.
In Italy however, where alcohol is
typically considerably cheaper than in
the UK, drinking to excess is taboo and
considered socially unacceptable.
Yet, despite our success in building
brands based on strong local consumer
insight (see Local heroes opposite),
we are not infallible. Consumers
loyalties and identities are regional
as well as national, and some of our
brands are deeply rooted in very
small communities, which are fiercely
protective of their way of life, their
culture and, indeed, their beer. (See
When the locals got vocal overleaf.)
These brand stories reinforce the
importance of putting consumer insight
at the heart of any brand strategy, and
having a marketing eco-system that can
remain sensitive to the idiosyncrasies
of local culture, while simultaneously
deploying the most effective and
efficient marketing and sales techniques.
We have worked long and hard to
develop such a system within SABMiller
one that gives local marketing teams the
autonomy they need to respond locally,
Brand strategy
but that utilises the expertise, skill and
learnings available across the business. It
is an important part of how we can add
value and leverage the scale of the group.
This combination of discipline
and freedom is cultural as much as
structural. Our instincts are to employ
the complete individual and empower
them to develop bespoke solutions. This
avoids the trap inherent in less flexible
systems, which lead to ideas that in
theory fit all markets, but in reality suit
none that are, in short, the lowest
common denominator.
Of course there are some compromises
with our local brand model. It is complex
and costly, the resulting global business
system is hard to manage and it is hard
to achieve real scale benefits across the
group. But we believe passionately that it
is the way to win in beer.
We know we cant be complacent: as
consumers become more sophisticated
they become more demanding, they
want new and different things and
search for more. This means we have to
continuously review what local means
to make it fresh and compelling to each
new generation of consumers.
In summary
We have embraced globalisation, but

with qualifications, as we believe that the
beer business is inherently local and will
remain so. Our determination to build
brands that resonate with local consumers
is a key point of differentiation between
SABMiller and its competitors.
We recognise that our approach
is more costly and more complex to
manage, and that in many ways we are
swimming against the tide identified all
those years ago by Ted Levitt.
But we are attempting the use the best
of what we know globally, to enhance
our offering and delivery locally. In
short, we believe we are the most local
of the global brewers. And while much
of consumer goods industry is focused
on identifying how everyone is the same,
I would say that SABMiller is trying to
work out how everyone is different.
This article is based on the Marketing
Society Annual Lecture delivered earlier
this year by Graham Mackay.
When the locals

got vocal
The city of Arequipa is located in the southwestern part of Peru nearly 8000 feet above
sea level and surrounded by three volcanoes.
Its rugged territory and tough climate play an
important role in the psychological make-up of
the people in the region. They pride themselves
on being plain spoken, with a fighting spirit and
tough character. Bullfighting where two bulls are pitted against one another and the one that
runs away is declared the loser is also an important part of the culture. The people feel an
element of their own toughness is characterised by the two animals locking horns.
When we first entered the country, we were naturally offended by the inefficiencies of
producing a small quantity of beer for such a remote community. We attempted to introduce
Cristal, a nationally-available beer, so that we could phase out Arequipena.
We determined that the best time to launch Cristal into Arequipa was at the annual fiesta.
However the communitys reaction was not what we hoped. In a dramatic, public and hostile
display, crates and kegs of Cristal were broken open and poured into the drains in the streets.
We learned our lesson and Arequipena thrives to this day, although the packaging and
advertising have been refined to reflect more accurately the characteristics of the people and of
the geography, including the addition of two fighting bulls on the label.
BRAND FINANCE VERDICT

David Haigh, CEO
In 1983 Ted Levitt wrote his seminal thesis on the

Globalisation of Markets. He put forward the theory that
markets were inevitably globalising and that multinationals
needed to globalise their brands accordingly. This led
to the general belief that monolithic global brands
would come to dominate world markets. As a result the
intervening 28 years have seen many organisations trying
to build monolithic global brands to take advantage of the
inevitable trend. Coca-Cola, McDonalds, Vodafone, Levi
Strauss and Heineken have all gone down the global brand
route, crushing local cultural and taste differences to fit the theory. City analysts too
have taken the view that consistent global brands are always best.
You might have thought that Unilevers ill-fated Path to Growth strategy in the
1990s would have stopped the theory in its tracks. But, although Unilever sacrificed
many good local and regional brands at the altar of high growth global brands,
losing its CEO Niall FitzGerald in the process, the theory has remained top of mind.
However, Graham Mackay, in his quietly-spoken and practical way, finally
demolished this accepted wisdom in his lecture to the Marketing Society. He
believes that Heineken is really the only beer brand in the world that looks
remotely like a global brand, and even Heineken is really strong in only a handful of
countries. His view is that beer is a very local taste and that beer brands therefore
tend to be local. For example, Fosters is a global brand from Australia, but actually
most Australians hate the stuff, preferring VB. SABMiller has just bought Fosters
holding company to capture the VB brand. It joins a stable of similar local brands
which have powered SABMiller plcs results.
Even the stock market analysts are waking up to the fact that local or glocal is
better than global. In this article Mackay finally demolishes Levitts theory. So read
on, and long live local brands.
David Hensley
Brand governance
Keeping a good name

A companys brand and reputation are invaluable assets
and need to be guarded carefully, particularly in a volatile
business climate. Boards must go beyond lip service and
establish robust governance processes for their corporate
brands, says Brand Finance managing director David Hensley
Our brand has little impact on our
numbers; its our distribution channels
that make the difference. Senior
executive in an insurance company 2011
We leave it for the experts in our
marketing team and our advertising
agency to manage our brand. Senior
banker 2011
These views are no longer as common
as they were a few years ago or at
least the first one isnt. Most CEOs and
CFOs would be able to at least pay lip
service to the idea that the brand is
one of their most valuable assets. Given
the publicity that annual brand-value
league tables have enjoyed in various
business publications over recent years,
thats not surprising. Brand Finances
most recent Global 100 brand league
table was picked up in 749 different
publications around the world in the
first week after it was launched.
But the second quote remains

true for many organisations. Brand
management is typically a function
that sits in marketing, or marketing
communications, or, less frequently,
public affairs.
We believe that the corporate brand
is too important to be delegated down
the organisation. The corporate brand
reputation doesnt help to attract just
customers, but employees, business
Brand equity
In our brand valuations, brand equity is one of the elements of brand strength. We measure
brand equity by analysing a combination of factors, including the following.
Function peoples perceptions of how good the branded products and services are.
Emotion how people feel about the brand. We gauge this from research into the image
attributes of the brand versus its competitors, assessing these against driver analysis of the
attributes most strongly associated with purchase in the category.
Conduct how well the organisation is seen to be behaving on, for example, environmental,
social and governance factors.
Loyalty how loyal customers are and the net promoter scores.
We analyse each of these factors by reviewing the most comparable market research available
to score the brand relative to its peers and competitors. Our brand strength index then
combines these with measures of the perceived corporate brand security/risk, and measures of
the impact of the brand such as margins and forecast revenue growth.
partners and investors too. It affects all

parts of the business.
Similarly, the brands reputation
is the product of more than just
marketing communications. Actions
by any part of the business can help
to grow or destroy corporate
brand reputation. In an age where
reputation is increasingly influenced by
recommendations and revelations in
social media, every action or comment
by an employee, whether in the call
centre or the pub, can potentially
increase or destroy brand value. If all
of these actions and communications
are co-ordinated you can build a strong,
coherent brand reputation. If they
arent, then your brand image will be
fragmented, inconsistent and at risk.
Brand equity is the set of perceptions
that sit in peoples minds about the brand,
perceptions that affect their attitudes and
behaviours. Whether someone chooses
to buy your product or service rather
than a competitors, or to invest in your
shares, or to come and work for you, is in
part determined by their concept of your
corporate brand. Is your company seen
as a reliable, or innovative, or friendly, or
low-cost sort of organisation?
The corporate brand may be worth
millions, if not billions, of pounds,
Euros or dollars. Brand value typically
amounts to between 10 per cent and
30 per cent of market capitalisation,
but can be more for extremely strong
brands. (See Chart 1 overleaf ) The brand
asset is a trademark, which must be
protected and has real value it could
be licensed out or sold. This value can
today be calculated by reliable methods.
Brand valuation may have been a
mixture of art and imagination two or
three decades ago, but now it is a matter
of science and accounting, enshrined in
international valuation standards: there
Brand governance
Chart 1
Brand value as a percentage of
market capitalisation ($US)
BRAND
BRAND VAL
(Sept 2011)
MARKET CAP
(Sept 2011)
BRAND VAL/
MKT CAP (%)
Google
48,278
166,075
29%
Apple
39,301
353,518
11%
Microsoft
39,005
208,535
19%
IBM
35,981
208,843
17%
Wal-Mart
34,997
178,880
20%
Vodafone
30,740
131,784
23%
General Electric
29,060
161,337
18%
Toyota
28,800
120,148
24%
AT&T
28,354
169,010
17%
HSBC
27,100
138,767
20%
is even an ISO standard, ISO 10668, just

for brand valuation methodology. Indeed
such financial valuation is now required
for the accounting of acquisitions.
In future we foresee shareholders
demanding to see the brand value
published as part of the accounts, and
movements in its value explained.
The brand has value because of its
impact on the three drivers of corporate
value revenues, costs and risk.
Brand impact on revenues
A strong brand affects revenues.

