Professional Documents
Culture Documents
An Overview
2/4/14 Premchander 1
Most Valued Luxury Brands
Brand Value
Louis Vuitton $23.58 b
Gucci $9.45 b
Hermes $6.18 b
Cartier $5.5 b
Tiffany $5.16 b
Burberry $4.34 b
Prada $4.27 b
Ralph Lauren $4.04 b
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Prospects for Brand Values - 2013
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Introduction
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What is Brand Valuation?
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Uses of Brand Valuation
Financial
Acquisition Strategic
Reporting
Merger Brand Management
Corporate
Strategy
BRAND VALUATION
Brand Portfolio
Evaluation Performance
Appraisal - Managers
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Methods of Brand Valuation
Cost Based
Formulary Approaches
Approaches
Market Based
Income Based Approaches
Approaches
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Cost Based Approaches
Consider the costs involved in creating the brand from the stage of
research, product concept and all the marketing and sales inputs
Looks at historical information
Little future orientation , some future orientation is possible by using
replacement cost.
Need to identify historical costs some of which are not directly
related to the brand – basis of allocation ?
Richard Branson incurs costs on trying to circumnavigate the
globe in a balloon $4.9 million in 1998. How much do you
allocate to building the Virgin Brand
What discount rate
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Market Based Approach
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Income-Based Approach
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Formulary Approaches
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Formulary Approaches – Interbrand Variables
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Formulary Approaches – Financial World Variables
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Acker’s “Brand Equity Ten”
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Capitalization of Brand Values
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Example: FW Illustration
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Estimating the Value of Kellogg’s Brand
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Price/Sales Ratio
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Corporate Brand – Live Example 1 (1999)
Alpha Limited
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Background
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Data and Methods
Current
Price point of competition for each product
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Valuation Methodology
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Valuation Methodology II
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Valuation 1 – DCF of Brand Premium
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Valuation Method 2 - Multiple
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Limitations
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Benefits
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Beta Limited - 1998
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Situation 2009
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Situation Historical
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1999 the Proposition
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Valuation Method
Market Multiples
Share Price to Sales of beta compared to market multiples of
unbranded lesser brands (Damodaran)
Lesser brands not listed so derived market multiple based on
margins, growth, risk. These were estimated after discussions
with Beta company sales and marketing executives
Royalty perpetuity
Value of Brand = Royalty / (WACC) Where WACC is the cost of
capital of Beta (Value of Brand in Beta’s hand)
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Valuation Method ctd
Brand Premium
Determine the investment in the brand over the last few years
Advertising budgets
Brand extensions
Promotion
Marketing Budgets
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Valuation ctd
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What is the right Brand Value?
Considerations
Fair to all shareholders of Beta => Minority, Institutions, Funds and
Management Group
Fair to owners of Gamma.
How to ensure value neutrality in the transaction?
What the market could pay?
Highest Valuation?
Weighted Average?
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What Happened?