P1 Does Marketing Matter? January 2009

Brand Valuation: 2015 Results

Comparison of the 2015 League Tables from Interbrand, Eurobrand, Millward Brown & Brand Finance

Analysis by Type 2 Consulting October 2015

P2

Brand Valuation

Four brand consultancies have been publishing annual league tables of the top 100 brands since 2011: Interbrand “100 Best Global Brands” Published in October Eurobrand “Global Top 100 Brand Corporations” Published in September Millward Brown “Top 100 List” Published in May Brand Finance “The World’s 500 Most Valuable Brands” Published in February This presentation compares the results of the 2015 league tables

P3

Methodology

•  The consultancies each employ an “economic use” methodology for estimating the financial value of brands: –  The “earnings split” approach (which calculates the net present

value of the brand-specific earnings of the business) is used by Interbrand, Eurobrand and Millward Brown

–  The “relief from royalty” approach (which calculates the net present value of the notional licensing fee that a company would have to pay for the use of its brand) is used by Brand Finance

•  The methodologies are conceptually robust, but leave room for considerable subjectivity in choosing: –  The proportion of profitability solely attributable to the brand –  The appropriate royalty rate

•  It is this subjectivity – not the different methodologies – that causes the massive inconsistencies in the results

P4

2015 Comparison

The four top 100 lists contain 203 different brands

Only 31 brands are common to all four lists

P5

There is an average difference of 2.2x between the high/low values of the 31 common brands

50% of the time, the consultancies disagree about whether the 28 brands common to the 2014 and

2015 lists increased or decreased in value

P6

INTERBRAND - 10/15 EUROBRAND - 9/15 MILLWARD BROWN - 5/15 BRAND FINANCE - 2/15Apple 170,276 Apple 150,593 Apple 246,992 Apple 128,303 Google 120,314 Google 80,995 Google 173,652 Samsung 81,716 Coca-Cola 78,423 Microsoft 73,258 Microsoft 115,500 Google 78,683 Microsoft 67,670 Coca-Cola 73,173 IBM 93,987 Microsoft 67,060 IBM 65,095 Johnson & Johnson 57,433 VISA 91,962 Verizon Wireless 59,843 Toyota 49,048 China Mobile 53,547 AT&T 89,492 AT&T 58,820 Samsung 45,297 P&G 52,724 Verizon Wireless 86,009 Amazon 56,124 GE 42,267 Verizon Wireless 51,983 Coca-Cola 83,841 GE 48,019 McDonald's 39,809 AT&T 51,770 McDonald's 81,162 China Mobile 47,916 Amazon 37,948 Philip Morris 50,973 Marlboro 80,352 Wal-Mart 46,737 BMW 37,212 IBM 48,080 Tencent 76,572 Coca-Cola 35,797 Mercedes 36,711 Wal-Mart 46,637 Facebook 71,121 IBM 35,428 Disney 36,514 Pepsico 45,462 Alibaba 66,375 Toyota 35,017 Intel 35,415 LVMH 43,812 Amazon 62,292 Wells Fargo 34,925 Cisco 29,854 McDonald's 43,654 China Mobile 59,895 BMW 33,079 Oracle 27,283 AB InBev 39,359 Wells Fargo 59,310 Deutsche Telecom 31,108 Nike 23,070 GE 39,170 GE 59,272 VW 31,025 HP 23,056 Amazon 38,828 UPS 51,798 Shell 30,716 Honda 22,975 Nestle 37,718 Disney 42,962 Disney 30,698 Louis Vuitton 22,250 Intel 33,011 MasterCard 40,188 ICBC 27,479 H&M 22,222 Toyota 31,172 Baidu 40,041 Mercedes 27,328 Gillette 22,218 Disney 31,039 ICBC 38,808 Vodafone 27,287 Facebook 22,029 Wells Fargo 30,520 Vodafone 38,461 HSBC 27,280 Pepsi 19,622 VW 30,064 SAP 38,225 China Construction Bank 26,417 American Express 18,922 Samsung 28,134 American Express 38,093 Citi 26,210 SAP 18,768 Facebook 26,630 Wal-Mart 35,245 Bank of America 25,713 IKEA 16,541 SAB Miller 26,061 Deutsche Telecom 33,834 Intel 25,011 Pampers 15,267 China Construction Bank 25,749 Nike 29,717 Chase 24,819 UPS 14,723 Vodafone 25,544 Starbucks 29,313 The Home Depot 24,471 Zara 14,031 Cisco 25,181 Toyota 28,913 Facebook 24,180