1/ It increases peoples propensity
to purchase the products and services
associated with it either because it stands
for superior or more reliable quality and so
simplifies their rational decision-making,
or because they feel some personal
emotional attachment to it.
2/ It increases peoples willingness
to pay a premium for these products
and services. They see the brand as a
proxy for quality, and assume associated
products and services will therefore
be functionally superior. Some also

believe they derive some personal selfexpressive value from their association
with the brand they feel other people
will see them as better or smarter or
part of a specific group.
3/ It increases peoples readiness to try
and to buy new products and services.
As such it facilitates successful innovation
and growth. Innovation is a safer bet for
strong brands like Apple, which can expect
to get far greater day one and quarter one
sales for an innovative new product, than
it is for a company with an unknown or
untrusted brand.
Brand impact on costs
A strong brand can reduce costs,

relative to the competition.
1/ It increases loyalty, reducing
customer churn and, in turn, the cost of
acquiring new customers.
2/ It makes it easier to get into
distribution channels: you have to pay
less of a premium to win a store listing.
3/ It can also reduce staff costs. The
kudos of working for a strong brand

means such brands often have to pay
less than their weaker competitors to
attract good people.
So a strong brand can save costs
in operations and HR as well as in
marketing and sales.
Brand impact on risk
A strong brand, loved by its customers,

also reduces risk and increases the
security of future income streams.
Strong brands, such as Apple or
Accenture, can more easily survive
a product failure (iPhone4 reception
problems) or a brand endorsement that
loses favour (Tiger Woods) than a weaker
brand. Weaker brands experiencing
such problems are less quickly forgiven:
reputational damage can be more severe
and harder to overcome, as some people
will see the problem as indicative of the
character of the brand, rather than as
is the case with stronger brands an
uncharacteristic mistake.
Research by Jennifer Aaker and
colleagues1 has shown that the level
of forgiveness also depends on what
sort of image the brand has. People are
more likely to forgive transgressions
such as service failure by a brand that is
youthful and fun than they are those by
a brand that has built its reputation on
its professional processes.
So a strong, trusted brand is less
susceptible to reputational risk, and
should therefore expect to have a more
secure future cashflow and a lower beta
than weaker brands.
But even strong brands are not immune
to reputation crises. Toyota, which had
spent many years establishing quality,
durability and reliability as its core brand
attributes, suffered enormously when
reports filled the news across the globe
that its cars were capable of unintended
acceleration and failing to slow down
when the drivers were trying to brake.
Toyota implemented a major vehicle
recall to make a mechanical modification
to the accelerator pedal, and a software
update to the braking system.
Over time, having diligently followed
up every claim of braking failure or
unintended acceleration, they found there
David Hensley
was not a single case in the USA that could
be proved to be down to the failure of the
cars electronic throttle control system.
Various other factors were discovered,
such as the habit of some American
drivers to replace their floor mats each
year, placing new ones on top of the old,
until the pile of carpet could catch the
accelerator pedal, but these were hardly
Toyotas fault. Its reputation as a producer
of high quality cars is restored, but it will
never recover the sales it lost when the
issue was front-page news.
A recent study by EisnerAmper2
into the attitudes of boards of
directors to risk showed that boards
rank reputational risk second only
to financial risk: 69 per cent of them
identified reputational risk as their
primary concern (after financial risk).
However, most boards that we talk to still
dont have integrated measures to track
their corporate reputations and brand
value on anything more than an annual
basis. In todays economically pressurised
times, with public scrutiny at higher levels
than ever, it is surprising that the corporate
governance of brand value is not a greater
priority for activist investors.
Chart 2
PERCEIVED RISK
Aside from financial risk, which of the

following areas of risk management are
most important to your boards?
69%
55%
Source: EisnerAmper
51%
34% 33%
21%
Tax strategies
Outsourcing risk
Risk due to fraud
Privacy and data security
Product risk
IT risk
CEO succession planning
14% 14%
Regulatory compliance risk
Reputational risk
Percentage of respondents
61%
The brand governance process

How should organisations manage their corporate brand and reputation? There is no one right
way. HSBC, Apple and Google are all extremely successful in managing their brands, but their
processes are as individual as their cultures.
However, there are some basic principles for good brand governance, and these serve as a
useful checklist that CEOs, CFOs and non-executive directors can use to ask how well the brand
is being managed in their organisations.
Know the brands value and what drives it. Understand this at a detailed level,
including what factors drive the brand value and how that varies across different customer
segments, different geographies and different products and services. Establish a monitoring and
reporting system so that the board has regular say quarterly updates on how the brand value
is growing or not. It is also useful to show leading indicators, such as social media tracking
and net promoter scores, as these will be indicative of future brand value movements.
Ensure that this knowledge is being applied to corporate strategy. It should
inform decisions on where to invest in growing the brand, where to milk the brand to maximise
the return on this important asset, and where to divest or bring in a partner because the brand
does not provide a strong enough platform to build the business on.
Incentivise senior executives and the board to grow the value of the brand.
Include brand value growth and relative brand value performance in performance objectives or
as a vesting criterion in a long-term incentive plan.
In todays
economically
pressurised
times, with public
scrutiny at higher
levels than ever, it
is surprising that
the corporate
governance of
brand value is not
a greater priority
for activist
investors
True, there are some leading global
organisations that pay great attention
to their brand. HSBC, the worlds most
valuable banking brand, according
to the September 2011 BrandFinance
Global 100 league table, is a prime
example: the bank even includes brand
equity as an element in its senior
executives long-term incentive plan.
But there are many others that dont.
Indeed, a European insurance company
told me recently that it wanted to use
its brand value ranking but purely for
public affairs purposes, not as part of its

management process.
If brand management and governance
is so important and straightforward,
why dont all companies do it? There are
three typical reasons.
1/ It is judged too difficult. Companies
arent aware that brand value can
be measured objectively and by
internationally recognised standards
that will stand up in a court of law.
2/ Many think it is unimportant.
They may not appreciate that brands
are often more important in business-tobusiness than consumer markets.
3/ They think they already do it. But
most actually only monitor brand value
in public affairs for publicity rather than
management reasons, and dont see
the brand as an essential part of good
corporate governance.
But if they dont have an explicit
brand value governance process, what
will they say to the investors when the
next reputational crisis hits their share
price?
Aaker, Fourie and Brasel, When Good Brands Turn

Bad, Centre for Responsible Business, UC Berkeley,
2008
EisnerAmper Second Annual Board of Directors
Survey, Concerns about Risks Confronting Boards, May
2011.
Football
Playing in a different
league
Their ownership of Manchester United has been
controversial, but the on- and off-pitch success the Glazers
have presided over during their six-year tenure is beyond
dispute. Dave Chattaway, head of sports brand valuation at
Brand Finance, explains why Manchester United is the most
valuable football brand in the world.
Two years ago Andy Lynch, a fund

manager at Schroders and a Liverpool
fan, told a Reuters journalist: Basically,
football clubs are lousy investments.
Its a fantastic sport. Its great to go and
watch. But I would never ever put my
money, or the money of anyone I cared
for, into a football club.
His scepticism was understandable.
Over the preceding few years many
clubs had delisted well below their
flotation price, and of the 20-odd clubs
that were listed in 2004 just one or
two remained. The bottom line was
that despite the hundreds of thousands
of fans who flocked to pay to watch
football every week, and the millions
of others who watched the games on
TV, generating lucrative broadcasting
deals for clubs, this had not, for the
large part, translated into a successful
investment story.
KBC Peel Hunt analyst Nick Batram
was equally downbeat. The City was
originally attracted to football because
it could see substantial growth in
revenues and a significant increase in
its intellectual property value as an
entertainment product, he said. But
while this had proved to be the case,
costs not least players wages had
spiralled. And, as Batram said: Clubs
living beyond their means is not a
sustainable business model.
He is right, of course, and these
criticisms of the football industry are
as relevant today as they were two

years ago. And Batram summed up the
challenge the clubs still face: Youre
dealing with different stakeholders:
players, fans and shareholders. Trying
to satisfy all three is a very difficult
balancing act, particularly when
success on the pitch doesnt necessarily
translate into greater profits.
But the challenge isnt insurmountable,
as the stellar performance of Manchester
United FC over the six years since the
American Glazer family took it over,
demonstrates. When the Glazers bought
the club in 2005 it was already well
managed both on and off the pitch
thanks to the winning combination
of manager Sir Alex Ferguson and
chief executive David Gill and his
predecessors. Its stock market valuation
peaked at close to 1bn in 1999, but the
share price also rose in late 2004 and
early 2005 when the Glazers started
getting involved. Indeed, the clubs
strong earnings track record prompted
some to ask whether the 790 million
purchase price overvalued the company.
The Glazers believed otherwise,
recognising what they called the
untapped commercial opportunity
of the Manchester United brand and
understanding that they could exploit
the on-pitch success of the club to drive
greater value from the brand that would
translate into financial results. The
clubs latest financial results (revenues
According to
Brand Finances
European
Football Brands
2011 league table
of the top 30
European clubs,
Manchester
Uniteds brand
value has more
than doubled
since 2005
PHOTOGRAPH SAM KESTEVEN
rose to a record 331.3 million in the

year ending June 2011, an increase
of 16 per cent on the previous year),
along with the current brand value as
determined recently by Brand Finance,
vindicate the Glazers approach. Love
them or loathe them and their
ownership of Manchester United has
been controversial the business
success story of the past six years is
incontrovertible.
According to Brand Finances European
Football Brands 2011 league table of the
top 30 European clubs, Manchester
Uniteds brand value has more than
doubled since 2005, from 197 million to
412 million this year, making it not only
the most valuable football brand in the
world, but also the worlds most valuable
sporting brand. Up 11 per cent on last
Manchester United
BOX 1
THE GLAZER GROWTH
year, the valuation allowed Manchester

