Superbrands Sri Lanka ‘Value Based Marketing’ ?· Superbrands Sri Lanka ‘Value Based Marketing…

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  • David Haigh CEOBrand Finance plc

    Superbrands Sri Lanka Value Based Marketing

    20th March 2007

  • Brand Finance plc

    worlds leading independent brand valuation and strategy consultancy

    maximise shareholder valuethrough effective management

    extensive global experience of intangible asset valuation, transaction support, brand management and licensing

    specialists with unique combination of strategy, finance and marketing expertise

    Brand Due Diligence

    Value BasedMarketing

    BrandValuation

  • AustraliaBrazil

    USA

    Canada

    RussiaLondon

    (HQ)

    France

    Holland

    Croatia

    Turkey

    Barcelona

    Madrid India

    Sri Lanka

    Singapore

    Brand Finance: Network

    Hong Kong

    Dubai

    Switzerland

  • Brand Finance: Example Clients

    http://www.holcim.com/CORP/EN/b/IEW/jsp/templates/home.html

  • The Intangible Revolution

    Understanding the hidden 70% of corporate value

  • In the past few decades, there has been a dramatic shift, a transformation, in what economists call the production function of companies the major

    assets that create value and growth. Intangibles are fast becoming substitutes for physical assets.

    The Intangible Revolution

    Baruch Lev - Professor of Accounting and Finance, Stern School of Business, NYU

    Between 1982 and 2003 the ratio of market value to book value of the S&P 500 increased from 1.2 to 4.6.

    S&P 500 - Market to Book multiples (year end 1982 to 2003)

    1.3X1.4X 1.4X

    1.7X1.9X 1.8X 2.0X

    2.4X2.2X

    2.6X2.9X

    3.1X2.9X

    3.5X

    4.1X

    5.1X

    6.0X

    7.3X

    6.1X

    5.1X

    3.8X

    4.6X

    0X

    1X

    2X

    3X

    4X

    5X

    6X

    7X

    8X

    Dec82

    Dec83

    Dec84

    Dec85

    Dec86

    Dec87

    Dec88

    Dec89

    Dec90

    Dec91

    Dec92

    Dec93

    Dec94

    Dec95

    Dec96

    Dec97

    Dec98

    Dec99

    Dec00

    Dec01

    Dec02

    Dec03

  • Global Intangible Assets Tracking Study

    Brand Finance analysis of top 25 stock markets

    >7000 companies

    $30 trillion of market cap

    99% of global market value

    $36 trillion of enterprise value

    62% of global enterprise value is intangible

    Trend from 2001-2005

  • Global sector value split

    0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

    Media

    Pharmaceuticals

    Food

    Retail

    Telecoms

    Oil&Gas

    Banks

    Insurance

    Electricity

    Auto

    Tangible Invested Capital Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value

  • Country value split

    0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

    Switz

    US

    C anada

    F rance

    S A frica

    A us

    Italy

    B elgium

    Japan

    Sing

    H K

    M alaysia

    C hina

    Tangible Invested Capital Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value

  • High: Low Intangible Value Countries

    100%0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

    Switzerland

    India

    US

    Malaysia

    South Korea

    China

    Tangible Invested Capital

    Disclosed Intangible Assets (ex Goodwill)

    Disclosed Goodwill

    Undisclosed Value

    Top Three

    Bottom Three

  • Intangible Asset types

    BrandedBusiness

    Value

    Tangible AssetValue

    IntangibleAssetValue

    Technology Intangibles

    Residual Goodwill

    Customer Intangibles

    Marketing Intangibles

    Contract Intangibles

    Artistic Intangibles

  • The Intangible Revolution

    I can make a whole lot more money skillfully managing

    intangible assets than managing tangible assets

    Warren Buffett, CEO

    http://images.google.co.uk/imgres?imgurl=http://cache.boston.com/bonzai-fba/Original_Photo/2005/03/11/1110550591_2331.jpg&imgrefurl=http://unreasonable.wordpress.com/&h=333&w=245&sz=17&hl=en&start=11&tbnid=yrGAbZNTxxsdlM:&tbnh=119&tbnw=88&prev=/images%3Fq%3Dwarren%2Bbuffet%26gbv%3D2%26ndsp%3D18%26svnum%3D10%26hl%3Den%26sa%3DN

  • P&G acquisition of Gillette

    Intangible Assets

    Tangible Assets

    Technology

    Relationships

    Brands

    Purchase Price Allocation:

    Gillette

    Purchase price 53.4

    $ billion

    Total Intangible Assets 29.7

    Intangible Assets :

    Brands 25.6

    Patents and technology 2.7

    Customer relationships 1.4

    Residual Goodwill 34.9

    Tangible Fixed Assets 4.5

    Working Capital 0.6

    L-t liabilities assumed (16.2)

