Woolworths, JB Hi-Fi most valuable brands while NAB, Ten Network decline

Westpac, electronics retailer JB Hi-Fi and Wesfarmers’ have been named by Brand Finance as the nation’s most valuable brand portfolios, due to aggressive expansion of their business during the downturn and consistency with their messages.

But Qantas, oil giant Caltex and NAB have all dropped in value due to poor industry performance, lower margins and failure to secure their brands’ reputations.

According to the second annual Australia’s Most Valuable Brand Portfolios report, released by Brand Finance, the most successful brands in Australia have managed to increase their value due to acquisitions and reputation management.

The report names Woolworths has the most valuable brand in Australia with a portfolio worth $6.4 billion, indicating growth of more than 5% since the company’s last survey. Brand Finance managing director Tim Heberden says the company was partly able to grow its value due to the chain’s rebranding and refurbishment programs.

“The new brand identity has been well received and strengthens the association with
fresh food. We do not expect that management will be overly concerned by the trademark challenge made by Apple.”

Generally, Heberden says the companies which have continued to perform well and record portfolio growth have put a large emphasis on maintaining a consistent message with their brands.

“The general secret with developing valuable brands is long-term commitment to investing in the brand and a long-term consistency with what the brand stands for and what it offers. With Woolworths, which has grown in the last couple of years, it’s partly due to the fact groceries weren’t affected by the downturn as much but also its growth in brand value and recognition.”

But customer recognition isn’t the only tool to grow value. Heberden says the introduction of JB Hi-Fi into the top 50 with a brand value of $357 million is due to the group’s decision to aggressively expand during the downturn.

“Targeted marketing efforts towards the savvy younger generation has proved effective as the business has grown from 10 to 123 stores in the last 10 years, achieving compound annual revenue growth of over 40%. The JB Hi-Fi brand represents almost 16% of enterprise value.

“They’ve targeted well, that brand and that offer stand well and they’ve been aggressively expanding the number of stores. I suppose the brand is part of the overall growth strategy.”

Sugar giant CSR rose into the top 50 with a brand value of $318 million due to record sugar prices, while Heberden also says Orica, which includes paint brands Dulex and British Paints, has managed to “quite well” with a brand value of $385 million.

But Heberden says companies that have recorded significant declines in their value, including NAB which dropped from last year’s first place to third with a brand value decline of 4.7% to $6.1 billion.

Aristocrat has fallen 25.8% to $286 million, while Ten Network has also fallen 11.7% in value to $455 million. Heberden says that while declines in industry activity play a major part in the lower values, companies are still ultimately responsible for the strength of their portfolios.

The lowest-valued company on the list was Nufarm, which remained in 50th place for a second consecutive year with a brand value of $280 million. But the biggest fall on the list has been Qantas, with a 27.5% decline to $1.9 billion.

“I think the message here is that you can’t turn an investment in brand on and off, and not have some form of damage. What I mean by that, is that we’ll find over the next few years companies which had knee jerk reactions to reduce marketing expenditure won’t do as well as the economy starts to grow, compared to those who continued investment during the downturn.”

The study was compiled using financial data compiled from Bloomberg, including enterprise value, net asset value, historic revenue and the weighted average cost of capital.

Revenue projects were made using consensus forecasts and OECD growth rates, while royalty rates for each portfolio has been calculated using analysis accounting for strength, risk and the future potential of the brand in relation to competitors.

“Brand value is calculated by applying the notional royalty rate to forecast revenue, and determining the present value of forecast post-tax brand royalties,” the company said.

Top 5 winners:
Woolworths – 5.4% to $6.3 billion
Westpac – 9.3% to $6.1 billion
Wesfarmers’ – 30.1% to $4.3 billion
Lion Nathan’s – 4.6% to $2.1 billion
JB Hi Fi – $357 million

Top 5 losers:
Qantas – 27.5% to $1.9 billion
NAB – 4.7% to $6.1 billion
Suncorp Metway – 21% to $1.3 billion
Caltex – 26% to $666 million
Tabcorp – 36% to $1.1 billion

Australia’s Top 10 Most Valuable Brands:
Woolworths – $6,384
Westpac Banking – $6,181
National Australia Bank – $6,123
Commonwealth Bank – $4,916
Telstra – $4,560
Wesfarmers – $4,383
ANZ – $3,900
Foster’s Group – $3,660
Coca-Cola Amatil – $3,614
Lion Nathan – $2,115