United to regain pole position from rival
Real Madrid.
And underpinning the brand value
is a financial performance that has
improved dramatically over the past six
years across a raft of different measures,
not least commercial, match-day and
media revenue, the three central
revenue streams for any football club.
The 46 million development of Old
Trafford in 2006 into a 76,000-seat
stadium allowed the theatre of dreams
to offer 8,000 additional seats, and
to improve higher-yielding corporate
hospitality. And although ticket prices
have risen by over 150 per cent over the
period, Old Trafford continues to sell
out, with match-day revenue rising by
157 per cent to 109 million.
THEN
2005
NOW
2011
Glazer
growth
Annual revenue (m)
166
331
199%
Commercial revenue (m)
49
103
212%
Matchday revenue (m)
69
110
157%
Media revenue (m)
48
119
247%
EBITDA (m) (%)
46
110
239%
Wage to turnover ratio (%)
51%
45%
-6
Implied business value (m)
790
2,000
253%
Brand value (m)
197
412
209%
Brand rating
AA
AAA
+1
Commercial partners (no)
20
+14
Shirt sponsor value (m p.a)
9m
Vodafone
20m
Aon
222%
Season ticket holders
43,000
54,000
126%
Average attendance
67,750
75,467
111%
Average season ticket price
487
722
148%
League titles (no)
15
19
+4
Media revenue has gone up 247 per

cent to nearly 120 million, buoyed by
improved domestic and international
deals. But the most significant difference
between Manchester United FC and
rival Premiership clubs is its approach
to commercial deals. It has exploited
the latent potential in its brand to hook
in over 20 global partners, including
Nike, Audi and Aon, who together are
paying over 100 million a year in order
to be associated with the champions.
The recent 40 million deal with DHL
to sponsor its training kit demonstrates
just how strong the appetite for brand
association is.
But this financial success is
underpinned by on-pitch success and
the simple formula that the Glazers used
to restore the Tampa Bay Buccaneers
to winning ways (the US football team

won the Superbowl four years after
the Glazers bought it) has proved
equally effective in turning the already
successful Manchester United into a
beacon of excellence in an otherwise
murky world where the combination
of sporting and financial success still
eludes even the top clubs.
It is no coincidence that its 2010/2011
performance cemented Manchester
Uniteds record as the most successful
football team in English football history.
It won the top football division for
the 19th time (including in four of the
past five seasons) and reached its third
Champions League final in four years.
Such success drives the fan base, which
in turn drives media, match-day and
commercial revenues, which allows for
Football
MANCHESTER UNITED
FAST
FACTS
Manchester Uniteds brand value has more
than doubled since 2005, to
412 m
Old Trafford continues to sell out, with

match-day revenue rising by 157 per cent to
Media revenue has gone up

247 per cent to nearly
109m 120m
103m
since
2005
since
2005
to be
associated
with the
champions.
are among
the brands
paying a
collective
BOX 2
The Glazers Business Model
Alluring football
and continued
on-pitch success
Fanbase
growth
Drive media,
match-day and
commercial
revenues
On-pitch
investment
Champions League
football
Domestic success
Cup victories
Overseas tours
New media
Multi-language
Website
Merit payments
Stadium yield
management
More commercial
partners/avenues
Superstars
Youth programme
English players
investment in players, which drives onpitch success. Its a virtuous circle. (See
Box 2)
The value of Manchester United could
be crystallised in the proposed IPO,
in which the Glazers hope to realise
around $1 billion (600 million) by
listing between 25 per cent and 35 per
cent of the club on the Singapore Stock
Exchange. If they achieve that price it
will value the whole club at around
2 billion not a bad return on the
Glazers investment if they chose to
sell and could find a buyer with deep
enough pockets. The IPO itself will
allow them to retain control, wipe out
some of the clubs debt (which stands at
308.3 million this year) and expand the
Asian operation, while at the same time
providing an exit route.
But the Glazers havent had an easy
ride. The takeover in 2005 was heated
and fears about the Glazers shorttermism and the amount of debt they
took on to buy the club led to highprofile opposition in the form of the
Green and Gold campaign to overthrow
them. But a mooted takeover bid by
the Red Knights, a group of wealthy
supporters, was aborted in 2010 after
it transpired that the Glazers put a
much higher value on the club than the
expected 1 billion offer.
The clubs storming success has
done much to quell the dissent, and
campaigners arguments that the
434 million in interest payments and
fees that has flowed out of the club since
2005 could have been invested in players
and facilities and in keeping costs down
have become ever more hollow as the
commercial and on-pitch results go from
strength to strength. There is another
argument too: that success has come not
from the Glazers ownership of the club
but from the consistently steady hands
of the two shrewd men at the helm
Ferguson and Gill.
During his 25-year tenure Ferguson has
become one of the most respected and
admired managers in the history of the
game, for his continuing ability to fashion
youthful, exciting squads on a relatively
modest budget (the wage to turnover
ratio has fallen from 51 per cent in 2005
to 45 per cent today) and for the strong
Manchester United
team ethos at the club.
Gill, a chartered accountant who
became chief executive in 2003 after six
years as finance director at Manchester
United, has proved equally adept at
juggling the clubs finances. Last years
record pre-tax losses of 79.2 million
were affected by one-off costs related
to a 526 million bond issue, but were
deftly turned into a record pre-tax profit
of 29.7 million this year, and Gills
repeated insistence that the club can
shoulder the interest burden and still
compete for the best players is borne
out in the results.
But one of the strengths of the
Glazers management has been to
value the best of what they have and
work hard to retain and build on it.
Keeping a man like Ferguson, the clubs
ultimate brand manager, by giving him
the resources and autonomy that allow
him to continue to deliver consistent
footballing success in the way he knows
best, is no mean feat and unusual in
both footballing and business circles
Where the Glazers have really upped
the clubs game is on the commercial
front. Revenues have risen by 212 per
cent, from 49 million in 2005 to
103 million today, nudging over
100 million for the first time this year after
an annual increase of 27 per cent. They
have expanded the commercial team from
two to 50 people, bolstering it with talent
and experience from the entertainment
and consumer goods sectors from both
sides of the Atlantic. Commercial activities
are sharper and more professional.
When the AIG shirt sponsorship was
nearing its end the commercial team sent
the top 50 brands they had targeted as
potential successors a Manchester United
shirt emblazoned with the respective
logos to hook them in. But they didnt go
with the highest bidder, rejecting a big
conglomerate in favour of the arguably
more neutral Aon. They are also better
than other clubs at showing potential
partners what return they can get for their
investment, and use the reassurance of
the strong Manchester United brand to
support their sales pitch.
New commercial deals since the
overhaul of commercial operations in
2008 has brought into the Manchester
One of the
strengths of the
Glazers
management
has been to
value the best of
what they have
and work hard
to retain and
build on it
United fold partners including Chilean
vineyard Concha y Toro, South Korean
tyre manufacturer Kumho Tyres and,
most recently, Malaysian snack brand
Mister Potato, which targets Uniteds
five million-strong fan base in Malaysia.
Manchester Uniteds commercial
director Richard Arnold called the deal
an excellent example of the global
appeal of Manchester United and its
ability to attract well-established but
ambitious companies into partnership.
But while Manchester Uniteds slick
commercial approach may be unique in
football, its common in heavily branded
industries from technology to fashion.
All Manchester United is doing is taking
best practice from companies like Apple
or Prada and applying it to their own
business.
Fans from rival clubs must look at the
Glazer family detractors with incredulity,
because what they have achieved during
their six-year reign is the difficult balance
between on-and off-field success that
eludes every other club. Youve only to
compare Uniteds record with its crosstown rival Manchester City to see how
easy it is to get things out of kilter.
Manchester Citys 97 per cent rise,
to 106 million, in the BrandFinance
Football Brands 2011 brand valuation
(taking it from 19th to 11th place in
the rankings) was buoyed by new
sponsorship deals, high profile signings
and FA Cup victory. But the lack of
team spirit at the club was exemplified
in 200,000-a-week star player Carols
Tevezs defiance of manager Roberto
Mancini by refusing to play in the Bayern
Munich match in September. The club