Bold : 10 brands common to all four listsItalics : Unique to one list (NB includes cases where Eurobrand features the corporate brand, and another list one of the product brands)

Common 10 10 10 10Unique 9 8 7 6

Top 30 Brands according to each Consultancy

Eurobrand data originally published in Euros and converted at €1 = $1.10

P7

BRAND INTERBRAND EUROBRAND M BROWN B FINANCE MAX:MINApple 170,276 150,593 246,992 128,303 1.9 Google 120,314 80,995 173,652 78,683 2.2 Microsoft 67,670 73,258 115,500 67,060 1.7 Coca-Cola 78,423 73,173 83,841 35,797 2.3 IBM 65,095 48,080 93,987 35,428 2.7 Amazon 37,948 38,828 62,292 56,124 1.6 GE 42,267 39,170 59,272 48,019 1.5 McDonald's 39,809 43,654 81,162 22,040 3.7 Samsung 45,297 28,134 21,602 81,716 3.8 Facebook 22,029 26,630 71,121 24,180 3.2 Toyota 49,048 31,172 28,913 35,017 1.7 Disney 36,514 31,039 42,962 30,698 1.4 BMW 37,212 20,783 26,349 33,079 1.8 Intel 35,415 33,011 18,385 25,011 1.9 UPS 14,723 22,232 51,798 19,537 3.5 Nike 23,070 18,962 29,717 24,118 1.6 American Express 18,922 16,777 38,093 21,567 2.3 Oracle 27,283 24,124 21,680 22,888 1.3 Cisco 29,854 25,181 16,060 23,217 1.9 HP 23,056 19,562 23,039 18,068 1.3 HSBC 11,656 19,874 24,029 27,280 2.3 Citi 9,784 20,936 17,486 26,210 2.7 Shell 5,530 16,468 18,943 30,716 5.6 Honda 22,975 12,370 13,332 22,424 1.9 IKEA 16,541 12,892 17,025 18,540 1.4 H&M 22,222 13,284 13,827 14,715 1.7 Ford 11,578 17,280 13,106 20,315 1.8 L'Oreal (corp) 10,798 14,871 23,376 12,480 2.2 JPMorgan 13,749 14,736 13,522 11,958 1.2 FedEx 5,130 14,152 19,566 13,672 3.8 Santander 6,097 12,537 12,181 18,700 3.1

TOTAL 1,120,285 1,014,756 1,492,810 1,047,560 2.3

Valuation of the 31 Brands common to the four Lists

Eurobrand data originally published in Euros and converted at €1 = $1.10

P8

BRAND INTERBRAND EUROBRAND M BROWN B FINANCE CONSISTENT?Apple UP UP UP UP YESGoogle UP UP UP UP YESMicrosoft UP UP UP UP YESCoca-Cola DOWN UP UP UP NOIBM DOWN DOWN DOWN DOWN YESAmazon UP UP DOWN UP NOGE DOWN UP UP DOWN NOMcDonald's DOWN DOWN DOWN DOWN YESSamsung DOWN UP DOWN UP NOToyota UP UP DOWN UP NODisney UP UP UP UP YESBMW UP UP UP UP YESIntel UP UP UP UP YESUPS UP UP UP UP YESNike UP UP UP UP YESAmerican Express DOWN UP UP UP NOOracle UP UP UP UP YESCisco DOWN UP UP UP NOHP DOWN UP UP DOWN NOHSBC DOWN UP DOWN UP NOCiti UP UP UP UP YESShell DOWN UP DOWN UP NOHonda UP UP DOWN UP NOIKEA UP UP DOWN UP NOH&M UP UP DOWN UP NOFord UP UP UP UP YESJPMorgan UP UP UP DOWN NOFedEx UP UP UP UP YES

