Global giants to lose $1 trillion in brand value over Covid-19
DUBAI, March 21, 2020
World’s biggest companies are set to lose up to €1 trillion ($1.07 trillion) in brand value as a result of the deadly Coronavirus Covid-19 outbreak, with the aviation sector being the most affected, according to Brand Finance, the world’s leading independent brand valuation consultancy.
The 2003 SARS outbreak, which infected over 8,000 people and killed 774, cost the global economy an estimated $50 billion.
As of March 18, there have been 218,663 cases and 8,943 deaths of Covid-19 confirmed worldwide. Global spread has been rapid, with 146 countries now having reported at least one case.
With a current combined value of €1,163,937 million, all the top 100 European brands are estimated to drop 13% in value following the impact of COVID-19, stated Brand Finance in the latest analysis released on Europe’s top 100 most valuable and strongest brands.
Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect of the outbreak on Enterprise Value, as of March 18, compared to what it was on January 1, 2020.
Based on this impact on Business Value, Brand Finance estimated the likely impact on Brand Value for each sector.
Each sector has been classified into 3 categories based on the severity of Business Value loss observed for the sector in the period from January 1 to March 18.
Assessed as the hardest hit sector are airlines, leisure and tourism, aviation, aerospace and defence. The global airline industry has called for up to €200 billion in emergency support and Boeing called for €60 billion in assistance for aerospace manufacturers.
The International Air Transport Association (IATA) has said most carriers will run out of money within two months as a result of the closure of borders for arrivals as governments order a shutdown to contain the coronavirus outbreak. A large number of major airlines have grounded most of their fleets and announced plans to lay off thousands of staff as they now confront a crisis unlike anything ever seen before in the airline industry.
As per Brand Finance analysis from the start of the year, Airbus had risen by 15% to €13 billion and Safran 7% to €6 billion as rising defence budgets and increasing demands from airlines helped grow their business. Our new analysis suggests that all of this growth will be reversed.
For the third consecutive year, Mercedes-Benz’s brand is the most valuable automobile brand in the world. The German brand has been investing strongly in R&D and has been one step ahead in the anticipation of new trends – particularly electric and autonomous vehicles.
Despite their strength, Mercedes and its parent company Daimler are already being affected by the virus. Daimler has stopped all manufacturing and demand is drying up. If social and economic restrictions are lifted within the next few months, purchases might only be delayed and the long-term impact small but longer-term delays could produce a long-term shock to a sector already challenged by disruption, trade wars and slowing demand in China.
Brand Finance CEO David Haigh said the Covid-19 pandemic was now a major global health threat and its impact on global markets was very real.
"Worldwide, brands across every sector need to brace themselves for the Coronavirus to massively affect their business activities, supply chain and revenues in a way that eclipses the 2003 SARS outbreak. The effects will be felt well into 2021," stated Haigh.
“However It is not all doom and gloom. Some brands will fare better under COVID-19: Amazon, Netflix, WhatsApp, Skype, BBC and BUPA are all booming,” he added.
On January 1, 2020, European brand value growth was slower than in previous years, at 5% (up to €1,135 billion). The trade war last year and worries about the global economy weighed down on growth for the big exporters – particularly cars, which saw slower growth than previous years.
Luxury apparel brands are strong performers in the Europe Top 100 – all of the large luxury apparel brands have risen in value this year, said the report.
Gucci, Louis Vuitton, Lancôme and Chanel all achieved significant brand value growth despite the slowing demand in China and a generally weakening growth last year.
However, the luxury industry, is also classified as high impact, is feeling immediate effects from COVID-19 outbreak, as highest spend on luxury comes from China, where the outbreak began in Wuhan province in December 2019. As the health epidemic takes its toll on the high street and forces shops to shut, the impetus for luxury purchases will be the first to fall.
“The harsh reality is that many brands are not going to make their 2020 targets due to the unprecedented challenges of the Coronavirus outbreak," stated Haigh. "It is hoped that lenders will be forthcoming in offering additional flexibility and liquidity," he added.-TradeArabia News Service
