Get documents about "BEST RUSSIAN BRANDS 2007
Document Sample
BEST RUSSIAN
BRANDS 2007
Ranking by
Brand Value
Interbrand Zintzmeyer&Lux
CONTENTS
Our approach and experience 5
The Best Russian Brands League Table 12
Breakdown by industry and trends 17
Selected brand profiles 20
Top four decliners 26
New entrants 32
Appendices 34
BEST RUSSIAN BRANDS 2007 2
THE BEST RUSSIAN BRANDS 2007
Interbrand Zintzmeyer & Lux in cooperation with Business Week magazine Top Russian valuable brands show robust growth in 2007, with the top 40 brands
presents the third annual ranking of 40 most valuable Russian brands arranged by gaining 23% in value over the last year’s top 40. The share of the leading 10 brands
brand value. We firmly believe that brands are not only intangible substance but are in the top 40 was reduced from 80% to 77%. There are a lot of changes in this
economic assets and must be managed as such. That is what makes our approach rating in comparison with the previous year due to the fact that Russian companies
valuable and informative for those who own and manage brands. Effective brand are becoming more open and B2C client oriented market in Russia is developing
management is based on brand value management. rapidly.
For seven years, Interbrand has been ranking the Best Global Brands in partnership While in previous years the table has been dominated by oil and telecom brands,
with BusinessWeek magazine. Brand values were determined using the method we continue to see growth in sectors like Beverages, Media and Retail. With the
Interbrand pioneered 20 years ago and has since used to value more than 5000 shift of focus onto embracing the consumer, it is encouraging to see more Russian
brands. The same brand valuation methodology has been employed to arrive at the companies acknowledge the need for branding and make significant long-term
top 40 most valuable Russian brands. investments in their brands.
To qualify for the Best Russian Brands league table study, the company to which We hope you enjoy this report and that it provides valuable information in the
they belong must be transparent so there is publicly available marketing and creation, management and measurement of your brands. We would like to
financial data. The brand must be of Russian origin and made to be used in Russia, congratulate the brands that are featured in our 2007 brand league table and wish
regardless of whether it’s owned by Russian or international company. Be you every success in your exciting journey forward.
recognizable outside of its primary customers. Also, the brand must not be a
monopoly, not as itself, nor in its sector of industry. These criteria eliminate Sincerely,
heavyweights such as Gazprom, Alrosa, MGTS as monopoly brands, numerous
brands from tourism and media, since the companies they belong to are not
transparent. Interbrand only ranks the strength of individual brand names, not
portfolios of brands, which is why some master brands of main Russian holdings
are not present. Airlines are not ranked because it’s difficult to separate their
Nicola Stanisch
brands’ impact on sales from factors such as routes and schedules. And this year
Managing Director
Interbrand removed pharmaceutical brands from the ranking, because consumers
Interbrand Zintzmeyer & Lux, Moscow
typically relate to the product, rather than to the corporate brand.
BEST RUSSIAN BRANDS 2007 3
WHY THE RANKING IS IMPORTANT
The Best Russian Brands study provides a brand value that is a top-line measure of It tells you whether you are investing adequately into your brand. Putting an
economic performance driven by the brand, stating what the particular brand is economic value on a brand (overall and by segment) can help make a strong
worth overall and among competitors. Brand value brings to marketing what business case for marketing investments, overall and across a company’s portfolio.
“revenue goals” or “financial hurdle rates” bring to other aspects of the business..
It tells you whether you have a marketing strategy that positions your brand around
The payoff comes when one looks behind the number – a single number only tells the right messages. Your customers make decisions every day between you and
you so much. It’s important to understand what drives brand value: intangible your competitor; analyzing the role of brand in those decisions helps focus your
earnings (the cash flow of a business not associated with tangible assets such as strategy on the attributes that differentiate your brand from others and strengthen
equipment or materials), the role of brand (a measure of how much brand your relationship with your best customers, ensuring future earnings.
influences purchasing decisions) and brand strength (a benchmark of a brand’s
relative risk compared to competitors). It tells you whether you have the right short-term tactics to drive value. By analyzing
the strength of your brand, you can target marketing campaigns to the most
Understanding the drivers of brand value can inform management action, from valuable customers and against your most formidable competitors, driving short-
overall business strategy to specific marketing tactics. It’s an easy-to-understand term sales.
metric to help brand owners determine where they are, where they’re going and
how to get there. It helps to make branding a more important aspect of global There are many insights from this ranking, but the core message is clear: brands
business management. are important assets requiring proactive and consistent investment, management,
and measurement.
BEST RUSSIAN BRANDS 2007 4
OUR APPROACH
AND EXPERIENCE
HOW WE DID IT
Criteria For Consideration Methodology
Using our database of Russian brands, populated with critical information over the The Interbrand method for valuing brands is a proven, straightforward and profound
past 20 years of valuing brand and more than 30 years of consulting with formula that examines brands through the lens of financial strength, importance in
organizations, Interbrand formed an initial consideration set. All were then subject driving consumer selection and the likelihood of ongoing branded revenue. Our
to the following criteria that narrowed candidates significantly: method evaluates brands much like analysts would value any other asset: on the
basis of how much they’re likely to earn in the future. There are three core
- There must be substantial publicly available financial data. components to our proprietary method:
Financial Analysis
- The brand must be Russian origin and made for Russia using independently if it’s
Our approach to valuation starts by forecasting the current and future revenue
owned by Russian company or international company.
specifically attributable to the branded products. The cost of doing business
(operating costs, taxes) and intangibles such as patents and management strength
- The brand must be a market-facing brand.
are subtracted to assess what portion of those earnings is due to the brand. All
financial analysis is based on publicly available company information. Interbrand
- The brand must not be a monopoly brand as in a whole as in its sector of industry.
culls from a range of analysts’ reports to build a consensus estimate for financial
reporting.
