Why Brands Matter 2020
An analytical report on the role of brands in value creation
Brand Finance Why Brands Matter 2020
Brands lead economic recovery
Strong, valuable intangible assets are crucial for growth in the modern economy. According to the Brand Finance Global Intangible Finance Tracker (GIFTTM) analysis, between the 2008 financial crisis and the beginning of 2020, global intangible value has grown on average by 13.2% per annum. By contrast, tangible net asset value has grown by 8.4% per annum.
Following the outbreak of COVID-19, total global intangible value had dipped from US$60.6 trillion at the beginning of 2020 to US$38.9 trillion on April 1st, stripping away 5 years of value growth. Since then, the market corrected itself and total intangible value reached an all-time high of US$65.7 trillion as at September 1st.
The sample included in the GIFT™ analysis looks at the value of over 55,000 entities – all publicly listed companies in the world, which are by default highly branded and care for their reputation more because of the imperative to maintain stakeholder trust and share price.
While according to the International Monetary Fund the global economy as a whole is forecast to contract by -4.4% this year1, these highly branded companies have already bounced back from the decline caused by the COVID-19 crisis and recorded +3.8% growth (from US$116.6 to US$121.0 trillion between January and September 2020), driven by the US$5.1 trillion of intangible value they added to their enterprise values over the course of this year.
Further demonstrating the importance of brands for economic growth, the top 10 most intangible companies, such as Apple, Amazon, or Tesla, which own the world’s most valuable brands and IP, account for US$3.6 out of that US$5.1 trillion or two thirds of the overall intangible value growth among all publicly listed companies.
During the year, the intangible value of these top 10 companies started at US$7.2 trillion, then dropped by just shy of US$1 trillion during the COVID-19 crash, and finally skyrocketed to a total of US$10.8 trillion as at 1st September, surpassing the US$10 trillion mark for the first time in the history of the GIFT™ study.
In times of crisis, brands – especially those most valuable and strongest in their categories and markets – become a safe haven for capital. Like gold or fine art during past economic downturns, nowadays well-managed, innovative, and reputable brands are what the global economy turns to in the hour of need. There can be no better evidence for why brands matter than the role they have already played and will continue to play in the post-COVID recovery.David Haigh, CEO, Brand Finance