INCREASE 18 26 18 23 YES = 14DECLINE 10 2 10 5 NO = 14

Divergence of Opinion on YoY Change

Facebook, L’Oreal and Santander excluded from the above analysis as they did not feature in the top 100 brands list for all four consultancies in 2014

P9

#1 INTERBRAND EUROBRAND MILLWARD BROWN BRAND FINANCE2015 Apple Apple Apple Apple2014 Apple Apple Google Apple2013 Apple Apple Apple Apple2012 Coca-Cola Apple Apple Apple2011 Coca-Cola Apple Apple Google2010 Coca-Cola Google Wal-Mart2009 Coca-Cola Google Wal-Mart2008 Coca-Cola Google Wal-Mart2007 Coca-Cola Google Coca-Cola2006 Coca-Cola Microsoft2005 Coca-Cola2004 Coca-Cola2003 Coca-Cola2002 Coca-Cola2001 Coca-Cola2000 Coca-Cola1999 Coca-Cola

#2 INTERBRAND EUROBRAND MILLWARD BROWN BRAND FINANCE2015 Google Google Google Samsung2014 Google Google Apple Samsung2013 Google Coca-Cola Google Samsung2012 Apple Coca-Cola IBM Google2011 IBM Coca-Cola Google Microsoft2010 IBM IBM Google2009 IBM Microsoft Coca-Cola2008 IBM GE Coca-Cola2007 Microsoft GE Microsoft2006 Microsoft GE2005 Microsoft2004 Microsoft2003 Microsoft2002 Microsoft2001 Microsoft2000 Microsoft1999 Microsoft

#1 & #2 Ranked Brand in Each Year

P10

Are the Results Converging?

•  The answer is “not obviously”: –  The number of brands appearing in the four top 100 lists in 2015

was 203 (versus 209, 213, 215, and 213 in the previous four years) –  The number of brands common to the four top 100 lists was 31 in

2015 (compared to 29, 28, 27 and 28 in the previous four years) –  The high/low valuations of the same brand each year still differ by

an average multiple of 2.2 –  50% of the time, there was disagreement between the four

consultancies about whether the common brands had increased or decreased in value versus 2014 (for previous years, there was disagreement 38%, 54% and 41% of the time)

–  The top 30 list from each consultancy contains almost as many brands that are unique to that list (an average of 8.5) as they include brands that are common to all four lists (10 in 2015)

P11

What Should We Conclude from this Inconsistency?

•  Brand valuation is in its infancy as a discipline: –  There is no GAAP-equivalent standard for how to measure the strength of a

brand, leaving room for considerable subjectivity in the assumptions included in the various valuation models

–  There is no consensus on the definition of a brand, and therefore no consensus about how to assess the relative importance of communication versus other factors (NPD, distribution weight, customer service and other important determinants of the customer experience)

•  It is a mistake for marketers to view brand valuation as a “silver bullet” for proving the business value of marketing: –  The wide variation in the published valuations undermines the credibility of

brand valuation among business audiences –  Brand valuation involves treating the brand as if it were a standalone asset that

is the sole responsibility of marketing, and this creates a “zero sum” dynamic between marketing and other functions of the business about what is driving the distinctiveness of the customer experience (and this is, after all, what the brand represents)

P12

Conclusions

•  The motives for wanting to ascribe a financial value to brands are generally laudable

•  In practice, we encounter three major hurdles: –  Customers pay for the entire experience not just the “brand” so it

is an artificial exercise to parse apart the purchase decision into its component parts

–  Brands appear to act as magnifiers/accelerators of underlying business value so their value is contextual

–  The accounting profession defines an asset as “a resource controlled by a company as a result of past events or transactions and from which future economic benefits are expected” so only allow for the trademark value (the intellectual property actually “controlled” by the company) to be recognized

•  In general, marketers need to stop seeing brand valuation as a way to demonstrate the value of Marketing, and focus instead on how brands enhance the value of the business

P13

Brand Value as a % of Total Enterprise Value

•  Using the brand data, T2 has calculated the proportion of business value represented by brand for different industries

•  We suggest that marketers use this as a starting point for their discussions about how to enhance business value through effective brand management

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P14

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