The world’s top 50 most valuable luxury and premium brands could lose up to US$35 billion worth of brand value as a result of the COVID-19 pandemic.
Within the luxury and premium ranking, three sub sectors are represented: apparel, automobiles and cosmetics & personal care. Brand Finance’s analysis has shown that these sub sectors are likely to be impacted differently by coronavirus, with apparel brands the most heavily impacted, facing a 20% brand value loss, autos moderately impacted, facing a 10% brand value loss and cosmetics brands largely sheltered from the damage of pandemic.
Looking beyond the luxury and premium sector, the value of the 500 most valuable brands in the world, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated US$1 trillion as a result of the Coronavirus outbreak.
Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. The likely impact on brand value was estimated for each sector. The industries have been classified into three categories – limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss.
There is no denying the importance of the Chinese market in ensuring the good health and growth in the luxury & premium sector. We have witnessed the Chinese successfully keep the sector above water following the 2008 crash and luxury brands will be relying on this market once again in the wake of the Coronavirus pandemic. Porsche – the most valuable luxury and premium brand in the world – sold a staggering 86,000 units in China in 2019 alone, and the auto giant, along with fellow brands across the sector, will be hopeful that keen spenders will keep demand high.
Alex Haigh Valuation Director, Brand Finance
German automobile brand, Porsche, has retained the title of the world’s most valuable luxury and premium brand by a considerable margin, following a 16% brand value increase to US$33.9 billion.
Porsche has cemented itself as the epitome of luxury – a brand renowned for its superior quality and world-class sports car manufacturing. Now rising to the challenge of an increasingly eco-conscious society, Porsche has become a pioneer in sustainability through the introduction of its first electric vehicle, the Taycan – making the brand the first traditional luxury car manufacturer to launch a fully electric model.
As the most commercially successful luxury car brand, Porsche has seen some of the fastest long-term growth of any brand in our auto rankings, built off sports cars and later SUVs and similar models. It is testament to the brand’s strength and wide appeal that its move to sports electric vehicles is one of the most hotly anticipated new models this year.
Givenchy is the fastest-growing brand in this year’s ranking, its brand value growing an impressive 74% to US$2.0 billion, simultaneously jumping 11 spots in the ranking from 37th to 26th.
Givenchy’s strong performance and growth, particularly in its makeup division and through its L’Interdit perfume, contributed to its parent company LVMH’s solid financial performance over the previous year. Givenchy has continued to focus on further developing its omni-channel e-commerce platform, the Maison Givenchy, originally launched in 2017 to coincide with former Artistic Director Clare Waight Keller’s - the first female artistic director of the brand - first show.
LVMH, the world’s largest luxury goods conglomerate, has been extending its philanthropic arm further following its €200 million pledge to the rebuilding of Notre Dame, by donating funds and resources to fight the pandemic. A further eight LVMH brands feature in this year’s ranking with a total brand value of US$39.3 billion and have grown, on average, by 19%.
Five French brands feature in the top 10 and have all celebrated a strong year, their brand values growing on average by 14%.
Sitting in third, Louis Vuitton is the fastest growing brand in the top 10, increasing by 21% to US$16.5 billion. Fifth-ranking Chanel recorded a solid 20% brand value growth to US$13.7 billion. The brand, which has been negotiating the absence of longstanding Creative Director Karl Lagerfeld who died in February last year, reported sales that broke US$12.8 billion in 2019.
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, familiarity, loyalty, staff satisfaction, and corporate reputation. According to these criteria Ferrari has retained its position as the world’s strongest luxury and premium brand with a Brand Strength Index (BSI) score of 94.1 out of 100 and a corresponding elite AAA+ brand strength rating.
Alongside revenue forecasts, brand strength is a crucial driver of brand value. As Ferrari’s brand strength maintained its rating, its brand value grew, improving 9% to US$9.1 billion.
Ferrari announced five new models in 2019, including the SF90 Stradale and Ferrari Roma, both aimed at new market segments. The company also established a manufacturing agreement with the Giorgio Armani Group to help push Ferrari collections into a more premium space.
For years, Ferrari has utilised merchandise to support brand awareness and diversify revenue streams but is now taking steps to preserve the exclusivity of the brand. The company plans to reduce current licensing agreements by 50% and eliminate 30% of product categories.
As with other auto brands, Ferrari’s shipments have suffered this year, which have halved versus its 2019 numbers. The suspension of the Formula 1 season has also damaged the brand’s sponsorship, commercial and brand revenues.
The embodiment of luxury, Ferrari continues to be admired and desired around the world, and its outstanding brand strength reflects this. It is no wonder that many consumers, who might never own a Ferrari car, want a bag or a watch emblazoned with the Prancing Horse, but it is also crucial that management remain at the steering wheel of the brand’s future and maintain its exclusive positioning by monitoring the licensing output closely.
Alex Haigh, Valuation Director, Brand Finance