- The Economic Value Added (EVA) must be positive.
Role of Brand Analysis
- The brand must not have a purely b2b single audience with no wider public A measure of how the brand influences customer demand at the point of purchase
profile and awareness. is applied to the intangible earnings to arrive at Branded Earnings. For this study,
industry benchmark analysis for the role brand plays in driving customer demand is
These criteria exclude brands such as Gazprom, MGTS, Alrosa, RZD which are derived from Interbrand’s database of more than 5,000 prior valuations conducted
monopoly brands, leading brands in tourism and media which are privately held, or over the course of 20 years. In-market research is used to establish individual brand
some brands from the mining, energy, metal industries as not a market-facing scores against our industry benchmarks.
brand and as having a purely b2b single audience with no wider public profile. Brand Strength Score
This is a benchmark of the brand’s ability to secure ongoing customer demand
(loyalty, re-purchase and retention) and thus sustain future earnings, translating
branded earnings into net present value. This assessment is a structured way of
determining the specific risk to the strength of the brand. We compare the brand
BEST RUSSIAN BRANDS 2007 6
against common factors of brand strength, such as market position, customer
franchise, image and support.
INTERBRAND’S BRAND VALUATION METHOD
THREE SIMPLE INPUTS
1 2 3
Branded Earnings Role of Brand Brand Strength
BEST RUSSIAN BRANDS 2007 7
INTERBRAND’S BRAND VALUATION METHODOLOGY
SIMPLE, PROFOUND & TRANSPARENT
FINANCIAL
BRAND VALUE CALCULATIONS
Forecasted current and future
earnings specifically attributable to
the brand
Role of Brand
Analysis
Branded Revenues
ROLE OF BRAND
A measure of how particular brand Economic Value Added
influences customer’s decision-
making at the moment of purchase Brand Earnings
Year 1 Year 2 Year 3 Year 4 Year 5
BRAND STRENGTH Brand Strength Analysis Brand
= Discount Rate Value
A benchmark of the brand’s ability to
secure on-going customer demand
(loyalty, re-purchase, retention) ILLUSTRATIVE
BEST RUSSIAN BRANDS 2007 8
HISTORY
Interbrand pioneered the development of brand valuation techniques in 1988 for Rank Hovis McDougall (RHM), who was resisting a hostile takeover
bid. The company needed to demonstrate that their value had been severely underestimated and hired Interbrand to quantify the value of RHM’s
portfolio of brands.
• Our approach is the industry standard, endorsed by
Academics – Government bodies
Auditors – High courts
Accountancy firms – Management consultants
Analysts – Stock exchanges
Advertising agencies – Tax authorities
Banks
• Interbrand completed more than 5000 brand valuations
• Valuation services used by more than 400 leading companies
• We’ve conducted brand valuations in all industry sectors
BEST RUSSIAN BRANDS 2007 9
WHY INTERBRAND?
Accepted standard across the industry: Interbrand invented brand valuation Provides a diagnostic tool for on-going measurement: The methodology
almost 20 years ago and has continued to innovate its methodology to allows for not only measurement, but also management of the brand. The
remain the “gold standard” across the industry. We have been recognized various inputs to the model provide insights into the drivers of brand value
by a range of constituencies that include academics (such as Harvard that inform both strategy and tactics that ultimately maximize shareholder
University), accountants (such as Accountants’ Digest), business journalists value. We work with our clients to leverage insights gained from the
(such as BusinessWeek), and even our competitors. analysis to develop on-going brand valuation metrics and tracking tools.
Many of our clients conduct on-going brand valuations (yearly as well as
Measures brand as a financial asset: Our definition of brand value, as the quarterly) and incorporate these measures into their performance
current and future earnings driven by the brand, gives management a management systems.
defensible approach to quantify the value of an intangible asset much like
the valuation of tangible assets. Focused on actionable results: These diagnostic tools and strategic insights
lead to recommended actions. We work with clients to identify both short
Incorporates rigorous analytic techniques: Our brand value methodology is and long-term actions that will protect and grow their brand value based
built on accepted practices in both finance and marketing. In finance we on the various insights gained from the analyses in the brand valuation
apply established principles of Economic Value Added (EVA) and Net model.
Present Value (NPV). In marketing we utilize the latest analytic techniques
such as structural equation modeling (SEM) and choice modeling to Customized to fit specific client needs: Finally, we tailor brand valuation for
quantify brand measures in an objective way. Our consultants stay on top each client based on its specific branding and business needs. Our brand
of the latest industry trends and often pioneer new techniques for the valuation methodology provides a framework in which the various inputs to
industry. the model can be analyzed based on available data and to the level of
granularity most relevant for each client.
