Middle East 502017The annual report on the worlds most valuable Middle Eastern brandsApril 2017Brand Finance Middle East 50 April 2017 3.Brand Finance Australia 100 March 2016 2. Global 500 February 2016 Airlines 30 30 February 2015Middle East 50 April 2017Foreword.Foreword 2 Definitions 4Methodology 6Executive Summary 8Full Table (USDm) 15Understand Your Brands Value 16How We Can Help 18Contact Details 19ContentsDavid Haigh, CEO, Brand FinanceWhat is the purpose of a strong brand; to attract customers, to build loyalty, to motivate staff? All true, but for a commercial brand at least, the first answer must always be to make money. Huge investments are made in the design, launch and ongoing promotion of brands. Given their potential financial value, this makes sense. Unfortunately, most organisations fail to go beyond that, missing huge opportunities to effectively make use of what are often their most important assets. Monitoring of brand performance should be the next step, but is often sporadic. Where it does take place it frequently lacks financial rigour and is heavily reliant on qualitative measures poorly understood by non-marketers. As a result, marketing teams struggle to communicate the value of their work and boards then underestimate the significance of their brands to the business. Skeptical finance teams, unconvinced by what they perceive as marketing mumbo jumbo may fail to agree necessary investments. What marketing spend there is can end up poorly directed as marketers are left to operate with insufficient financial guidance or accountability. The end result can be a slow but steady downward spiral of poor communication, wasted resources and a negative impact on the bottom line.Brand Finance bridges the gap between the marketing and financial worlds. Our teams have experience across a wide range of disciplines from market research and visual identity to tax and accounting. We understand the importance of design, advertising and marketing, but we also believe that the ultimate and overriding purpose of brands is to make money. That is why we connect brands to the bottom line. By valuing brands, we provide a mutually intelligible language for marketers and finance teams. Marketers then have the ability to communicate the significance of what they do and boards can use the information to chart a course that maximises profits. Without knowing the precise, financial value of an asset, how can you know if you are maximising your returns? If you are intending to license a brand, how can you know you are getting a fair price? If you are intending to sell, how do you know what the right time is? How do you decide which brands to discontinue, whether to rebrand and how to arrange your brand architecture? Brand Finance has conducted thousands of brand and branded business valuations to help answer these questions.Brand Finances recently conducted share price study revealed the compelling link between strong brands and stock market performance. It was found that investing in the most highly branded companies would lead to a return almost double that of the average for the S&P 500 as a whole. Acknowledging and managing a companys intangible assets taps into the hidden value that lies within it. The following report is a first step to understanding more about brands, how to value them and how to use that information to benefit the business. The team and I look forward to continuing the conversation with you. Brand Finance Middle East 50 April 2017 5.Brand Finance Middle East 50 April 2017 4.DefinitionsDefinitions+ Enterprise Value the value of the entire enterprise, made up of multiple branded businesses+ Branded Business Value the value of a single branded business operating under the subject brand+ Brand Contribution The totaleconomic benefit derived by abusiness from its brand+ Brand Value the value of the trade marks (and relating marketing IP and goodwill attached to it) within the branded businessBranded BusinessBranded EnterpriseE.g.SavolaE.g.PandaE.g.PandaBrand ValueBranded BusinessBranded EnterpriseBrand ContributionE.g.PandaBranded Business ValueA brand should be viewed in the context of the business in which it operates. For this reason Brand Finance always conducts a Branded Business Valuation as part of any brand valuation. Where a company has a purely mono-branded architecture, the business value is the same as the overall company value or enterprise value. In the more usual situation where a company owns multiple brands, business value refers to the value of the assets and revenue stream of the business line attached to that brand specifically. We evaluate the full brand value chain in order to understand the links between marketing investment, brand tracking data, stakeholder behaviour and business value to maximise the returns business owners can obtain from their brands.Brand ContributionThe brand values contained in our league tables are those of the potentially transferable brand asset only, but for marketers and managers alike. An assessment of overall brand contribution to a business provides powerful insights to help optimise performance.Brand Contribution represents the overall uplift in shareholder value that the business derives from owning the brand rather than operating a generic brand. Brands affect a variety of stakeholders, not just customers but also staff, strategic partners, regulators, investors and more, having a significant impact on financial value beyond what can be bought or sold in a transaction.Brand ValueIn the very broadest sense, a brand is the focus for all the expectations and opinions held by customers, staff and other stakeholders about an organisation and its products and services. However, when looking at brands as business assets that can be bought, sold and licensed, a more technical definition is required. Brand Finance helped to craft the internationally recognised standard on Brand Valuation, ISO 10668. That defines a brand as “a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos and designs, or a combination of these, intended to identify goods, services or entities, or a combination of these, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits/value”.Brand Strength Brand Strength is the part of our analysis most directly and easily influenced by those responsible for marketing and brand management. In order to determine the