has had 18 different managers during
Fergusons 25 years at Manchester
United, including four during the past six
years. It is also losing tens of millions of
pounds a year. If any club demonstrates
the folly of believing it can buy success,
Manchester City is it.
Manchester Citys approach is typical
of clubs in both the UK and the rest of
Europe. Manchester United shows that
its blueprint for commercial and sporting
success is not easily copied. Things have
moved on since the 1990s when clubs
were run more like hobbies, but the
injection of professional management
has done little to remedy the common
problem afflicting clubs the clash
between sport and business values
which threatens to kill the game.
Some observers believe UEFAs new
Financial Fair Play regulations, which
require clubs to live within their means,
will bring much-needed discipline and
force clubs to balance their books. The
choice clubs have is to cut costs or buy in
superstars who will generate additional
revenue for them. Most wont entertain
the former so are gambling on the latter,
but while they may comply with the letter
of the law, many are expected to seek
ways round the legislation.
The current state of play is
unsustainable, and if clubs cant
regulate themselves, it is likely to take
some high-profile casualties a rich
backer pulling out, a club having to
cancel a game or unable to pay its
players to bring them to their senses.
It is not a question of whether the
bubble will burst, but when.
In the meantime we are likely to see
a polarisation between the best and the
rest. While emulating Manchester Uniteds
success may be a pipe dream for many,
there are steps clubs can take to improve
their fortunes. The combined brand
value of the top four European teams
surveyed by Brand Finance is over 1.7
billion more than the combined brand
value of the other 26. The ones at the top
have been able to convert their on-pitch
success into off-pitch commercial returns.
Driving the divide is consistent domestic
success and Champions League presence;
large commercial, developed and fully
Football
BOX 3
TOP EUROPEAN FOOTBALL BRANDS 2011
RANK
BRAND VALUE
%
BRAND DESCRIPTION
2011 2010 CHANGE RATING
m
m
2011 2010
1
MANCHESTER
UNITED FC
412
373
10.6%
AAA
The Red Devils add another FA Premiership title to the trophy cabinet.
Continued on-pitch success, backed up with increased off-pitch commercial
innovation and clout.
REAL MADRID CF
401
386
3.9%
AAA
Real lose out to United this year, but huge revenues still drive strong brand
value as major brands look to be affiliated with the club and its Galacticos.
FC BARCELONA
392
362
8.5%
AAA
The Catalans continue to impress the world with their sublime football, and
the 2011-12 season sees the UEFA Champions League winners take a paid
shirt sponsor to help tackle their mounting debt pile.
FC BAYERN
MUNICH
308
301
2.3%
AAA
The biggest commercial revenues in world football ensure Bayern remains

firmly one of the big four brands. Its prudent financial model sets it apart
from its European peers.
CHELSEA FC
196
200
-2.1%
AA
With no trophies last year and 50m flop Torres failing to hit form, the boys
from Stamford Bridge see their brand value stagnate. The club needs a
better global presence to challenge the leaders.
ARSENAL FC
188
215
-12.5% AA
Things go from bad to worse for the Gunners, their under-par contracted
commercial deals and loss of superstars straining their ability to maximise
their brand potential.
AC MILAN
170
167
1.9%
AA-
Poor attendances at the ageing San Siro stadium and a disappointing

Champions League hold back ACs brand despite domestic success.
FC INTERNAZIONALE
MILANO
164
160
2.8%
AA
Behind AC Milan in Serie A and our brand value league table, Inter Milan
have done well to hold onto star man Wesley Sneijder.
LIVERPOOL FC
156
141
10.6%
AA
A resurgent Liverpool may not be in Europe this year, but the clubs heritage
remains and we expect the new owners to add some marketing magic to
push the brand equity.
10
10
JUVENTUS FC
115
127
-9.9%
BBB+
Missing out on Champions League football, combined with Italian clubs

moving to collective media rights, has dampened the outlook for Juve.
Hopefully the new club-owned stadium will provide a platform for growth.
11
19
MANCHESTER
CITY FC
106
54
97.1%
BBB
Huge sponsorship deals, star signings, Champions League football and a first
trophy in 35 years. Unsurprisingly Manchesters other club turned in this
years most improved performance.
utilised stadiums; a global fan base and

brand awareness, and a clearly defined
commercial strategy to attract global
partners.
The UEFA Financial Fair Play rules
mean that clubs can no longer simply
rely on wealthy owners to bankroll the
best talent. To balance the books they
will have to become more creative in
generating income from the valuable
brand assets they hold. And even
the top clubs need to invest more in
servicing their brands in order to
monetise their strength. After all, they
have teams dedicated to servicing,
upgrading and maximising the use
of their fixed assets their stadiums
and players but in most cases their
marketing, research and commercial

investment is minimal.
And with broadcasting and matchday revenues largely capped by fixtures
and centrally-derived deals, its the
commercial branded revenues that offer
the greatest potential returns, particularly
as they are not so immediately correlated
with on-pitch success.
Brand Finance defines the brand as a
trademark and associated intellectual
property. A football club comprises
a mixture of fixed tangible assets
(stadium, training ground, facilities
and so on); disclosed intangible assets
(purchased players); and undisclosed
intangible assets (including internallydeveloped players, mailing lists, the
workforce, management, goodwill

and brand value). The metrics Brand
Finance uses to determine the value of
the brand include things like European
and domestic success, global reach,
average attendance, shirt sponsorship
value, stadium utilisation, highest-value
player, UEFA ranking and so on.
At the end of the day, of course, a brand
is worth what someone is prepared to
pay for it and a football club is unlikely
to sell the brand on its own. However,
companies that understand the value of
their brands tend to focus much more
closely on making money out of them
than those that dont. And the fact that
Real Madrid has higher revenues than
Manchester United but a less valuable
Manchester United
brand indicates there could still be
untapped revenue-generating potential
for Manchester United.
Uniteds commercial director Richard
Arnold hit the nail on the head when
commercial revenues broke the
100 million barrier for the first time
this year: Weve really only just started.
There is a lot more to come. United has
huge future potential.
Its an argument that those marketing
the upcoming IPO will leverage fully. To
what extent investors will be persuaded
is another matter, but given the strong
Asian fan base (190 million out of
Manchester Uniteds 333 million fans are
reportedly in Asia), and the opportunity
to replicate that regional appeal in other
areas of the world, the potential for
continued growth looks strong.
The clubs South Korean following has
grown tremendously since the signing of
Ji-sung Park in 2005, with similar growth
among Hispanic Americans after the
arrival of the Mexican international Javier
Hernandez last year. While Manchester
United prides itself on its home-grown
talent, signing top-flight players from
other countries inevitably broadens its
global appeal and could become a more
prominent feature of its strategy in years
to come. Whats more, as with any strong
brand, it can attract such players without
having to pay over the odds for them.
So having doubled their money over the
past five years, but leaving considerable
financial potential still to be exploited in
the club, now could be the perfect time
for the Glazers to realise part or all of their
investment. The forthcoming IPO will test
the market appetite for this.
The danger is that any new owner
tries to exploit the brand too far. Taking
on too many commercial partners
could begin to devalue the brand, for
example. An investor might hope for
a better return by putting their money
into one of the other clubs and applying
a similar formula to the one the Glazers
have employed at Manchester United to
drive improved returns. Indeed, might
the Glazers try to apply their winning
formula to another Championship club?
The latent value implicit in the brand
valuations in BrandFinances league table
suggests they have plenty to go for.
BOX 4
HOW THE BUSINESS VALUE HAS GROWN
September 2003
Glazer familys interest
in Manchester United
becomes apparent as
they acquire over 3%
of the listed shares in
Manchester United Plc
August 2006
Completion of 45m
spend on adding 8,000
seats to make Old
Trafford a 76,000 seat
stadium
2000m
1620m
1350m
1150m
850m
790m
460m
February 2010
The Red Knights
launch a takeover bid
to buy the club back
from the Glazers
August 2011
Glazer family inform
Singapore Stock
Exchange of proposed
$1bn part flotation of
the club
975m
May 2005
Glazers acquire
Manchester United Plc
for 790m
2003-04 2004-05 2005-06 2006-07 2007-08
August 2011
Signs 40m deal with
DHl for training kit
sponsorship
June 2009
New 4 year 80m shirt
deal signed with Aon
Corp (40% uplift on
prior AIG deal)
2008-09 2009-10
2010-11
ANALYSTS VERDICT
Vinay Bedi, divisional director, Brewin Dolphin Newcastle