BEST RUSSIAN BRANDS 2007 10
WE HAVE LED OVER 5,000 BRAND
VALUATION ASSIGNMENTS
BEST RUSSIAN BRANDS 2007 11
BEST RUSSIAN BRANDS
LEAGUE TABLE
TOP 10 BRANDS
BEST RUSSIAN BRANDS 2007 13
11-20 BRANDS
BEST RUSSIAN BRANDS 2007 14
21-30 BRANDS
BEST RUSSIAN BRANDS 2007 15
31-40 BRANDS
BEST RUSSIAN BRANDS 2007 16
BREAKDOWN
BY INDUSTRY
AND TRENDS
BREAKDOWN BY NUMBER
INDUSTRY BREAKDOWN 2007 2006 2005
ALCOHOLIC BEVERAGES 5 5 6
AUTOMOTIVE 1 1 3
TRENDS
2005-2007 BEVERAGES 5 4 4
CONFECTION RY 3 3 5
BREAK DOWN 2007
ENERGY 0 1 1
FINANCIAL SERVICES (BANKS) 5 7 7
FOOD 3 5 5
FURNITURE 0 0 1
GAS 0 1 1
INSURANCE 2 1 1
MEDIA 2 0 0
METAL 2 0 0
OIL 4 4 1
PERSONAL CARE 0 1 0
RETAIL 2 2 0
STEEL 1 1 1
T BACCO 0 0 1
TELECOM 5 3 3
WHITE GOODS 0 1 0
BEST RUSSIAN BRANDS 2007 18
BREAKDOWN BY BRAND VALUE (in USD millions)
INDUSTRY BREAKDOWN 2007 2006 2005
ALCOHOLIC BEVERAGES 3.173 2.291 2.176
AUTOMOTIVE 138 32 73
TRENDS
2005-2007 BEVERAGES 614 447 459
CONFECTIONERY 525 449 340
BREAK DOWN 2007
ENERGY 0 73 80
FINANCIAL SERVICES (BANKS) 1.376 1.347 2.405
FOOD 631 696 500
FURNITURE 0 0 18
GAS 0 189 186
INSURANCE 321 169 163
MEDIA 517 0 0
METAL 323 0 0
OIL 2.218 2.624 688
PERSONAL CARE 0 41 0
RETAIL 446 337 0
STEEL 334 424 399
TOBACCO 0 0 13
TELECOM 13.795 10.613 10.107
WHITE GOODS 0 43 0
BEST RUSSIAN BRANDS 2007 19
SELECTED
BRAND PROFILES
(SIGNIFICANT GROWTH 06-07)
+24%
The best brand from 2006 Rating also confirmed its status at current TOP 40.
This success is based on the most effective marketing activity of the brand.
Unprecedented loud and successful for the Russian market rebranding
influences the first place in 2006. Then it was the brightest branding project
which attracted all authorities and left another branding projects of 2005
very far behind.
In 2006 Beeline didn’t have visible changes. So at this time the victory of
Beeline is a proof of right direction of branding policy after rebranding
project. Beeline brand has a range of characteristics confirming absolute
success such as bright, aware, client oriented, directed to the target
audience, advanced, contemporary.
Tat the base of success in 2006 were effective advertising campaigns, new
products and good quality of services. The advertising was strongly emotion
oriented, compared to their main competitor - MTS. We also note
successful BTL advertising.
Domination in the points of sales and high quality of advertising allow the
brand to have the biggest share of loyal customers in its industry. It is this
indicator and not a size of client base that becomes most important in the
process of mobile market saturation.
BEST RUSSIAN BRANDS 2007 21
+16%
MTS is the largest mobile operator in Russia and CIS (app. 76 million
subscribers on 09.2007). MTS’ financial position is strong enough and keeps
increasing the number of subscribers. During 2006 the company focused
mostly on low-budget segments - thus the company image (“respectable
operator for respectable people”) was lost.
The most significant event in 2006 was rebranding of Sistema Telecom
holding and MTS was a part of this project. Convergence idea is a unique
and progressive idea at the Russian market. Rebranding was really
necessary for MTS, because their corporate style was outdated. MTS
message was rightly perceived by authorities – this is an announcement
from the position of simplicity, clarity and accessibility.
New corporate style distinguishes MTS from its nearest competitive
environment. Simultaneously there were some troubles with consistent and
clear communication of the new set of brand values that leads to the shift of
attention to the company logotype.
Rebranding did not lead to radical changes in MTS image perception, but
there are positive trends in perception of MTS as a brand, which strives for
self-improvement and evokes interest. As far as the emotional driver is the
key when choosing the operator, the movement towards high brand
emotionality creates additional competitive advantages in future under
condition of effective communication.
BEST RUSSIAN BRANDS 2007 22
+27%
Lukoil is the most international brand founded in Russia. Robust expanding
of the Lukoil brand is the base of its success.
In 2006 Lukoil was very active in the USA retail market. It merged American
retail businesses, branded their gasoline stations that operated under such
brands as Mobil, Texaco and many others.
Besides Lukoil was very active in Finland and other international markets.
In Russia Lukoil continued expanding its network of gasoline stations and
shown the market some new product sub-brands among lubricants. The
launch of these lubricants’ product brands was very successful and got the
Lukoil brand added value.
BEST RUSSIAN BRANDS 2007 23
+23%
Megafon is one of top 3 telecommunication brands in Russia. Because of
very tough competition every one of them tries to be unique in order to sell.
Megafon in 2006 made repositioning not rebranding. It developed and
realized a new brand concept. The basic directions for Megafon was
maximum mobility. The basic idea is of constant moving (“We make the
world move”).
Megafon shifted the key image of white-collar young workers (young
careerist) to the image of yappy on whom future is dependent.
The idea developed in the new design applications. For example two main
colours (green and purple) were changed to the full colour range. Clear
images were changed to images of the world, moving people, life
circulation.
