Looking beyond Russia, 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) – based on the level of brand value loss observed for each sector in the first quarter of 2020.
The COVID-19 pandemic is a major global health threat and its impact on global markets is very real. Worldwide, brands across every sector need to adapt to the reality changed by Coronavirus, with a massive impact on their business activities, supply chains, and revenues in a way that eclipses the 2003 SARS outbreak. The effects will be felt well into 2021.David Haigh, CEO, Brand Finance
Sberbank has maintained its leading position in the annual Brand Finance Russia 50 ranking of the nation’s most valuable brands, with a staggering brand value of RUB 840.2 billion.
Sberbank continues to exceed its customers’ expectations by actively expanding its digital ecosystems platform. Through strategic partnerships and M&A activity, Sberbank has become a one-stop shop for its customers, as it expanded its Consumer and IB services into logistics, shopping, entertainment, corporate education, healthcare, legal, and business services. Such diversification creates convenience to Sberbank’s customers and helps to reduce revenue volatility in the long run. Moreover, integration of business processes creates opportunities to further reduce the costs, as synergies are created between various departments. Integration of other services in Sberbank’s product offerings was successful due to the strong brand image of Sberbank.
Sberbank has earned unparalleled trust in its domestic market and is a bedrock of the Russian financial system. The bank is an excellent example of how customer relationships can build a compelling brand that commands great loyalty.David Haigh, CEO, Brand Finance
Aside from calculating overall brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. Along with the level of revenues, brand strength is a crucial driver of brand value.
According to these criteria, Aeroflot has retained the title of the world’s strongest airline brand and has also become the strongest brand in Russia, with a score of 92.1 out of 100 and a corresponding AAA+ rating. Sberbank (91.6) and MTS (90.9) follow closely as the only two other Russian brands to have secured the elite AAA+ brand strength rating. Aeroflot is one of just a few airline brands across the globe that have recorded an improvement in brand strength year-on-year, a testament to the brand’s exceptional reputation and popularity among its core customers. Aeroflot’s strong brand will put it in a strong position to help the business recover from a turbulent 2020.
Despite headwinds in the industry, Aeroflot had managed to capitalise on its strong brand to achieve extraordinary financial performance before the COVID-19 crisis, recording a 6% rise in brand value to RUB 107.8 billion. The brand’s revenue was boosted by a combination of increased demand over the course of 2019 and its strategic pricing, both of which have protected the brand as ground handling and airport costs continue to rise.
Aeroflot, which was well on track to achieve its strategy 2023 at the beginning of the year, will no doubt rely on its long-established and respected brand to defend its market share and to rise up to the challenge that COVID-19 poses.David Haigh, CEO, Brand Finance
After successful acquisition of Morton Group in 2017, PIK Group has become the largest real estate developer in Russia, and reaping the benefits of the acquisition, it is the fastest-growing brand in Russia this year, up 51% to RUB 33.5 billion and jumping 10 ranks up to 30th. Like most prominent companies in Russia, PIK is looking ahead to create value to its shareholders by further expanding its offerings.
As the result of extraordinary financial performance, Yandex Group – Russia’s largest search engine – has increased its brand value by 31%, making it the third fastest growing brand in the ranking, following PIK and Slavneft which recorded a 32% increase year-on-year. Yandex.Taxi revenues grew at an astonishing 98%, making it one of the most prominent growth segments after Bets and Media Services within the Group.
Tinkoff Bank – Russia’s only neobank – has entered the ranking for the first time, managing to secure 39th position. The bank has achieved above average familiarity scores, as well as scored relatively high on innovation and quality of services.
Evraz – London-listed mining company and a constituent of the FTSE 100 index – has been valued by Brand Finance for the first time in 2020. The company is the most valuable new entrant to the top 50 this year, taking 34th place in the ranking, and presenting itself as a viable competitor to other Mining, Metal & Steel companies – NLMK, Severstal, and another new entrant – Metalloinvest. With shifting preferences among shareholders towards ESG investments, mining companies have to ensure that – besides profitability – appropriate systems of checks and balances are in place regarding environmental concerns.
As part of this year’s ranking, Brand Finance has conducted additional analysis on brand strength, brand value, and creation of value for key stakeholders among the top 50 most valuable Russian brands.
One important observation relates to the fact that companies with higher brand strength tend to have lower cost of goods sold to revenue ratio. This could be caused partially due to the better relations with suppliers, effective management, and ability to attract and retain cost effective talent to the company. This effect is more prominent in industries like telecoms and retail.
The matrix unveils some important observations regarding brands in the Brand Finance Russia 50 2020 ranking. In the upper left quadrant are the brands that have managed to achieve high brand strength, but this was not yet translated into higher brand value. Such companies have high potential to capitalise on its brand strength gains and increase the value of its brands in the future.
Sberbank, Aeroflot, MTS and a few other brands in the upper right quadrant are in the sweet spot and continued investment in brand development will ensure their continued presence in this segment.
Brands in the lower right quadrant achieved high brand value, but for this situation to continue in the future, management should dedicate additional resources for brand development. Stronger brand recognition will help to build customer loyalty and attract talent.
The lower left quadrant consists of brands that have a lot of unrealised potential in brand strength and brand value alike. Management of these companies should prioritise development of strong and recognisable brands, as this will help to drive their branded business value in the long term.