    Total Goodwill 64.5

    PresenterPresentation Notes P&Gs acquisition of Gillette in October 2005 for $53.4bn, was the largest acquisition ever in the consumer goods sector P&G is US listed and will therefore have reported the acquisition under FAS 141, but as I said, this is very similar to IFRS 3 in most respects. Here we can see Total Goodwill of $64.5 bn, after deducting fixed assets and working capital from the purchase price. Brands are valued at $25.6 bn (40% of total goodwill) Patents and technology at $2.7 bn Customer relationships at $1.4bn Leaving $29.7bn of residual goodwill. Nothing on distribution agreements, customer lists, licensing agreements Despite quite a substantial valuation for brands, we can see that residual goodwill remains very high. The question is what is in that goodwill? Synergies would be included in goodwill but would they really represent $35bn. It begs the question whether the full value of intangible assets is actually being reported in these deals (which is an issue we will come back to shortly).

    http://en.wikipedia.org/wiki/Image:BRAUN_Logo_sw.jpghttp://en.wikipedia.org/wiki/Image:Oral-B.png

  • The Brand Finance Global Top 250

    Tracking the strongest and most valuable brands in the world

  • BF250 top 10 brands by value

    Source: BrandFinance250

  • BF250 top 10 brands by Brand Strength

    Source: BrandFinance250

    Brand Rating

    Number of Brands

    Brands

    AAA+ AAA AAA-

    12 8 17

  • Brand Equity

    Financial

    Staff

    Customers

    Brands affect all business value drivers

    Suppliers

    Affects AudienceBehaviour

    Drives down equity and borrowing costs

    Drives down staff expense andincreases efficiency

    Increased acquisitionrates, volume and values

    Better terms of business, and higher discounts

    Increase in FinancialValue

    Revenues

    Direct Costs

    Overheads

    Cost of Capital

  • FutureValue

    Discounted at cost of capital

    FUTURE CASH FLOWSOVER PLANNING PERIOD

    PERPETUITY

    Value

    Today Time

    Yr.5

    Branded BusinessValue

    Unbranded BusinessValue

    Brands affect all business value drivers

  • Case Study

    Taking the global brand war seriously

  • The sole purpose of brands is to get more people to buy more of your

    product, more often for more money.

    What do brands add?

    Sergio Zyman, former-CMO of

    PresenterPresentation Notes HISTORICALLY MOST COMMENTATORS FOCUS ON IMPACT OF BRAND ON CONSUMERS AND CUSTOMERS

    STRAIGHT FORWARD OPINION FROM SERGIO SYMAN SUMMARISES VIEW THAT BRANDS ARE ENTIRELY ABOUT DEMAND CREATION

    NO DOUBT BRANDS DO AFFECT CONSUMER BEHAVIOUR AN PURCHASING IN A POSITIVE WAY

    TAKE COKE AND PEPSI AS AN EXAMPLE

  • Source: De Chernatony and Knox

    Blind

    Prefer Diet Pepsi 51

    Prefer Diet Coke 44

    Equal / Dont know 5

    Brand attributes drive brand preference

  • Coca Cola

    10 20 30 40 50 60

    Taste

    CompetitorsPepsi-Cola

    10 20 30 40 50 60 Example Only

    Brand attributes drive brand preference

  • Source: De Chernatony and Knox

    Blind

    Prefer Diet Pepsi 51

    Prefer Diet Coke 44

    Equal / Dont know 5

    23

    65

    12

    Named

    Brand attributes drive brand preference

  • Coca Cola

    10 20 30 40 50 60

    Taste

    Distribution

    Price

    Offers

    Design

    CompetitorsPepsi-Cola

    10 20 30 40 50 60

    Promotions

    Packaging

    Advertising

    Example Only

    Brand attributes drive brand preference

  • Pepsico emotional connection with consumers

  • Pepsico emotional connection with consumers

  • $ 2.4 B

    $ 1.5 B

    $ 5.9 B

    $ 5.0 B

    $ 3.6 B

    $ 3.8 B

    $ 2.4 B $ 1.5 B

    $ 1.6 B

    $ 1.6 B

    $ 1.3 B

    $ 1.3 B

    $ 1.1 B

    $ 1.9 B*

    Source: Estimate of 2002 Global Sales at Retail

    $ 14.8 B

    * International only.

    $ 1.0 B

    Sixteen Billion $ Global Brands (2005)

    Pepsico satisfying consumer tastes

  • Pepsi International vs Coke International CSD Growth vs PY

    Source: KO earnings releases, PI analysis

    3.9% 4.1%

    6.4%

    10.7%

    9.7%

    2.4%1.7%

    2.6% 2.3% 2.40%

    2001 2002 2003 2004 2005

    2002-2005 International Volume Growth

    +9% +12% +11% +20%

    Pepsico delivering outstanding growth

  • 5.0

    5.5

    6.0

    6.5

    7.0

    7.5

    8.0

    8.5

    9.0

    Mana

    gemen

    tPr

    oduc

    tsInn

    ovati

    onEm

    ployee

    s

    Socia

    lInv

    estme

    ntSo

    undn

    ess

    Asset

    s

    Overa

    ll

    Coca-Cola PepsiCo

    Corporate Brand Reputation Scores - 2000Source: Fortune - Global Most Admired Companies