These changes let Megafon rise in the Interbrand Rating by four places.
BEST RUSSIAN BRANDS 2007 24
+40%
Under the strategic re-branding program, Vneshtorgbank and its
subsidiaries with more than 50% participation, which are located in Russia,
other CIS countries, Europe, Asia and Africa, from October, 24, 2006 started
operating under a single VTB brand. Vneshtorgbank`s retail business has
been developing in Russia under VTB 24 brand.
The Development Strategy of the VTB Group focuses on turning it into a
leading national banking group and envisages further development of the
Group as a universal lending institution engaged in all key segments of the
banking market, including corporate banking, SME financing, household
lending and investment banking services.
Vneshtorgbank`s re-branding was an important stage in the Development
Strategy of the Bank aimed at building a powerful international financial VTB
Group. A single brand of the Group was an important tool for ensuring
further business efficiency and bigger share of the VTB Group in the Russian
and international banking markets. It has been enabling the Group to
compete on equal footing with major international banks and to address the
most pressing public and commercial issues, among them: developing key
Russian industries, implementing national top-priority projects, making the
national financial sector stronger and more competitive, attracting bigger
lending and investment to the Russian economy and handling transactions
of Russian companies in foreign markets.
A transition of all the members of the Group to a common brand gave them
undeniable competitive advantages compared to operating under different
brand names. All this influenced high growth of the brand value.
BEST RUSSIAN BRANDS 2007 25
TOP 4 DECLINERS
2007 TOP DECLINERS
-71%
-25%
-14%
-10%
BEST RUSSIAN BRANDS 2007 27
-71%
Slavneft was founded by Russian and Belorussian government in 1994. After
privatization in 2002 Slavneft became a private company.
During the last years Slavneft has been one of the top 10 Russian oil
companies with vertical integrated organization structure including mining,
refinement and sale. Slavneft has had a wide network of gasoline stations
and also manufactured and promoted retail oil products (mobile oil, etc.). So
Slavneft was pretty client oriented brand and took the 5th place in our
previous Brand League Table.
But at the moment Slavneft lost its independent and now only plays a role as
a supplier for the shareholders which are TNK-BP and Gazprom Neft.
Also Slavneft essentially reduced its retail network (gasoline stations) and so
decreased client orientation.
At the moment Slavneft is mainly mining supplier for the global players and
not an independent company.
Eventually the Slavneft brand value lost 71% for the year and in 2007
is $192 m in compare with $637 m in the previous year.
BEST RUSSIAN BRANDS 2007 28
-25%
Historically the world of steel had been one of over capacity and over
production. Long term price decline and price volatility resulted in poor
returns. Boom and bust was very much a feature of the industry.
Today the world of steel is a global industry, both for suppliers and
customers. The industry is modernizing, innovating and investing, with
significant growth in developing economies and a huge demand from China
in particular. There is high demand and high global prices.
The whole industry is re-shaping itself. There is rapid consolidation, with true
global players emerging. The future of steel is less about mining and
products, and much more about sophisticated technology and value add.
Successful players in the future will focus on, and better understand, the
world of the end- customers.
In this rapidly changing world there are winners and losers.
Severstal had and has a clear ambition to grow and become one of the
leading players in the world. Severstal is already on its way to become a
global business. Severstal has made significant acquisitions, they have
restructured the group, and they want to continue to grow. The one thing
that is holding Severstal back is its brand.
There are a lot of problems with brand architecture, with clear brand
platform and brand strategy. Severstal needs a global brand to speak with a
clear voice, to get them noticed and better understood. A powerful brand
that supports a powerful ambition.
BEST RUSSIAN BRANDS 2007 29
-14%
Beer market is that market where the question of having a brand is
obligatory condition of being a player of this market. At the moment beer
product is at first a brand and other qualities such as gustatory senses play
only the second role. Difficulties or weaknesses of beer branding connect
with unwillingness and fear of owners to find new, uncial technology and
manufacture innovation products. Based on only emotional branding it’s very
difficult to strong customer loyalty.
Bochkarev is a nice case as the best case in creating the brand and as an
opposite not good case in managing the brand. At the start of entering the
market when it wasn’t so over saturate the choice of brand value was wider
than now but for Bochkarev there was chosen capacious value named
“traditions”. Positioning and emotion value was successfully realized in such
ad message as “Bochkarev is a real beer”. The brand in consumers mind
became a standard of beer. Almost momentary popularity is a perfect
confirmation of rightly chosen strategy. But later the market has been being
in the process of filling, a lot of European strong brands which actively
promoted its traditionalism and its methods’ compliance with the standards
of the Middle Ages.
This situation influenced reduction of Bochkarev sales. Middle class
preferred the Western traditions as really Russia is not a native land for such
drink as beer. So Bochkarev lost its traditional values and couldn’t find new
values. Communication became not clear and degraded for customers.
Eventually brand started loosing its market positions and value.
BEST RUSSIAN BRANDS 2007 30
-10%
J7 is the oldest juice brand on the Russian market. It was founded in the mid
90s. At that time this brand was one leader on the market.
But times are changing. At the moment there are a lot of new strong
Russian juice brands on the market. And they passed ahead J7 as by
awareness indicators as by sales.
What are the causes? The first of them is the name of the brand. English
pronunciation and Latin spelling for the Russian FMCG brand is not a good
choice. As confirmation we can see that the J7 awareness indicators hasn’t
been changing for a lot of time. They’ve stopped reducing.
