COVID: TOP BRANDS TO LOSE R65BN

The Covid-19 pandemic has dealt a serious blow to local and international brand values. But telecoms operator MTN is holding on to its top spot in SA, despite being squeezed on all sides and hitting headlines for the wrong reasons

ý For the first time, the devastation the Covid19 pandemic is wreaking on brands is laid bare in the latest Brand Finance local rankings. The global agency estimates SA’S top 50 leading brands stand to lose more than R65bn in their value — a drop of 15%.

And looking beyond SA, the value of the 500 most valuable brands in the world, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated R15-trillion as a result of the outbreak. Brand Finance has assessed the impact of Covid-19 based on the effect of the outbreak on enterprise value — a measure of a company’s total value, including market capitalisation and short- and long-term debt as well as any cash on the company’s balance sheet — compared to what it was on January 1 2020.

Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories — limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss) and heavy impact (up to 20% value loss) — based on the level of value loss observed for each sector in the first quarter of 2020.

Notes Brand Finance SA MD Jeremy Sampson: “Now, more than ever, the economy will rely on the strength of home-grown brands to support the nation’s efforts on home soil and abroad to try to pull SA out of the slump that has engulfed the nation for the past decade.”

The agency believes that post-covid the country and the continent still have potential and opportunities for brands. However, it says the next six months will be crucial. With so much uncertainty in the world, and in particular concerns about potential damage to both the populations and economies of emerging countries, Africa will be in for a rough ride before things improve.

Against that backdrop telecoms giant MTN, which has just started rolling out its 5G network, has retained the title of SA’S most valuable brand, despite recording a 2% brand value loss to R49.4bn. Brand Finance says: “Despite being touted as one of SA’S greatest corporate success stories, the brand has been hitting the global headlines recently and has been placed under increased scrutiny following allegations that it paid bribes to militant Islamist groups in Afghanistan. This is not the first time the brand has come under the microscope — it was also fined by the Nigerian government in 2015 — and MTN will, once again, rely on its strong brand and its far-reaching market share to maintain its position as SA’S most valuable brand.”

The report notes that as with all big telecoms companies globally, MTN is being squeezed from all sides as messaging apps such as Whatsapp hit voice and SMS revenue and challenger brands offer comparable data services at below-market rates, leading to fierce price competition and decreasing margins. Covid-19, it says, may be an opportunity for telecoms brands to reverse their fortunes.

Recording a 29% brand value increase to R2.4bn, and simultaneously jumping five spots, Life Healthcare is the fastest-growing brand in the ranking. Brand Finance says the group has successfully turned the tide on its fortunes, after a turbulent couple of years negotiating the fallout from the Competition Commission’s Health Market Inquiry report, where the sector was placed under scrutiny for rising consumer costs and lack of transparency, both of which damaged brand values. On the frontline of the global pandemic in SA, Life Healthcare and fellow hospital group brands Mediclinic (down 15% to R4.9bn) and Netcare (down 50% to R1.6bn) were expected to be among the few brands to benefit as a result of increased demand. This has not been the case, however, with all three brands showing significant loss in revenue as nonessential elective procedures have been cancelled.

In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction and corporate reputation.

Based on these criteria, Vodacom (down 9% to R30.3bn) is the strongest brand in SA, with a brand strength index score of 89.5 out of 100.