MILAN — The world’s 50 most-valuable luxury and premium companies are expected to lose over $20 billion worth of brand value as a result of the pandemic, according to a report released by brand valuation consultancy Brand Finance.
The London-based firm assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what this was on Jan. 1 this year, and ranked companies hailing from the fashion, automotive and cosmetics and personal care industries based on clusters ranging from high positive impact — up to 20 percent brand value growth — to heavy negative impact, up to 20 percent brand value loss.
In general, the study showed that fashion and automobile brands will be the most negatively impacted, facing a drop of 10 percent in brand value, while cosmetics labels are expected to better withstand the crisis.
Overall, Porsche topped the ranking, as its brand value was up 15.6 percent to $33.9 billion, according to the study.
“There is no denying the importance of the Chinese market in ensuring the good health and growth in the luxury and premium sector. We have witnessed the Chinese successfully keep the sector above water following the 2008 [financial] crash and luxury brands will be relying on this market once again in the wake of the coronavirus pandemic. Porsche 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,” said Alex Haigh, valuation director at Brand Finance.
Gucci ranked second, with a brand valuation that jumped 20.2 percent to $17.63 billion. Following the Italian fashion house, Louis Vuitton got the bronze medal but was also the fastest-growing brand in the top 10, increasing its brand value by 21.4 percent to $16.5 billion.
Overall, five French brands featured in the top 10 positions, registering average brand value growth of 14 percent. Cartier slipped to the fourth position from the third with a brand value of $15 billion, while Chanel and Hermès retained their fifth and sixth spots in the ranking with brand values of $13.7 billion and $11.9 billion, respectively.
Ferrari and Rolex followed, while Dior gained a spot to ninth, surpassing Coach, which reported a brand value loss of 9.7 percent to $6.8 billion.
In particular, nine LVMH brands appeared in this year’s top 50 ranking with a total brand value of $39.3 billion and an average growth of 19 percent.
Givenchy did particularly well, becoming the fastest-growing label in Brand Finance’s ranking, as its brand value jumped 74.2 percent to $2 billion, and the company climbed 11 spots to the 26th position. According to the research, Givenchy’s strong performance and growth were driven in particular by its makeup division and its L’Interdit perfume.
Honorable mentions also went to Tom Ford, Clé de Peau Beauté, SK-II and Estée Lauder, whose brand values grew 42.7 percent, 32.6 percent, 32.5 percent and 27 percent, respectively.
On the other hand, Valentino’s brand value dropped 39.1 percent, along with those of automotive powerhouses Bentley, Maserati and Aston Martin, which were down 24 percent, 43.7 percent and 49.5 percent, respectively.
In addition to measuring the overall brand value, Brand Finance also evaluated the strength of brands — and, consequentially, their power in influencing consumers’ choices — based on criteria including marketing investments, familiarity, loyalty, staff satisfaction and corporate reputation. Ferrari topped this ranking with a Brand Strength Index — or BSI — score of 94.1 out of 100.
The company, which last year established a manufacturing agreement with the Giorgio Armani Group to help push its collections into a more premium space, has banked on merchandise for years to support brand awareness and diversify its revenue streams. But it is now taking steps to preserve the exclusivity of the brand, as Ferrari forecast to reduce its current licensing agreements and cut 30 percent of product categories.
“The embodiment of luxury, Ferrari continues to be admired and desired around the world, and its outstanding brand strength reflects this,” said Haigh. “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.”
Rolex, Gucci and Louis Vuitton followed Ferrari in the top 10 strongest brands ranking, which also included Lancôme, Estée Lauder, Hermès, Moncler, SK-II and Bottega Veneta.
Both Brand Finance’s rankings showed Italian and French labels’ leadership in the luxury arena. Italian companies performed better than French ones in terms of quantity and brand strength, but weren’t up to the trans-Alpine labels for brand value and growth.
In particular, out of the top 50 companies, the ranking showcased 15 Italian brands and 12 French firms, with the former registering an average BSI score of 80 out of 100. But French players totaled an average of $7 billion in brand value, while Italians had $3.4 billion.
In addition to Valentino and Maserati, the Italian firms reporting brand value losses included Dolce & Gabbana and Salvatore Ferragamo, down 20.8 and 13.2 percent, respectively.
Bottega Veneta, which was included in the strongest brands ranking, registered a 20.2 percent brand value loss, due to factors unrelated to brand awareness and reputation, according to the study.
Looking beyond the luxury and premium sector, Brand Finance forecasts the value of the 500 most valuable brands in the world to fall by an estimated $400 billion because of the pandemic, with the aviation sector being the most affected. In comparison, the 2003 SARS outbreak cost the global economy an estimated $50 billion.
“However it is not all doom and gloom. Some brands will fare better under COVID-19: Amazon, Netflix, WhatsApp, Skype, BBC and BUPA [health care company] are all booming,” concluded David Haigh, Brand Finance’s chief executive officer.