The second issue links with inconsistent communication. At first the brand
was positioned as a juice for all family. The next concept was completely
new and named as “J7 is adventure”. J7 sponsored very popular TV project
“The Last Hero”. And now after brand’s renovating J7 has started with new
communication concept “Life is a play”. Eventually the brand doesn’t have
clear perception for customers.
Also there are another causes such as competitors’ activity, lost in
reputation, etc. which influence serious problems in sales.
BEST RUSSIAN BRANDS 2007 31
NEW ENTRANTS
NEW ENTRANTS
Brand Value
Rank 2007 (m) Growth
11 $357 New
14 $301 New
15 $294 New
17 $253 New
18 $248 New
20 $230 New
22 $215 New
29 $138 Re-entry
32 $116 New
33 $110 New
34 $109 New
36 $79 New
40 $70 New BEST RUSSIAN BRANDS 2007 33
APPENDICES
FREQUENTLY ASKED QUESTIONS
What is brand value? How did you take account of the fact that brands are run through
franchisees?
Why value brands?
What is the relationship between the following terms: brand awareness,
How does Interbrand derive the value of brands?
brand equity, brand share and brand value?
What was the basis of the financial assessments?
Do the valuations reflect the underlying state of the economy?
What was the basis for the marketing assessments?
How should one understand the brand value as a % of market
What was Businessweek’s role in the Best Russian Brands ranking? capitalization?
Why are certain brands not on the list? How does brand value rank against ad spending?
Certain strong Russian brands are missing. Were they considered? Is it possible to recognize brand value on a balance sheet?
Within certain large industry sectors there are no brands that appear on the What is Interbrand’s view on brands appearing on balance sheets?
list. Why?
Why is Interbrand an expert in assessing brand value?
What new industries appear on the league table for the first time and why?
Does Interbrand conduct other brand studies?
What are criteria for the Russian brands to be presented in Best Global
What is the difference between the valuations in Best Russian Brands and
Brands ranking?
consulting valuations for clients?
Was there a limit to the number of brands included from any one industry?
Are there any brands that have a sufficient brand value but did not make
the list?
BEST RUSSIAN BRANDS 2007 35
FREQUENTLY ASKED QUESTIONS
What is brand value? How does Interbrand derive the value of brands?
Brand value is the dollar value of a brand, calculated as Net Present Value Our valuation approach is a derivative of the way businesses and financial
(NPV) or today’s value of the earnings the brand is expected to generate in assets are valued. It fits with current corporate finance theory and practice.
the future. Like any other financial value, brand value is at a point in time There are three key elements and they are detailed below:
based on the assumptions and information available at that point in time.
Brand value is calculated according to the most widely accepted and used Financial Forecasting
valuation principles. This makes brand value comparable to business - and
We identify the revenues from products or services that are generated with
all NPV-based asset values.
the brand. From these Branded Revenues we deduct operating costs,
applicable taxes and a charge for the capital employed to derive Intangible
The valuations of brands appearing in the Best Russian Brands (BRB) are
Earnings. Intangible Earnings are the earnings that are generated by all of
calculated in their current use to their current owner. They, therefore, do
the business’s intangibles such as brands, patents, R&D and management
not necessarily represent the potential purchase, extension or licensing
expertise. This is a prudent and conservative approach as it only rewards
value of the brands.
the intangible assets after the tangible assets have received their required
return. The concept of Intangible Earnings is therefore similar to value-
Why value brands?
based management concepts such as economic profit or EVA (Economic
Value Added is Stern Stuart’s branded concept). Based on reports from
The purpose of these valuations is to demonstrate to the business
financial analysts we prepare a forecast of Intangible Earnings for six years.
community that brands are very important business assets and in many
cases the single most valuable company asset. We also aim to show that Role of Branding
branding and marketing are key business issues that have direct
shareholder value impact. Through six years of publishing Best Global Since Intangible Earnings include the returns for all intangibles employed
Brands in Businessweek magazine we have created the world’s most in the business, we need to identify the earnings that are specifically
significant and influential brand and marketing study. In fact, the attributable to the brand. Through our proprietary analytical framework
Businessweek/Interbrand best global brands ranking was the third most called role of branding, we can calculate the percentage of Intangible
sought-after benchmark report by CEOs and CFOs. And in Russia at the Earnings that are entirely generated by the brand. In some businesses (e.g.
third time we are creating the Russian most valuable brands based on the fragrances or packaged goods), the Role of Branding is very high as the
same method as we create Best Global Brands League Table. brand is the predominant driver of the customer purchase decision.
BEST RUSSIAN BRANDS 2007 36
FREQUENTLY ASKED QUESTIONS
However, in other businesses (in particular b2b) the brand is only one and therefore more likely to deliver the expected earnings.
purchase driver amongst many and the Role of Branding is therefore lower.
For example, people are buying Microsoft not only because of the brand The assessment of Brand Strength is a structured way of assessing the
but mostly because the company has an installed base of 80% of the specific risk of the brand. We compare the brand against a notional ideal
market and it would be for most users extremely difficult to switch their and score it against common factors of Brand Strength. The ideal brand is
existing files to a new software platform. In the case of Lukoil people buy virtually ‘risk free’ and would be discounted at a rate almost as low as
not only because of the brand, but also because of the location of the government bonds or a similar risk free investment. The lower the Brand
petrol stations. Strength the further it is from the risk- free investment and so the higher
the discount rate (and therefore the lower the Net Present Value).