Since the early 1990s Manchester United has been a fairly
slow-moving vehicle that has occasionally taken some
time to build up speed in certain areas for example,
marketing, advertising and PR-related opportunities. They
never really believed how big they were or could be. So
although the ingredients for success were already there
when the Glazers took over, the Glazers may have given
them some impetus.
In the past few years they have started to have the impact
in the world market that I expected they would have
instigated earlier. In the early 1990s the management had little comprehension of
what the brand was worth. The value of the brand today, at 412 million, is higher
than the value of the whole company when it floated in 1991 47 million. So a
good job has been done as a result of understanding (and therefore being able to
exploit) what theyve got. The Glazers biggest contribution is probably bringing
knowledge about just what the club could achieve.
Other clubs will struggle to replicate Manchester Uniteds success, because the
club has a depth of history and tradition and of embedded backing and loyalty that
other clubs either dont have or dont have on such a large scale. Fans, especially
overseas followers, can be more fickle, largely swayed by on-pitch success. It
requires a huge amount of work to build up and then maintain a following.
Im not sure if there are the people out there with pockets deep enough to buy
Manchester United and history has shown most other clubs tend to represent
second best. For all the glory and headlines Manchester United earn, there are
lots of owners at clubs elsewhere, including in the Premier League, who will be
reflecting that It doesnt look quite as good as it did in the brochure.
24 | BRANDFINANCEJOURNAL | issue 1october 2011
Nation brands
A game of two halves
IMAGE DREAMSTIME
Against an uncertain economic backdrop,

nation brand values are reflecting a
growing polarisation between the fortunes
of developed and developing markets.
With the US losing its AA rating in Brand
Finances Nation Brands index for the first
time in ten years, which country might
replace it as the new global benchmark?
And how does declining nation brand value
affect brands? Oliver Schmitz, managing
director Brand Finance South Africa,
explains.
The gloomy economic climate in both the United States

and the Eurozone is reflected not just in falling stock markets,
but also in brand values of the countries most affected.
The impact on the USs brand value in particular has been
dramatic. According to Brand Finance, the USs brand value
fell by $1.2 trillion, to $11,370 trillion, between April and
September this year, a decline of ten per cent and the lowest
score the US has achieved since tracking began in 2000. In
the space of five months, the US brand lost one-third of the
$3.5 trillion value it had gained over the previous five years.
Brand Finance downgraded its brand rating from AA to AA- as
a consequence.
Brand Finance determines nation brand values through
a detailed analysis of economic data, perceptual market
research data and infrastructure measures, which combine
to produce a score out of 100. Brand US declined across all
three measures of brand strength (see box on methodology).
Infrastructure scores fell from 77 to 76, economic measures
from 74 to 64 and brand equity measures (image abroad,
quality of life, customer satisfaction and national culture) from
71 to 61. The declining brand strength figure reflects inflation,
higher cost of capital, reduced capital, higher unemployment
and a tarnished image abroad. In terms of brand strength, the
US has now fallen below Canada, Australia and South Korea.
Prior to the recession, Brand US communicated strong
and desirable values in everything from popular culture
and entertainment to food and retailing brands, says Ollie
october 2011issue 1 | BRANDFINANCEJOURNAL | 25
Global economy
Figure 1. US Brand Value and Brand Strength
2007 2011
Brand value
14,000
72
12,000
72
Brand strength
74
72
71
67
80
70
60
10,000
50
11,370
12,576
11,939
4,000
9,115
6,000
10,107
8,000
12,635
US $ million
2,000
40
30
20
10
0
1
01
11
Se
pt
2
20
10
Ap
ril
20
20
09
08
20
20
07
Figure 2. US Brand Strength

2000 2011
77
77
78
74
74
74
74
72
72
72
71
72
67
0
01
20
02
20
0
20 3
04
20
0
20 5
06
20
07
20
08
20
09
Ap 201
ril 0
Se 20
pt 11
20
11
80
78
76
74
72
70
68
66
64
62
60
20
20
0
Schmitz, director of Nation Brand Valuation at Brand Finance.

But the dramatic fall in brand strength of what has long been
the global benchmark means that emerging markets across the
globe will now look to other nations to take the lead. Its a shift
that signals exceptionally testing times for Brand US in years
to come.
David Haigh, CEO of Brand Finance, says: Brand US is
under enormous pressure as a decade of crises in business
and foreign policy has been compounded by serious economic
problems. Low consumer spending, a static property market
and the sovereign debt credit downgrade have all taken their
toll on its brand value. At the same time, other developed and
emerging nation brands are performing better and growing
in value. The economic crisis and double-dip recession will
accelerate these differences, with further shifts likely in the
near future.
As the worlds biggest economy, Brand US is still significantly
more valuable than the second country in the league table,
Germany, which Brand Finance valued at $3.1 trillion in
April 2011. Yet its declining value and brand strength have
considerable implications for its future prosperity and,
potentially, for that of companies domiciled there.
A drop in a nations brand value could, in theory, be a good
leading indicator for the performance of its companies. For
example, a downgrade by one of the credit ratings agencies
could lead to lack of investment in business because of the
rising cost of capital. The governments depleted coffers
(due to the higher costs of servicing its debt) could result in
a tighter fiscal policy, leading to lower levels of disposable
income for the man or woman in the street, which, combined
with the likelihood of rising unemployment because of falling
government investment in highways, public buildings and
other job-creating schemes, will inevitably result in a drop in
consumer demand.
The US vs Canada
Its instructive to look at the differing fortunes of the US and

its close neighbour Canada.
The USs problems began at the beginning of the
Millennium, when its reputation suffered internationally due
to widespread criticism of the tactics used during the post-9/11
War on Terror. The funds it poured into the conflicts in both
Afghanistan and Iraq to the detriment of the local economy
took their toll on the US economic benchmarking in Brand
Finances brand valuations. And although the international
banking crisis of 2008 sent shock waves around the world, its
effect was felt most sharply in the US, where a domestic subprime mortgage crisis precipitated the financial crisis and led
to the unprecedented $700 billion bailout of the American
financial system.
When large seemingly indestructible institutions like
Lehman Brothers started declaring bankruptcy, confidence
was inevitably shaken. The general public was concerned by
the apparent reckless abandon of bankers in their frenzy to get
rich quick, and by the impotence of a government incapable
of anything other than rescuing the banks as they failed. When
Nation brand valuation

methodology
The BrandFinance Nation Brands index is based on high-level valuation
of nation brands using publicly available information. It calculates
brand values using the Royalty Relief method, but uses GDP as a proxy
for brand revenues. GDP is segmented into three categories: primary
(agriculture/forestry/fishing etc), secondary (manufacturing/industry
etc) and tertiary (services/financial and insurance, etc).
Brand strength is determined against three macro categories,
namely: infrastructure and efficiency, brand equity and economic
performance. Each of these categories has a number of subcategories. Brand equity, for example, comprises image abroad, quality
of life, customer satisfaction and national culture. Brand strength is
taken into account when conducting valuations.
Nation brands
Figure 3. Brand Strength and Brand Value
US vs Canada
Brand value Canada
Brand strength Canada
Brand value US
Brand strength US
14000
12000
80
75
74
73
70
67
60
50
%
40
1,475
4000
1,309
6000
11,370
8000
12,576
US $ million
10000
30
20
2000
10
0
Se
Ap
ril
pt
20
20
11
11
Figure 4. Canada Brand Strength

2000 2011
76
75
75
74
73
%
72
73
73
73
73
72
73
73
72
71
71
71
71
71
70
69
20
00
20
0
20 1
02
20
0
20 3
04
20
0
20 5
06
20
0
20 7
08
20
09
Ap 201
ril 0
Se 20
pt 11
20
11
68
Figure 5. Brand Values of the Eurozone brands

2007 2011
United Kingdom
Italy
Spain
Greece
Ireland
2500
US $ million
2000
1500
1000
500
0
2007
2008
2009
2010
2011
Standard and Poors downgraded the USs credit rating in 2011

it had a major impact on the countrys brand strength index.
Economically, credit was harder to come by, and, perhaps
more damaging, the image of an indomitable America lay in
tatters.
By contrast, Canadas brand value rose between April and
September 2011 from $1.31 trillion to $1.47 trillion (up 13 per
cent), improving its Brand Finance rating from AA to AA+
in the process (and allowing it to pip Brand US in the brand
equity stakes).
Despite Canadas support for the War on Terror, the country
survived relatively unscathed. It deployed fewer than 3,000
troops compared to the USs 90,000, encouraging the popular
perception that Canada was a reluctant ally rather than a
fierce supporter of the war. But other factors also helped it
close the brand strength gap with the US, not least its position
as the worlds eighth largest exporter of oil and its rising
population.
Later, when the financial crisis bit, Canadas strict lending
rules helped its banking system weather the storm, with
Royal Bank of Canada being voted the tenth safest bank in
the world by Global Finance magazine in 2010. The hit to the
value of Canadas brands during 2008/9 was softer, and the
subsequent brand value growth in the following years was
faster, than that of US brands.
Since the initial crisis in 2008, Canadas responsible banking
policies have continued to boost the countrys reputation as a
dependable financial centre. Its stable banking system, ranked
the worlds soundest by the IMF, is largely responsible for its
record brand strength rating of AA+ in September this year.
Unsurprisingly, five of the top 15 Canadian brands identified
in the BrandFinance Global 500 study this year are banks.
Even so, the combined value of the top ten Canadian brands,
although it reached $47.3 billion, is still $1 billion less than the
value of the worlds most valuable brand, Google
($48.3 billion).
There was bad news for Canadas most international brand,
with BlackBerry maker Research in Motion losing 25 per
cent of its value over the period, relegating it from fifth to
tenth place. The prolonged services blackout that affected
millions of users in October can only propel it further down
the rankings. BlackBerrys decline comes as the other handset
providers are encroaching on its traditional business-tobusiness territory, affecting its handset sales.
BlackBerry has also failed to capture the hearts and minds
of consumers around the world in the way that rival Apple
has. While Apples iPad has enjoyed spectacular success, the
BlackBerry Playbook tablet device has struggled since it was
launched in April and disappointed investors by failing to
meet initial targets.
There is no disputing the consistent strong performance
of brands in Canada this year, but when it comes to managing
global brands, Canada appears to be weaker, says Haigh.
There is a stark contrast between the 25 per cent fall in value
of BlackBerry and the 33 per cent rise in value of Apple over
the same eight-month period. Apple is recognised for its flow
Global economy
of innovative products, whereas BlackBerry appears to have
taken its foot off the accelerator. As ambitious brands that are
prospering within Canada look beyond their national borders,
it remains to be seen if Canadian brands can become truly
global leaders.
Figure 6. Brand values of the BRIC countries

