Online Extra: Leaders and Laggards in the Brand Derby
Coca-Cola may be a symbol of American indulgence and optimism, but it has proved once again that it's also a powerhouse global brand with a 1% increase in brand value, to $70.5 billion, this year. That performance allowed the soft-drink brand to retain its No. 1 berth in BusinessWeek's annual ranking of the world's most valuable brands, compiled with marketing consultant Interbrand Corp. Remaining at No. 2, with a 2% gain in value, was Microsoft (MSFT ), at $65.2 billion.
At a time that antipathy to America around the globe has deepened, Coke's (KO ) high ranking comes as continuing testimony to the notion that strong brands transcend the vagaries of political controversies and other upheavals. All told, two-thirds of the top 100 brands are U.S.-based, and many, from Gillette (G ) to Starbucks (SBUX ), turned in robust performances, sometimes driven by healthy growth in the same overseas markets where anti-American feeling has run high.
"Brands have an ability to survive these issues if they've built a permanence into the marketplace," says Interbrand Chairman and CEO Chuck Brymer. "These are very significant brands with very significant marketing behind them."
Interbrand's valuations measure the power of a strong brand to raise sales and earnings, calculating how much of those future sales and earnings can be attributed to the brand and weighting that for such other factors as the brand's market leadership, stability, and ability to cross geographical borders. Because the difficult economic environment is lowering projected revenue streams, many top companies' brands weakened this year even though they continued to invest in their products, marketing, and customer service. Four of the top 10 brands, including familiar names like Disney (DIS ) and McDonald's (MCD ), were down.
Others, however, had strong performances. At a time when many people are questioning whether technology has become a mere commodity, four out of the five brands with the biggest percentage gains in brand value are tech outfits. South Korea's Samsung was the standout, scoring a 31% increase, to $10.8 billion, more than double its value just three years ago. That lifted Samsung to the No. 25 spot on our list. As in recent years, the Korean outfit continued to enter new markets, and more important, it keeps climbing the value chain with more sophisticated products and better design.
Other tech brands that scored big gains were Hewlett-Packard (HPQ ), up 18%; German software maker SAP (SAP ), 14%; and PC juggernaut Dell (DELL ), 12%. HP did an effective job of integrating the Compaq operations it acquired, but the Compaq brand -- worth nearly $10 billion last year -- was dropped from the list after being relegated by its new owner to a narrow array of retail products. (The other top-gaining brand was the French cosmetics marque L'Oreal, up 10%.)
The list has more bright spots. Although tough times are forcing some consumers to curb their spending on discretionary items, several luxury-good purveyors managed to keep their products on the must-have list: Mercedes (DCX ), Tiffany (TIF ), Prada, and new additions Hermes and cognac brand Hennessy. That was partly because the truly wealthy people who support some of these brands are unaffected by economic downturns but also because more modestly affluent consumers who traded up to these icons during the 1990s boom are reluctant to trade back down unless they have no choice.
Some steep erosion occurred, too. Once-blue-chip brands like Ford (F ), Kodak (EK ) and Nintendo (NTDOY ) continued to slide, and AT&T (T ) was dropped from the list because its narrower scope no longer meets Interbrand's requirements for a global brand. (By contrast, Vodafone [VOD ] and T-Mobile are well along in their transition to becoming global brands and may well qualify in the coming years, says Jan Lindemann, global managing director at Interbrand.) Reuters (RTRSY ) suffered the sharpest decline, down 28%, as its newly parsimonious Wall Street clients continued to drop their Reuters terminals and defect to Bloomberg.
This year's newcomers included auto maker Nissan (NSANY ) at No. 89, following a dramatic turnaround under CEO Carlos Ghosn, and No. 37-ranked banker HSBC (HBC ), which has dramatically boosted its global profile by buying banks in the U.S., Europe, and developing markets, rebranding them as HSBC, and spending heavily to make that name familiar to people. Its success to date -- it clocks in at $7.6 billion in brand value -- shows that even in today's crowded brandscape, newcomers with something to say can still find room.
By Gerry Khermouch in New York