For each of the brands (and categories) we have assessed the Role of
Branding. The Role of Branding is derived as a percentage - thus if it is What was the basis of the financial assessments?
50%, we take 50% of the Intangible Earnings as Brand Earnings. If it is
10%, we only take 10% of the Intangible Earnings. Published annual reports were used to examine the revenues, earnings and
balance sheets of the brand- owning companies. Analyst reports and
Brand Strength expert prognosis are used as the basis for identifying the specific brand
revenues and earnings and for forecasting future earnings.
For deriving the net present value of the forecast Brand Earnings, we need
a discount rate that represents the risk profile of these earnings. There are What was the basis for the marketing assessments?
two factors at play: firstly, the time value of money (i.e. $100 today is more
valuable than $100 in five years because one can earn interest on the Unlike other brand value league tables, Interbrand does not rely on a single
money in the meantime); and secondly, the risk that the forecast earnings source of marketing information. Using a single brand study would limit the
will actually materialize. The discount rate represents these factors as it type of information (usually limited to perceptual data) and the type of
provides an asset-specific risk rate. The higher the risk of the future customer (usually general public) that can be considered. Because many
earnings stream, the higher will be the discount rate. leading brands operate in specific customer segments (especially b2b),
only considering the general public can be very restrictive. Instead,
To derive today’s value of a future expected earnings stream it needs to be Interbrand refers to a wide array of primary and secondary sources which
‘discounted’ by a rate that reflects the risk of the earnings actually are applicable to each brand.
materializing and the time for which it is expected. For example, $100 from
the Beeline brand in five years requires a lower discount rate than $100 37
BEST RUSSIAN BRANDS 2007
from the Megafon brand in five years, as the Beeline brand is stronger
FREQUENTLY ASKED QUESTIONS
Moreover, Interbrand utilizes its network of valuation brand experts from Certain strong Russian brands are missing. Were they considered?
offices around the world.
In each case there was a reason why they could not be evaluated based on
What was BusinessWeek’s role in the Best Russian Brands ranking? purely public data.
BusinessWeek did not influence the selection of brands or the RTR - a unique media organization since it’s a government-owned
determination of any of the values. Their role was to publish the study and corporation that is not supposed to generate a profit. There are, however,
to tie the reported performance of brand value to some of the wider issues parts of it which are commercial and which do generate profits but these
affecting these brands. They also provided the specific one-line comments are still the minority of the business. And also the company does not
that appear in the table. Interbrand is not responsible for these and they do produce public financial data.
not necessarily represent our views. BusinessWeek is our global partner in
publishing Best Global Brands ranking. Gazprom - is the biggest Russian company, “the face of modern Russia”
and Russian property today. Obviously Gazprom is a monopoly brand and
Why are certain brands not on the list? cannot be included in the BRB ranking.
This is a frequent question especially from companies who would expect Monopoly character or public available data are the most common causes
that the strong brands are missing. And Interbrand can evaluate these
their brands to be on the list. There are five reasons:
brands as a separate project.
- The brand is not Russian origin.
- The brand has a pure b2b single audience and has no wider public profile Within certain large industry sectors there are no brands that appear on the
and awareness. list. Why?
- The company does not produce public data that enables us to identify the
branded business (the company has multiple brands or has unbranded Airlines - there has clearly been significant investment in airline brands
production). (and many of them are, by definition, global) but they are still operating in
- The brand is not big enough (brand value below $70 million falls below situations where the brand plays only a marginal role. In most cases, the
the 40 brand ranking). customer decides based on price, route, schedule, corporate policy or
- The business is driven by a number of intangible factors and it is difficult frequent flyer points. The brand may often only have a real impact when all
to separate the brand from the rest. these other items are at parity. We have assessed the brand value for
- The brand is a monopoly brand. airlines by using internal data to strip out the impact of these other factors.
BEST RUSSIAN BRANDS 2007 38
FREQUENTLY ASKED QUESTIONS
But from purely public information this is difficult to do reliably. What are criteria for the Russian brands to be presented in Best Global
Brands ranking?
Energy - although there are many large energy brands that are highly
The brands first of all must be global. What does it mean?
valuable, at present none of these brands fulfill our criteria. They are or
monopoly brands or pure b2b single audience oriented. It means that minimum 30% of the branded business needs to be outside
the home country to be considered global. However if the home country of
Pharmaceuticals - there are no pharmaceutical brands in this year’s league the brand is small (e.g. the Netherlands) we required a higher percentage.
table. In the pharmaceutical industry, it is the product brand rather than the For US brands, the overseas sales ratio can be smaller due to the size of
corporate brand with which the consumer builds a relationship. the US market, which is nearly as big as all of Europe. Applying the one-
third overseas sales requirement would penalize US brands for being
What new industries appear on the league table for the first time and why? successful in their domestic market.
We also wanted evidence that the brand was established in a wide number
Media and metal industries appear on the league table 2007.
of markets around the world. At the very least it needed to have a
substantial presence in at least one country in each of the following 4
Two media companies - NTV and RBC - have entered the league table this
regions: North America, Latin America, Europe and Asia-Pacific. It also
year. It connects with our more detail view on before closed media industry.
needed to be managed consistently as a global brand. As an example, Wal-
We studied the strongest brands in this industry and expanded the long
Mart is a valuable brand however it is not consistently branded as Wal-Mart
list. And we hope that media industry will become more open and we’ll see
around the globe. From the Russian brands we see that the best chances
more media brands in our ranking.
to be presented in Global ranking has Lukoil.