2007 2011
3500
Eurozone
The BRIC countries
In broad terms the developing economies story is very

different from the developed economies one with the nation
brand values of China, India, Brazil and Russia continuing on
their steadily upwards trajectory despite the brand strength
index telling a slightly different story.
Chinas dip in brand strength in 2008 was caused by a
drop in infrastructure and brand equity perhaps surprising
given that this was in the run-up to the Beijing Olympics.
But the fanfare surrounding the games didnt mask human
rights stories or simmering ethnic tension in Tibet, and news
stories coming out of China about fake products (including
poisonous milk and pharmaceuticals) and associated health
complications raised questions about the countrys respect
for international law. Mattel had to recall millions of childrens
toys manufactured in Chinese factories with poor safety
standards. And copyright scandals, including entire fake Apple
stores, could lead to more questions about the governments
policy on respecting intellectual property rights.
The Brazilian economy has continued to experience swift
growth as the country has both expanded its industrial
production and profited from a protracted commodities
boom. This steady growth is reflected in the countrys brand
equity score and the increase in its brand strength between
2007 and 2009. Indeed, the overall good economic health and
future growth potential of the Brazilian economy accounts for
the healthy rise in brand strength for the country between
2007 and 2011.
India should be rivalling Chinas brand value growth but
has been dogged by scandals in recent years. Corruption and
lack of reform have put some foreign investors off India. Anna
Hazares 2011 protests in Delhi focused national attention
on the pressing problem of corruption in the country. The
telecommunications bribery scandal in 2008 alone was
estimated to have cost the country $40 billion: ministers
sold the licences at a fraction of their real value. Some
commentators have been disappointed with the inability
of the current government, led by respected economist
Brazil
India
Russia
US $ million
3000
2500
2000
1500
1000
500
0
2007
2008
2009
2010
2011
Figure 7. Brand strength of the BRIC countries

2007 2011
80
China
Brazil
India
Russia
60
%
40
20
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
Brand values of countries in the troubled Eurozone are, not

surprisingly, falling. Nation brand values are responding to the
pervasive problem of huge public debt and over-budgeting,
which, to date, only Ireland seems to have tackled effectively
but even here the results have yet to feed through into the
valuation. There is, as yet, no obvious correlation between
nation brand values and company brand values, but because,
as we outlined above, nation brand value could be a leading
indicator for company performance, European companies
have no room for complacency.
China
Figure 8. Brand Equity Rating of the BRIC countries

2007 2011
80
China
Brazil
India
Russia
70
60
%
50
40
30
20
2007
2008
2009
2010
2011
Nation brands
Figure 9. South Africa Brand Strength
60
59
58
56
%
58
58
58
58
59
58
56
55
54
55
54
52
51
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
50
Two things are

key to Africas
continuing
growth and
future success:
dynamic African
businesses and
brands, and an
enabling
political
environment
that will be a
catalyst for
Africas
independence
agenda and
economic
emancipation
Manmohan Singh, to tackle these systemic problems.

In China, by contrast, the Chinese Communist Party
governments highly centralised leadership has at a high
human and environmental cost allowed China to enjoy rates
of economic growth that are higher than Indias.
Another factor counting against India is the renewed
threat of terrorism. Terrorism reared its ugly head again in
2006 in the form of co-ordinated bombings and shootings
in Mumbai. Islamic extremism is causing problems for the
government and damaging the countrys reputation among
the international community.
South Africa
South Africa has a low, but stable, nation brand value ranking
(it came in at 34 in both 2010 and 2011 in the BrandFinance
Nation Brand index) but its brand strength performance is
more buoyant.
Whats more, South Africa is Africas top nation brand, with
a brand value of $150bn this year, up 12 per cent on 2010.
South Africas rise owes much to its successful hosting of the
2010 Fifa World Cup, which improved perceptions of the
country at home and abroad.
One of the most important factors driving perceptions of
South Africa as a nation brand capable of holding its own on
a world stage, is its infrastructure. It set up some impressive
facilities in order to host the World Cup, and it will continue to
benefit from these. The World Cup itself did wonders for the
countrys image, showcasing as it did just what South Africa is
capable of delivering.
These positive perceptions are also driving tourism.
South Africa has become one of the fastest growing tourism
destinations in the world. Respondents to a recent survey
by TripAdvisor.com voted Cape Town as the number one
tourist destination on the planet. Many people expected
the downturn in tourism that usually follows the hosting of
a world event. But due to the successful 20 Experiences in
10 Days tourism campaign launching in key international
markets immediately as the World Cup ended, tourism in
South Africa has continued to flourish.
But its not just tourism thats benefiting from South Africas
glowing brand the entire private sector is scoring too. The
top three most recognised corporate brands in Africa are
South African. The mobile network operator MTN is number
one, while leading banks Standard Bank and Absa are second
and third respectively.
And the halo effect will stretch across other African
countries. This is important, because the image of Africa
does not reflect the growth and entrepreneurial spirit that
has allowed the country to outpace developed economies by
growing at five per cent in a tough global economic climate.
Two things are key to Africas continuing growth and future
success: dynamic African businesses and brands, and an
enabling political environment that will be a catalyst for
Africas independence agenda and economic emancipation.
But African brands are largely unexploited assets. MTN, the
199th most valuable brand in the world, according to Brand
Global economy
Finance, is the only African brand in Brand Finances Top 500
rankings. It has grown substantially since it was established in
South Africa 17 years ago, and now operates in 21 countries in
Africa and the Middle East, and its services connect over
120 million people.
Our research shows that 66 per cent of brand value on the
continent is generated by international brands and only
34 per cent by African brands. There are a number of reasons
for this. One is the different perceptions of quality between
African and international brands, and one way of addressing
this discrepancy is for African brands to push their local
agenda something that international brands, ironically, do
far better. Coca-Cola, which, according to Brand Finances
inaugural Brand Africa 100 report, is the second most admired
brand in Africa, exemplifies this approach, investing as it does
economically, socially and environmentally in the communities
where it operates. In similar fashion African brands need to
make people aware of their economic investment, development
and the associated employment they create.
Most Valuable Nation Brands in Africa 2011 (US$ billion)
African
Rank
Brand
Brand Value
2011
Brand Rating
South Africa
150
A-
Egypt
79
BBB
Nigeria
56
Morocco
40
A-
Algeria
39
BB
Angola
24
CC
Tunisia
19
A-
Ghana
13
A-
Kenya
13
BBB
10
Libya
13
Governments have work to do too, because perceptions

of African brands are also influenced by trust. Civil wars,
local unrest and corruption do nothing to help the cause
of African brands. Even South Africa, which boasts the
strongest economy in Africa, faces many problems, among
them concerns over high crime rates, HIV/AIDS, poverty
and unemployment, which continue to hamper economic
development on the country.
Yet the strength of Africas nation brand, which, according
to the BrandFinance Nation Brand index, is 47 per cent
(compared with 63 per cent for Europe, 72 per cent for North
America, 56 per cent for South America, 60 per cent for Asia
and 68 for Australasia), suggests that corporate brands are not
leveraging the full effect of what can be achieved in Africa.
If brands could better exploit the nations brand strength,
that, in turn, could help to drive the value of the African
nation brand, which currently generates just one per cent of
global nation brand value. This figure compares to 35 per cent
apiece by Europe and North America, 22 per cent by Asia, four
per cent for South America and three per cent for Australasia.
And a higher nation brand value would help the cause of
corporate brands. Its a virtuous circle.
Perhaps another reason African brands are not exploiting
their full potential is that African people dont value brands as
highly as their international counterparts do. But as products
and services become more commoditised, it is brand that
becomes the differentiator, and brands that get that message
now will steal a competitive march on their rivals.
Most Valuable Brands in Africa 2011

(US$ million)
African
Rank
Brand
Industry Group
Domicile
Brand Value 2011
Brand Rating
MTN
Telecoms Services
South Africa
4,503
AAA-
Standard Bank
Banks
South Africa
2,257
AA+
Absa
Banks
South Africa
1,803
AA-
N.N.P.C
Oil & Gas
Nigeria
1,514
AA
First National Bank
Banks
South Africa
1,463
AA
Nedbank Group
Banks
South Africa
1,268
AA-
Investec
Diversified Finan Serv
South Africa
1,225
AA-
SABMiller
Beverages
South Africa
1,218
AAA-
Eskom
Utilities
South Africa
1,018
AA
10
Shoprite
Retail
South Africa
984
AA
Campaign
Where do the figures come from?

