In a classic David and Goliath situation, popular new digital-first and social media-led labels are disrupting even the world’s biggest beauty brands. This year’s Brand Finance Cosmetics 50, compiled by leading independent brand valuation company and strategy consultancy Brand Finance, demonstrates that there is no such thing as ‘too big to fail’ in the fast-moving beauty environment.
Annie Brown, Consultant,
“Last year, we were talking about polarisation,” says Annie Brown, Consultant at Brand Finance, referring to the way in which brands on the lower rungs of the 2018 top 50 saw their revenues chipped away by challenger brands, while the largest remained relatively unscathed.
In contrast, “this year, it’s been more about the disruption of challenger brands and how we’ve noticed the impact that they can have all the way up to the top”.
“These challenger brands are grabbing attention through their consumer focus and inclusive mindset, which they’re pushing through different digital platforms,” Brown notes.
Understanding the metrics
As part of its brand valuation services, Brand Finance does a public study each year on the world’s most valuable brands, dividing these into different publications by sector and country, with the most famous being its pan-industry global 500.
Companies are ranked by brand value and brand strength; the methodology used is called royalty relief, a hypothetical situation under which Brand Finance works out what the brand owner would have to pay in a fair market transaction in order to licence their brand.
An influencer of brand value is how well-perceived brands are across different stakeholders and this is measured via brand strength. This index score out of 100 shows the strength of a brand benchmarked against its competitors.
“Brand strength is a balanced scorecard of metrics that we think are relevant to assess the strength of that brand,” explains Brown. “It’s split into three sections. The first is brand investment: how much is being invested in the marketing, promotion and distribution of that brand, and the development of its products?”
Brand strength, in turn, is expected to feed brand equity: essentially the current ‘health’ of the brand.
“Finally,” says Brown, “both investment and equity are expected to feed brand performance: how well is that branded business performing? Is it achieving a price premium, a volume premium? Both of these are expected when you have a strong brand.”