Two new brands from metal industry - Nornikel and RUSAL - are presented Was there a limit to the number of brands included from any one industry?
in our current ranking. These brands are b2b brands but has a lot of
No, however, one of the requirements of a leading Russian brand is that it
business activities and are not oriented only one pure segment. So we
is in fact leading. The mark of leadership is not just about market share but
decided to include them in our long list. Nornikel and RUSAL manage
also about behaving as a leader - setting trends, quality standards,
effectively their brands and build strong consistent and successful brands.
authority, etc. Thus, there are brands that are in the top three of their
category’s market share but did not make the cut; and there are brands
that are not top three that did make the ranking. The rules described are
guidelines and ultimately each brand was assessed for inclusion on its own
merits. BEST RUSSIAN BRANDS 2007 39
FREQUENTLY ASKED QUESTIONS
Are there any brands that have a sufficient brand value but did not make are all measures of what a customer thinks or does, it is not an assessment
the list? of the economic value created by those thought or actions.
Do the valuations reflect the underlying state of the economy?
There are certainly strong Russian brands that have a value exceeding $70
million but which did not make the list because they do not meet our Yes - in two ways. The forecasts are prepared with an overall view on
ranking criteria. This would be true of many of the industrial and transport economic growth at a point in time. The formula for converting the Brand
brands, but also surprisingly true of a lot of media, hi-tech (IT&Internet) Strength Score into a discount rate is tied to the underlying government
and leisure brands. bond yield.
How should one understand the brand value as a % of market
How did you take account of the fact that brands are run through
capitalization?
franchisees?
The market capitalization represents the market’s valuation of all the equity
This was an issue with some of the oil retail brands - Lukoil, TNK, Slavneft. of a company. In theory, the market capitalization is the value of all
We based our valuation on the earnings that the brand owner makes from tangible and intangible assets owned by the company less all the debt
the brand and an estimate of the earnings that the franchisees make from owed by the company. The brand value/market capitalization relationship
the brand (what is called a total- system view). as in all other valuations, can be read in a number of ways:
these earnings were then reduced to take account of a return for the use of
- If the brand value percentage of market capitalization is low, it suggests
the tangible and other intangible assets.
that the business is driven by other kinds of assets (tangible and
intangible) and that the brand is relatively unimportant. It could also mean
What is the relationship between the following terms: brand awareness,
that the business is failing to leverage the brand as much as it should be
brand equity, brand share and brand value?
and that investors should be concerned about that.
Brand value is the only measure that looks at the economic benefit of the - If the brand value percentage of market capitalization is high, it suggests
brand to its owner. In other words, it is an end in itself. Brand awareness that the business is driven by the brand and that investors should take care
and brand equity are a means to an end. Brand awareness is simply of how the brand is being managed since this will have a very direct effect
knowledge that a brand exists, thus brand awareness may prompt on shareholder value. It could also mean that the business is under-valued
customers to consider buying a product. Brand equity is a measure of by the market and that they are failing to reflect the true value of all the
customer perceptions of a brand; thus it may give a customer reason to assets of the business of which the brand is one (but only one).
prefer a product over the alternatives. Brand share is simply the market 40
BEST RUSSIAN BRANDS 2007
share achieved by the brand. Thus brand awareness, equity and share
FREQUENTLY ASKED QUESTIONS
The comparison of brand value to market capitalization is mainly useful for Unfortunately the Russian accounting standard RSBU doesn’t let our
mono-branded businesses as the market capitalization relates to all companies recognize brand value on a balance sheet.
company assets. For companies that own and operate under many
different brands such as Nestle a comparison with market capitalization is What is Interbrand’s view on brands appearing on balance sheets?
less useful.
We support the stance of the different accounting standards which
How does brand value rank against ad spending? recognize the value of brands on the balance sheet. Interbrand has been
leading the debate on this issue for many years. However, current
It is not really appropriate to try to correlate these two. Brand value is a accounting standards allow only for the recognition of acquired brands, not
measure of the output from a series of brand investments and initiatives internally developed brands. Also, the impairment test for brands on the
over a long period of time. Advertising is one element in wide spectrum of balance sheet allows only for a potential value reduction but not increase.
communications companies employ. Other communications include The acquisition criterion means that the Gucci brand is recognized on the
sponsorships, online, point of sale, customer service, and so on. In some balance sheet of PPR as an intangible asset while the Louis Vuitton brand
cases brands are built with very little or no advertising as in the case of does not show up on the balance sheet of LVMH.
Pyaterochka where retail space and employees are the key
communications channels. We conclude that the recognition of acquired brands on the balance sheet
is a step in the right direction for providing shareholders with better
Is it possible to recognize brand value on a balance sheet? information about the assets they have invested in. However, it’s still not
sufficient, as the value of internally generated brands cannot be disclosed
Several accounting standards - such as International accounting standards despite making up the vast majority of the most valuable brands around the
(IAS) 36 and 38, US GAAP, UK FRS 10 - allow and/or require the world.
recognition of acquired goodwill, including brands on the balance sheet.