Brands are the single most
valuable intangible assets in
business today. They drive
demand, motivate staff,
secure business partners
and reassure financial
markets. Leading-edge
organisations recognise
the need to understand
brand equity and brand
value when making
strategic decisions. But
brand valuation is being
brought into disrepute by
the wide discrepancies
in value ascribed to the
same brands by different
valuation consultancies.
Whats needed to rebuild
confidence, says Brand
Finance plc CEO David
Haigh, is more transparent
brand valuation methods
and assumptions and
greater independence and
objectivity by the valuation
firms.
Royalty Relief
is by far the
most widely
recognised
approach to
brand valuation
among auditors,
accountants,
lawyers, courts,
banks and tax
authorities
As the world economy enters an
increasingly troubled period, financial
markets are feeling the impact of
continuing economic crises in Europe,
political deadlock in America, and fears
of a slowdown in Asia.
To measure the impact that the
double-dip recession has had on the
value of global brands this year, Brand
Finance published a report in September
that measured the change in brand
value of the top 100 brands in the
world (as identified in our January 2011
BrandFinance Global 500 report). Brand
Finance used the Royalty Relief method to
determine the value of these brands.
Unsurprisingly, brand values fell
during 2011, but not as dramatically
as might have been expected. Indeed,
most of the revalued brands appear to
be riding out the recession. The most
obvious reason for this resilience is that
the top 100 brands are, by definition,
the strongest in the world. Brand equity
and customer loyalty built up over
years serve them well in difficult times
as customers seek the reassurance of
brands they know and trust.
Nevertheless, there were some

interesting changes in both brand value
and league table position between
January and September. One of the most
notable examples was Apple, which
jumped from eighth to second place
with a rise in brand value of 33 per cent
($10 billion) to $39.3 billion. There are
a number of reasons for this, not least
bumper revenues from the launch of the
iPhone 4 and iPads 1 and 2.
Apple has always been an innovative
brand noted for a combination of high
quality design, functionality, utility
and luxury that has won devoted fans
the world over. Apples brand value
has consequently grown year by year.
The death of Steve Jobs may reduce its
brand value in the near future. So far
customers have proved exceptionally
loyal, but without its visionary and
inspirational founder at the helm many
worry about Apples future prospects in
a highly competitive industry.
But while Apples $10 billion rise in
value in the space of nine months is
understandable, far more difficult to
explain is the considerable difference
Independent brand valuation

Brand
BrandFinance value
(US$bn)
September 2011
Interbrand value
(US$bn)
October 2011
Millward Brown value

(US$bn)
April 2011
Coca-Cola
27.0
71.9
73.8
IBM
36.0
69.9
100.8
Microsoft
39.0
59.1
78.2
Google
48.3
55.3
111.5
General Electric
29.1
42.8
50.3
McDonalds
24.2
35.6
81.0
Intel
23.5
35.2
13.9
Apple
39.3
33.5
153.3
Walt Disney
15.2
29.0
17.3
HP
25.0
28.5
35.4
in value ascribed to the brand by

Interbrand and Millward Brown.
Interbrand values the Apple brand at
$33.5 billion in its October Best Global
Brands 2011 league table, but Millward
Browns BrandZ Top 100 in July valued
the brand at $153.3 billion. Such large
differences in opinion are curious, yet
Apple is not the only brand on which
the experts disagree (see chart above).
Why is it that Brand Finance
values Coca-Cola at $27 billion while
Interbrand values it at nearly $72
billion? Why does Interbrand value
Google at $55 billion while Millward
Brown values it at over $111 billion?
Such wide discrepancies make public
scepticism about the published brand
values entirely understandable. Mark
Ritson, associate professor of marketing
at Melbourne Business School, summed
up the problem in a recent Marketing
Week column. He wrote: The problem
is not whether we should value a
brand...but rather where the figure
comes from.
The problem is compounded, as he
pointed out, by the fact that most
journalists working for the popular

press dont really understand brand
valuation so they treat any and all
approaches with equal attention.
The primary reasons for the wide
differences in brand value are that
different consultancies define brand
differently, and use different valuation
methodologies and key assumptions.
1/ Asset definition. In accordance
with technical valuation practice Brand
Finance defines brand in its published
league tables as Trademarks and
associated Intellectual Property (IP).
Neither Millward Brown nor Interbrand
clearly state how they define brands
for the purpose of their reports. But in
their valuations of Google and Apple,
they appear to include a much wider
bundle of IP in their definition of brand,
something that would inevitably lead to
higher brand valuations.
2/ Income recognition. Brand Finance
reviews the financial statements of the
companies it values in forensic detail,
and includes in the calculations only
income specifically earned by the brand.
In the case of Coca-Cola, for example,
only 50 per cent of the companys total

turnover is represented by the CocaCola brand itself. The rest comes from
other brands such as Fanta, Sprite and
Desani, whose turnover Brand Finance
excludes from the calculation. This
inevitably leads to a lower valuation
than those of Interbrand and Millward
Brown, if these two firms are, indeed,
including the additional turnover.
3/ Different valuation methods.
Brand Finance uses a valuation
technique known as Royalty Relief,
which is by far the most widely
recognised approach to brand valuation
among auditors, accountants, lawyers,
courts, banks and tax authorities. It
considers the market rate companies
would pay to license their brand if they
did not own it. Such corporate royalty
charges are applied to turnover to
produce a stream of notional brand
earnings, which are discounted back to
a net present value.
By contrast, Interbrand and Millward
Brown determine the proportion of
earnings attributable to a brand using
a less transparent research drivers
Campaign
The following series of charts explains how Brand

Finance cross checks the sense of calculated brand
values for a selection of top global companies,
as produced by Brand Finance, Interbrand and
Millward Brown.
Stage 1: Calculating Enterprise Value
First Brand Finance calculated each companys Enterprise
Value by adding market capitalisation on 30 June 2011 to the
debt recorded in the balance sheet on that date. The sum
of shareholders equity and debt is generally deemed by
corporate financiers to be the financing side of the balance
sheet. The sum of these is the Enterprise Value, which is
represented by tangible and intangible assets of all kinds.
Preference and minority
shareholders at latest
balance sheet date
500
Net debt at latest

balance sheet date
Market capitalisation at
30 June 2011 of ordinary
share capital
400
300
$ billion
200
100
HP
IB
M
icr
os
of
t
Ge
ne Goo
g
ra
l E le
le
M ctri
cD
c
on
al
d's
In
te
l
Ap
W
pl
al
tD e
isn
ey
M
ol
ca
-C
Users of
valuation
reports need to
understand the
drivers of brand
value so that
they can
manage their
brands more
effectively, or, in
the case of
investors or
other interested
parties, gain a
more
meaningful
picture of how a
particular
brand is doing
Why are published

brand valuation
opinions so different?
Co
analysis, which often seems to result in

much higher brand values.
4/ Different valuation dates. Brand
Finance valuations usually have a value
date of 1 January each year although
the September update had a 1 July
value date. Interbrand and Millward
Brown valuations come out at different
times of the year. If market conditions
have changed significantly between
the different valuation dates, this can
sometimes account for discrepancies in
brand valuations.
However, despite these different
approaches, so long as brand valuation
calculations are transparent then
interested parties can understand how
valuation opinions were arrived at,
allowing them to challenge them or
to draw conclusions about the action
required to enhance value. Users of
valuation reports need to understand
the drivers of brand value so that
they can manage their brands more
effectively, or,
Continues on page 35
Next Brand Finance allocated the Enterprise Value (EV) of

each company between asset classes as at 30 June 2011. There
are three classes of assets: tangible assets, disclosed intangible
assets (those intangible assets appearing in balance sheets
following acquisition) and undisclosed intangible assets (the
remaining intangible asset value attributed to the company by
investors in the marketplace).
Undisclosed intangibles
Disclosed intangibles
Net tangible assets
500
experience of technical valuations in each sector. In its

experience, and based on reported IFRS 3 decisions, it is
uncommon for trademarks and associated IP to exceed 30 to
40 per cent of total intangible asset value.
Artistic-related
intangibles
100
Customer-related
intangibles
Marketing-related
intangibles
80
60
40
20
400
ra
l
Ge
100
HP
l
El e
ec
M
t
cD ric
on
al
d's
In
te
l
Ap
W
al ple
tD
isn
ey
og
of
Go
ne
icr
os
IB
ol
ca
-C
Co
200
300
$ billion
Technology-related
intangibles
Contract-related
intangibles
Goodwill
Percentage
Stage 2: Allocating Enterprise Value between

tangible and intangible assets
Brand Finance estimate
HP
Stage 4: Comparison of brand value with

marketing-related intangibles (graph and table)
Stage 3: Apportioning intangible assets into key

intangible asset classes (absolute values $bn and %)
200
$ billion
$ billion
HP
IB
M
icr
os
of
t
Ge
ne Goo
g
ra
l E le
le
M ctr
cD
ic
on
al
d's
In
te
l
Ap
W
p
al
l
tD e
isn
ey
Customer-related
intangibles
Marketing-related
intangibles
50
Co
250
Technology-related
intangibles
Contract-related
intangibles
100
Artistic-related
intangibles
Marketing-related intangibles
150
ol
Goodwill
Brand Finance brand value
Interbrand brand value
200
ca
-C
Brand Finance then apportioned the total intangible value

between intangible asset classes defined by the International
Financial Reporting Standards 3 (IFRS 3). Brand Finance
does this in both absolute values terms and in percentage
terms. This is a Brand Finance estimate based on its extensive
Millward Brown brand value
IB
M
icr
os
of
t
Ge
G
oo
ne
g
ra
l E le
le
M ctr
cD
ic
on
al
d's
In
te
l
Ap
W
p
al
l
tD e
isn
ey
Co
ca
-C
ol
150
100
50
HP
IB
M
icr
os
of
t
Ge
Go
ne
o
g
ra
l E le
le
M ctri
cD
c
on
al
d's
In
te
l
Ap
W
p
l
al
tD e
isn
ey
M
Co
ca
-C
ol
Brand Finance estimate
Finally, Brand Finance compared its estimates of brand

