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Brand valuation and marketing company Brand Finance released its annual study of the top 50 most valuable cosmetics brands. The company calculates brand value using the royalty relief approach. Brand value is essentially the cost that a third party would have to pay to license the use of a brand. Brand strength analysis is used to determine the royalty rate, and brand strength analysis benchmarks the strength, risk and future potential of a brand relative to its competitors. This takes into account financial metrics such as net margins, average revenue per customer, marketing and advertising spend as well as qualitative measures such as brand affection and loyalty. Brands are then awarded a brand rating, a letter grade, similar to a credit rating from AAA+ to D. Having been determined based on the brand strength, the royalty rate is then applied to revenue figures to determine the brand value.
For the 2013 listing, despite a very slight brand value fall, Olay held its dominant position at the top of the BrandFinance Cosmetics 50 table, with a value of $11.7 billion. However, Olay’s lead at the top has shrunk from $4 billion to $3 billion following the growth of L’Oréal. The French giant has continued its progression up the rankings, having moved from fourth to third last year, it is now second. Brand value growth of $952 million, more than any other brand, means its total brand value is now S$8.7 billion.
L’Oréal’s success hinges on shrewd exploitation of its French heritage. France’s nation brand is synonymous with luxury, helping to drive $26 billion worth of luxury goods exports in 2012. L’Oréal has contributed to this trend, targeting emerging markets such as Brazil and China to achieve revenue growth of 12% last year.
L’Oréal is followed in the BrandFinance Cosmetics 50 by Neutrogena, Nivea and Lancôme, which have all recovered well from brand value falls last year. Sixth place Avon is this year’s biggest casualty. Down from second last year, it lost $2.7 billion of brand value this year. The $2.3 billion lost last year means Avon’s brand value is down $5 billion on 2011 and now stands at just $5.2 billion. The particularly dramatic brand value falls suggest low levels of investor confidence following a revenue drop of 5% and a loss of $42.5 million in 2012.
Commenting on the results, Mary-Ellen Field, chairman of Brand Finance Australia, stated, “The global beauty industry continues to do, well, beautifully. With the increasing wealth of women in developing economies we have, not surprisingly, seen the sales of beauty products in these countries growing. Cosmetic halls in department stores throughout the world continue to be exciting places despite growing competition from Internet sales.”
Below is the full, 50-place list from Brand Finance for “The World’s Most Valuable Cosmetic Brands:”