  • 5.0

    5.5

    6.0

    6.5

    7.0

    7.5

    8.0

    Mana

    gemen

    tPr

    oduc

    tsInn

    ovati

    onEm

    ployee

    s

    Socia

    lIn

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    ent

    Soun

    dness

    Asset

    s

    Overa

    ll

    Coca-Cola PepsiCo

    Corporate Brand Reputation Scores - 2002Source: Fortune - Global Most Admired Companies

  • Brand effect on investor behaviour

    Pepsi Versus Coca-Cola. PE Ratio

    0

    10

    20

    30

    40

    50

    60

    70

    Jan-

    96

    - - -

    Jan-

    97

    - - -

    Jan-

    98

    - - -

    Jan-

    99

    - - -

    Jan-

    00

    - - -

    Jan-

    01

    - - -

    Jan-

    02

    - - -

    Jan-

    03

    - - -

    Jan-

    04

    - - -

    Jan-

    05

    - - -

    PepsiCoca-Cola

  • Revenues (2004) $21 billion $29 billion(2005) $23 billion $33 billion

    Growth 9% 12%

    Average Market value (2004) $111 billion $87 billion(2005) $95 billion $98 billion

    Growth -17% 11%111234

    162

    Key Value Statistics 2004-2005

  • The Brand Finance Sri Lanka Top 50

    Tracking the strongest and most valuable brands in Sri Lanka

  • The Brand Challenge

  • The Brand

    ChallengeCorporate Individual

    Governmental

  • The Governmental Brand Challenge

    Tourism

    People

    Products / Services

    Investment

    The four dimensions of Nation Branding(Simon Anholt, CEO GMI Index)

  • Governmental branding campaigns in tourism

  • Geographic denomination of origin powerful branding local products

    Consumers are willing to pay more "authentic" and of "high quality"

    Protected name products attract a price premium of up to 20-30%. For example: Champagne, Parma Ham, Feta cheese, Patna Rice, Darjeeling Tea

    Governments are increasingly standing up for their producers

    Ethiopia versus Starbucks

    Governmental branding campaigns in produce

    http://www.wipo.org/sme/en/images/darjeeling_tea.gif

  • Direct support (Grants and Initiatives)

    USA EU China Singapore Malaysia

    Indirect support (Fiscal and Regulatory)

    Switzerland Ireland Singapore Dubai Maldives!

    Government support for brand owners

    Winning the war in a world of free trade

    Competing to be thehome of choice

  • The Brand

    ChallengeCorporate Individual

    Governmental

  • Top 10 Sri Lanka brands by value

    Dialog DCSL Cargills Food City Ceylinco Insurance SLT Singer Nestle Commercial Bank Lion CTC

    The Corporate Brand Challenge

  • The Corporate Brand Challenge

  • Vodafone global brand footprint

  • The Corporate Brand Challenge

  • The Corporate Brand Challenge

  • The Brand

    ChallengeCorporate Individual

    Governmental

  • Brand Equity

    Financial

    Staff

    Customers

    Brands affect all business value drivers

    Suppliers

    Affects AudienceBehaviour

    Drives down equity and borrowing costs

    Drives down staff expense andincreases efficiency

    Increased acquisitionrates, volume and values

    Better terms of business, and higher discounts

    Increase in FinancialValue

    Revenues

    Direct Costs

    Overheads

    Cost of Capital

  • Visual Identity Valuable Proposition

    Cost Centre Revenue Source

    Shareholder ValueImposition

    Shareholder Value Improvement

    From Brand = To Brand =

    The Individual Brand Challenge

  • Contact Details:

    David HaighCEOBrand Finance plc8 Oak LaneTwickenhamTW1 3PA UK

    Tel: +44 208 607 0300Fax: +44 208 607 0301

    d.haigh@brandfinance.com

    Slide Number 1Brand Finance plcBrand Finance: Network Brand Finance: Example ClientsSlide Number 5The Intangible RevolutionGlobal Intangible Assets Tracking StudyGlobal sector value split Country value splitHigh: Low Intangible Value CountriesIntangible Asset typesThe Intangible RevolutionP&G acquisition of GilletteSlide Number 14BF250 top 10 brands by value BF250 top 10 brands by Brand StrengthSlide Number 17Slide Number 18Slide Number 19Slide Number 20Slide Number 21Slide Number 22Slide Number 23Slide Number 24Slide Number 25Slide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31Slide Number 32Slide Number 33Slide Number 34Slide Number 35Slide Number 36Slide Number 37Slide Number 38Slide Number 39Slide Number 40Slide Number 41Slide Number 42Slide Number 43The Corporate Brand ChallengeThe Corporate Brand ChallengeVodafone global brand footprintSlide Number 50Slide Number 51Slide Number 52Slide Number 53The Individual Brand Challenge Slide Number 55

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