value with the total marketing-related intangibles of the
company. This graph compares the value of marketing-related
intangibles with the brand values published by Brand Finance,
Interbrand and Millward Brown in 2011.
In the case of Coca-Cola, total marketing-related intangibles
should be significantly higher than the value of the CocaCola brand alone because the Coca-Cola Corporation owns
Campaign
Coca-Cola
IBM
Microsoft
Google
General Electric
McDonalds
Intel
Apple
Walt Disney
HP
MarketingRelated
Intangibles
(MRI) in $ bn
59.4
42.1
43.5
53.8
34.7
26.2
26.2
60.9
17.3
27.0
many brands (Fanta, Sprite, Desani and so on) in addition

to Coke. In every case, brand values should be lower than
total marketing-related intangibles, as brand value is just one
marketing-related intangible. But with just two exceptions,
Apple (Interbrand) and Intel (Millward Brown), our
competitors calculated brand values that exceed the value of
the total marketing-related intangibles in those companies as
calculated by Brand Finance.
Brand Finance
brand value
($ bn)
Brand Value as
a % of MRI
Interbrand
brand value
($ bn)
Brand Value as
a % of MRI
Millward
Brown brand
value ($ bn)
Brand Value
as a % of MRI
26.99
35.98
39.01
48.28
29.06
24.21
23.49
39.30
15.24
24.99
45%
85%
90%
90%
84%
93%
90%
65%
88%
93%
71.9
69.9
59.1
55.3
42.8
35.6
35.2
33.5
29.0
28.5
121%
166%
136%
103%
123%
136%
134%
55%
168%
106%
73.8
100.8
78.2
111.5
50.3
81.0
13.9
153.3
17.3
35.4
124%
239%
180%
207%
145%
310%
53%
252%
100%
131%
STAGE 5: Comparison of brand values with total

intangible assets (graph and table)
Brand Finance brand value
Interbrand brand value
Total intangibles
200
$ billion
In all cases total intangible asset values exceed the calculated

brand values of all three consultancies. This is to be expected
given that the brand is only one of many hugely valuable
intangibles. However, the discrepancies between the
proportion of total intangibles accounted for by brands varies
widely between different consultancies.
250
Millward Brown brand value
150
100
50
Ge
HP
of
t
ne Goo
g
ra
l E le
le
M ctr
cD
ic
on
al
d's
In
te
l
Ap
W
p
al
t D le
isn
ey
M
M
icr
os
IB
Co
ca
-C
ol
Total
intangibles
Coca-Cola
IBM
Microsoft
Google
General Electric
McDonalds
Intel
Apple
Walt Disney
HP
148.4
210.6
174.0
119.5
154.2
74.8
105.0
243.7
43.1
77.1
Brand Finance
brand value
($ bn)
26.99
35.98
39.01
48.28
29.06
24.21
23.49
39.30
15.24
24.99
Brand Value
as a % of Total
Intangibles
18%
17%
22%
40%
19%
32%
22%
16%
35%
32%
Interbrand
brand value
($ bn)
71.9
69.9
59.1
55.3
42.8
35.6
35.2
33.5
29.0
28.5
Brand Value
as a % of Total
Intangibles
48%
33%
34%
46%
28%
48%
34%
14%
67%
37%
Millward
Brown brand
value ($ bn)
73.8
100.8
78.2
111.5
50.3
81.0
13.9
153.3
17.3
35.4
Brand Value
as a % of Total
Intangibles
50%
48%
45%
93%
33%
108%
13%
63%
40%
46%
Threats [to
independence]
led accountancy
bodies and
regulators to
discourage
audit firms
from providing
consulting and
valuation
services to their
audit clients.
We believe the
same restriction
should apply to
the valuation of
brands by
companies
whose primary
role is to build
them
Continued from page 32 in the case of

investors or other interested parties,
gain a more meaningful picture of how a
particular brand is doing.
Against this background Brand
Finance has analysed the total amount
of intangible value of the top ten
branded companies in the world to
provide a sense check between total
marketing-related intangible assets and
the brand values published by Brand
Finance, Interbrand and Millward
Brown. (See panel opposite)
The need for transparency
Brand valuations are no different from

the valuation of buildings, equipment,
pension assets and liabilities, shares,
bonds, patents, art, wine and many
other assets. If you ask two expert
valuers for an asset valuation opinion
in any asset class you will inevitably
get different answers. Even if they
use identical methods and similar
assumptions they may come to different
conclusions. However, if the calculations
are entirely transparent it is possible
to form a balanced view on the validity
of the valuers opinion. It also helps
to know that the valuer reached their
opinion independently and objectively.
Why might the valuers independence
be compromised?
There are five professionally
recognised threats to independence.
1/ Self-interest having an interest in
the outcome of the brand valuation.
2/ Self-review both creating the asset
and forming a valuation opinion on it.
3/ Advocacy compromising an arms
length opinion to promote the clients
interests.
4/ Familiarity becoming too familiar
with the management of the company
under review.
5/ Intimidation letting commercial
or other threats affect the result of the
brand valuation.
In the 1980s and 1990s such threats
led accountancy bodies and regulators
to discourage audit firms from providing
consulting and valuation services to
their audit clients. We believe the same
restriction should apply to the valuation
of brands by companies whose primary
role is to build them.
Unfortunately, Interbrand and

Millward Brown are both wholly-owned
subsidiaries of marketing services giants
(Omnicom and WPP respectively), which
make millions of dollars building the
very brands their subsidiaries then value.
Indeed, Interbrands strapline is Creating
and managing brand value.
There is a strong and growing body
of opinion that it is impossible for
a consultancy to provide genuinely
independent brand valuation opinions
on brands that they, or their parent
company, built in the first place. To this
end Brand Finance plc has launched
the Campaign for Independent
Brand Valuation, which promotes
strict guidelines on the conduct of
brand valuers to avoid actual and
perceived threats to their independent
judgement.
Bridging the gap between

marketing and finance
At Brand Finance we focus on

measuring companies intangible value
and on helping them to grow it.
Our services complement and
support each other, resulting in robust
valuations underpinned by an in-depth
understanding of revenue drivers and
licensing practice.
Valuation I Analytics I Strategy I Transactions

Brand Finance plc, the worlds leading independent brand valuation and strategy
consultancy, has a global footprint with over 15 offices worldwide.
For more information, please contact us on:
T: +44 (0) 207 389 9400
F: +44 (0) 207 389 9401
E: enquiries@brandfinance.com
www.brandfinance.com
If you are interested in attending our global forums, please visit:
www.brandfinanceforum.com

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BrandFinance Journal

2 | BRANDFINANCE JOURNAL | issue 1october 2011

18Football: Manchester United

15Governance: David Hensley 10SABMiller: Graham Mackay

The BrandFinance Journal is

Brand Finance plc

Editor David Haigh, Founder and

october 2011issue 1 | BRANDFINANCE JOURNAL | 3

The ISO standard requires that brand

To this end, we are now launching the Campaign for

4 | BRANDFINANCE JOURNAL | issue 1 October 2011

Striking a fine balance

Morten Lundal took on the Vodafone brand baton when

look at history. But Vodafone is a very

at engaging customers in the brand,

October 2011issue 1 | BRANDFINANCE JOURNAL | 5

6 | BRANDFINANCE JOURNAL | issue 1 October 2011

relationship with the McLaren Formula

unmatched customer experience; and

October 2011issue 1 | BRANDFINANCE JOURNAL | 7

nature of the business. Taste in beer,

to sell: we are selling the ability to

the results had no resonance with local

8 | BRANDFINANCE JOURNAL | issue 1 October 2011

countries across five continents and works

Set up by Chris Gent and Gerry Whent

operating company is a big company in

BFJ: Do you think brand valuation

October 2011issue 1 | BRANDFINANCE JOURNAL | 9

efficiently. Increasingly, connecting

BRAND FINANCE VERDICT

10 | BRANDFINANCE JOURNAL | issue 1october 2011

Swimming against the global tide

driver would be in cigarettes where

Why beer is different

But beer is different. Alcohol is a moodaltering substance and beer in particular

global beer sales volumes, and about

Today we are the biggest drinks business

october 2011issue 1 | BRANDFINANCE JOURNAL | 11

been badly neglected under public

Beer remains resolutely local

And brewing has remained at its heart

many countries that remains the case

wealthier and the middle class grows

12 | BRANDFINANCE JOURNAL | issue 1october 2011

Tyskie Gronie, Poland

My explanation is that they are

Pilsener is our national brand in Ecuador

As Polands largest beer brand with a

october 2011issue 1 | BRANDFINANCE JOURNAL | 13

Castle Lager, South

brand in their repertoire of personal

14 | BRANDFINANCE JOURNAL | issue 1october 2011

We have embraced globalisation, but

When the locals

BRAND FINANCE VERDICT

In 1983 Ted Levitt wrote his seminal thesis on the

october 2011issue 1 | BRANDFINANCE JOURNAL | 15

Keeping a good name

But the second quote remains

partners and investors too. It affects all

16 | BRANDFINANCE JOURNAL | issue 1october 2011

is even an ISO standard, ISO 10668, just

Brand impact on revenues