The standards clearly identify brands as intangible assets with an infinite As the need for some formal statement about brand value (and the value of
economic life. This means unlike other intangible assets (e.g. patents, other intangible assets) is becoming increasingly important we would
databases) or goodwill (e.g. training, workforce) brand value does not have advocate some type of statement in the annual report on the intangible
to be amortized through the income statement. However, they are subject business assets including brands. Whether this happens in the traditional
to an annual impairment test and their carrying value needs to be reduced balance sheet or whether it happens in a new ‘Statement of Intangible
if the value declined. The technique is consistent with the way in which Value’ would be a secondary concern. N.B. there is a precedent for this in
Interbrand has assessed brands for balance sheet inclusion - though of the way in which the Cash Flow Statement was developed to complement,
but not replace, the Profit & Loss Account. BEST RUSSIAN BRANDS 2007 41
course using more extensive and proprietary data.
FREQUENTLY ASKED QUESTIONS
Why is Interbrand an expert in assessing brand value? What is the difference between the valuations in Best Russian Brands and
consulting valuations for clients?
In 1988, Interbrand developed and introduced the first valuation of a
portfolio of brands that used a brand-specific valuation approach. Since The valuation methodology is the same, however, the level of detail and the
then we have continuously updated and improved our valuation approach data input significantly differ. The BRB valuations are mostly consolidated
to make it the global industry standard of brand valuation. The Interbrand top-line assessments based on publicly available marketing and financial
brand valuation methodology is the widest endorsed and used valuation data. We recognize segment differences for diversified brands by product
approach around the world. Interbrand alone has valued more than 5,000 or service but not geography or any other classification (e.g. financial
brands in all industries worldwide. services or technology). As the valuations are based on publicly available
data, they are only as reliable as the data that the brand-owning companies
Our valuations have been endorsed by leading academic institutions
publish about themselves (in annual reports, analysts briefings, press
including Harvard, Thunderbird, Columbia, Emory and St. Gallen. Our
articles, syndicated market research etc.).
valuation approach has the highest depth of applications including
strategic brand management, marketing budget allocation, marketing ROI, Consulting valuations are based on detailed customer segmentations, as
portfolio management, brand extensions, M&A, balance sheet recognition, well as in-depth marketing and financial analyses. They have a much higher
licensing, transfer pricing and investor relations. Our valuations have been level of accuracy and granularity. The purpose of a consulting valuation
audited for inclusion on the balance sheet by all leading accounting firms.
goes well beyond assessing financial worth. It identifies and quantifies
Also, many tax authorities and law courts around the world have accepted
value drivers, and helps the company to manage its brand to increase the
our valuation approach.
shareholder value of the underlying business. However, if clients undertake
Does Interbrand conduct other brand studies? consulting valuations we are in a much better position to identify publicly
available data that are likely to align the BRB valuation with the consulting
Since 2000, Interbrand has partnered with BusinessWeek to produce an valuation. In cases where companies make our consulting valuations
annual study of the Best Global Brands, creating the world’s most publicly available, for example through a note in the balance sheet, these
significant and influential brand and marketing survey. PRWeek magazine values will also be published as the BRB ranking value.
conducted a survey of the important rankings to senior executives. Their
survey concluded that the Best Global Brands study is regarded by senior
management as the third-most influential ranking. In addition to the global
study, Interbrand has established national or regional brand value league Thank you.
tables in Switzerland, Fance, Spain, Australia, Singapore, China, Taiwan, BEST RUSSIAN BRANDS 2007 42
Mexico, Canada and Brazil.
ABOUT INTERBRAND
Creating and managing brand value Interbrand has 34 offices in more than 20 countries around the globe and
clients from among the most respected businesses. Moscow office of
The Interbrand Brand Value Management Model TM Interbrand was opened in 2005, March, 24. It provides a whole complex of
branding services - Creating, Managing and Evaluating brands.
Brands do not become and remain successful on their own. Nor are they
ensured ongoing leadership without proactive, diligent and detailed Interbrand is a wholly owned subsidiary of the Omnicom Group, the
management. Interbrand works collaboratively with clients to consistently industry leader in Marketing Communications.
and continually evaluate, create and manage their brand assets. We do this
by employing the following model.
The Brand Value Management model is a closed loop with neither a
specific beginning nor definite end. The model begins at a different point
for every brand, based on business need. However, one aspect does
remain constant: once in progress, the model actually accelerates, by
generating synergies and capturing new opportunities through carefully
crafted and integrated activities. It becomes an inexhaustible source of
energy and competitive advantage for every brand.
Brand Value Management comprises three distinct, yet interrelated,
phases: Evaluate, Create, and Manage - three phases where the brand and
market opportunities are painstakingly examined, creatively brought to life,
and thoroughly and holistically coordinated.
For over 30 years, Interbrand has worked with leading global brands to
create and manage brand value through an integrated set of offerings. We
offer brand and business strategy, brand valuation, quantitative and
qualitative research, retail design, brand architecture and portfolio
optimization, naming, corporate identity design, packaging design,
communications creation and online digital asset management tools. 43
BEST RUSSIAN BRANDS 2007
CONTACT US
General inquiries:
Nicola Stanisch
Managing Director IBZL Moscow
Tel: +7 495 787 4600
nicola.stanisch@interbrand.com.ru
Maxim Parfentchikov
Managing Director IBZL Moscow
Tel: +7 495 787 4600
maxim.perfentchikov@interbrand.com.ru
Media inquiries:
Sergey Sharyukov
Consultant, Project Coordinator, IBZL Moscow
Tel: +7 495 787 4600
Sergey.sharyukov@interbrand.com.ru
Additional information on brands
www.interbrand.ch
www.interbrand.com
www.brandchannel.com
BEST RUSSIAN BRANDS 2007 44
Related docs
