Brands Bounce Back, With Some Casualties

Brands Bounce Back, With Some Casualties

Wall Street Journal

September 16, 2010

By Suzanne Vranica

As the economy begins to mend, brands are making a comeback. But a spate of high-profile corporate crises has taken a bite out of the value of some well-known brand names. According to Interbrand's annual list of the top 100 global brands, BP PLC and Toyota Motor Corp. are among those whose brand value tumbled over the past year in the face of public-relations debacles. "It was a significant year for brand-reputation travails, which hurt the value of many brands," said Stephen A. Greyser, a Harvard business-school professor specializing in brand reputation.

Interbrand, a branding firm owned by New York-based ad giant Omnicom Group Inc., has released its rankings since 1999. It says they reflect its assessment of a company's financial condition, using a formula based on net operating profit after tax. The rankings also reflect consumer-polling data on brand preferences compiled by other firms, coupled with the opinions of its own specialists. Interbrand ranks the strength of individual brands, not portfolios of brands, which is why companies like General Motors Co. and Procter & Gamble Co. don't make the list. It uses the annual rankings in part as a tool to attract new clients.

The value of the world's top 100 brands rose by a collective 4% this year to $1.20 trillion, rebounding from a 4.6% decline the previous year amid the harsh economic climate. Coca-Cola Co. retained the No.1 spot it has held for the past 11 years, and International Business Machines Corp., Microsoft Corp., Google Inc. and General Electric Co. rounded out the top five.

Interbrand does consulting work for some of the world's biggest brands, but a spokeswoman said its rankings aren't biased toward clients. "This report is based on public data and equal weighting is given to all brands," she added. None of this year's top-five brands is currently an Interbrand client, but the firm has worked for Microsoft and GE in the past. Out of the 100 brands on the list, Interbrand currently works with 20, but worked for most of them in the past. Many of this year's biggest gainers were technology companies. Internet-search giant Google's brand value rose 36%, according to Interbrand. The firm said Google's strong financial performance played a major role in the outcome, but that Google has also "solidified its brand with consumers by always updating and improving its products." Interbrand said brand value increased 23% at online retailer Amazon.com Inc. and 37% at consumer-electronics maker Apple Inc.

While Google and Amazon spend comparatively little on advertising their brands, Interbrand says the growing role that technology plays in people's lives is buoying their brand value. The biggest decliner in the study was Harley-Davidson Inc., whose brand value sank 24%, falling to No. 98 on the list from No. 73 a year ago. Interbrand said the motorcycle maker's brand value underwent a "rapid decline" as consumer's discretionary spending shriveled during the recession. "Given the financial focus of the Interbrand study these results are to be expected in light of what has gone on in the economy," said a spokesman for Harley-Davidson, which posted a steep loss for 2009 as its revenue plunged. "Based on all the other marketing research that we have, we know that the Harley-Davidson brand is among the strongest globally,"he added.

BP, besieged by bad publicity after the Deepwater Horizon oil spill, fell off Interbrand's top-100 list. The oil company, long considered one of the world's premier brands, had been on the list for nine years, and ranked as the world's 83rd most valuable brand last year.

BP has been aggressive in trying to repair its tarnished image, spending millions on ads that show BP employees vowing to clean up and restore the Gulf Coast. "We do not comment on external benchmarking studies," said a BP spokesman. Interbrand said Toyota's brand value fell 16% this year as the auto maker recalled millions of vehicles for potentially dangerous defects. Seeking to repair the damage, the auto maker, whose ranking slipped to No. 11 from No. 8 the previous year, has been running ads emphasizing its commitment to safety. "While we haven't seen the results of this year's study, Toyota remains the [auto] industry's best-selling retail brand year to date, which reflects our customers' continued confidence in the safety and reliability of our products and their trust in our brand," said Tim Morrison, corporate manager of marketing communications at Toyota Motor Sales USA Inc., in a statement. Interbrand said Toyota's brand is on the mend, but it will take BP's brand more time and effort to recover its reputation in Washington circles. "Consumers have a shorter memory than politicians," and BP's business "hinges on government trust," said Jez Frampton, chief executive of Interbrand.

Goldman Sachs Group Inc.'s brand value grew just 1% this year, Interbrand said, amid image problems stemming from the financial crisis; in the previous year it fell 10%. Goldman Sachs declined to comment. Among brands battered by the financial meltdown last year, Citigroup Inc. has begun to rebound but its brand value still decreased this year by 13%. American Express Co., which lost about 32% of its value last year, slipped 7% this year. American Express declined to comment, while a spokesman for Citigroup said "Citi is now very well positioned to regain both its business momentum and its traditional brand power. Our brand continues to be particularly strong outside the U.S."

In a bid to repair their image, financial companies have begun to reinvest in marketing their brands after cutting back on ad spending during the recession. For many brands, making up lost ground won't be easy. Consumers have been slow to abandon bargain-hunting habits they adopted during the recession, and are reluctant to pay a premium for branded products. While the improving economy has helped rebuild consumer's trust in business, it is far from a full recovery, especially in the U.S., according to an annual survey from New York public-relations firm Edelman. "Consumers are more skeptical since the shock of September 2008," said Richard Edelman, the firm's chief executive. Companies "really have to prove they have changed," and doing that nowadays takes a lot more than just advertising, he said.