strength of a brand we have developed the Brand Strength Index (BSI). We analyse marketing investment, brand equity (the goodwill accumulated with customers, staff and other stakeholders) and finally the impact of those on business performance. Following this analysis, each brand is assigned a BSI score out of 100, which is fed into the brand value calculation. Based on the score, each brand in the league table is assigned a rating between AAA+ and D in a format similar to a credit rating. AAA+ brands are exceptionally strong and well managed while a failing brand would be assigned a D grade. Effect of a Brand on StakeholdersPotentialCustomersExistingCustomersInfluencerse.g. MediaTradeChannelsStrategicAllies &Suppliers InvestorsDebt providersSalesProductionAll OtherEmployeesMiddleManagersDirectorsBrandBrand Finance Middle East 50 April 2017 7.Brand Finance Middle East 50 April 2017 6.Methodology InputsStakeholderBehaviourPerformanceBrand Equity Value DriversBrand ContributionAudit the impact of brand management and investment on brand equity Run analytics to understand how perceptions link to behaviourLink stakeholder behaviour with key financial value driversModel the impact of behaviour on core financial performance and isolating the value of the brand contribution Brand Audit Trial & Preference Acquisition & RetentionValuation Modelling1 2 3 4Brand Finance Typical Project ApproachBrand Finance calculates the values of the brands in its league tables using the Royalty Relief approach. This approach involves estimating the likely future sales that are attributable to a brand and calculating a royalty rate that would be charged for the use of the brand, i.e. what the owner would have to pay for the use of the brandassuming it were not already owned. Brand strength expressed as a BSI score out of 100.BSI score applied to an appropriate sector royalty rate range.Royalty rate applied to forecast revenues to derive brand values.Post-tax brand revenues are discounted to a net present value (NPV) which equals the brand value.The steps in this process are as follows: 1 Calculate brand strength on a scale of 0 to 100 based on a number of attributes such as emotional connection, financial performance and sustainability, among others. This score is known as the Brand Strength Index, and is calculated using brand data from the BrandAsset® Valuator database, the worlds largest database of brands, which measures brand equity, consideration and emotional imagery attributes to assess brand personality in a category agnostic manner.Strong brandWeak brandBrand strength index(BSI)BrandRoyalty rateBrand revenues Brand valueForecast revenuesBrand investmentBrand equityBrand performance2 Determine the royalty rate range for the respective brand sectors. This is done by reviewing comparable licensing agreements sourced from Brand Finances extensive database of license agreements and other online databases. 3 Calculate royalty rate. The brand strength score is applied to the royalty rate range to arrive at a royalty rate. For example, if the royalty rate range in a brands sector is 1-5% and a brand has a brand strength score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4.2%. 4 Determine brand specific revenues estimating a proportion of parent company revenues attributable to a specific brand. 5 Determine forecast brand specific revenues using a function of historic revenues, equity analyst forecasts and economic growth rates. 6 Apply the royalty rate to the forecast revenues to derive brand revenues. 7 Brand revenues are discounted post tax to a net present value which equals the brand value.League Table Valuation MethodologyHow We Help to Maximise Value6. Build scale through licensing/franchising/partnerships5. Build core business through market expansion4. Build core business through product development3. Portfolio management/rebranding Group companies2. Optimise brand positioning and strength1. Base-case brand and business valuation(using internal data), growth strategyformulation, target-setting, scorecard andtracker set-upEvaluate ongoing performanceCurrent brand and business valueTarget brand and business valueMaximising astrong brandBrand Finance Middle East 50 April 2017 9.Brand Finance Middle East 50 April 2017 8.Emirates has been the most valuable brand in the Middle East ever since Brand Finance initiated its ranking in 2010 and the Dubai-based airline has been top of its industry at a global level for the last five years. However 2017 sees a dramatic shift. Emirates brand value is down 21% to US$6.1 billion. This sees it lose its place at the top of its industry; three US brands (American, United and Delta) have overtaken it. Even more dramatically however, Emirates has lost its place as the Middle Easts most valuable brand to STC. STC grew 11% in value this year to US$6.2 billion. Brand Finance Middle East Managing Director Andrew Campbell comments, “The Riyadh-based giant demonstrates a departure from its once traditional approach; it is embarking down a path of humanisation, re-engaging its many stakeholders with a fresh, personable outlook. A clear indication of its success is the 5-point increase in its brand strength index score, proving that putting some heart into it pays off.” Like STC, Ooredoo has generally tried to employ a mono-brand structure. Since rebranding in its home market of Qatar in 2014, Ooredoo has pursued a successful rebrand strategy across seven other markets, establishing a significant regional brand spanning Africa, the Middle East and South East Asia. This has provided a platform for launching a new network in Myanmar, as well as fully dual branding with large, well-established operator, Indosat in Indonesia. Ooredoos brand value has grown from below $1bn to more than $3bn in four years, propelling it into the top 10. Ooreedoo is now 6th, up from 11th last year. Though STC is top and four of the Middle Easts top ten brands are telecoms companies, telecoms is only the second most valuable sector by brand value, accounting for 28% of the total. Banking makes up the biggest share of total brand value of the Brand Finance Middle Easts 50, comprising 43% of the US$75 billion total. Banking is also the source of the regions fastest growing brand, Middle East 50Executive SummaryRank 2017: 1 2016: 2 BV 2016: $ 6,218m BV 2015: $ 5,613mBrand Rating: AA+Rank 2017: 2 2016: 1 BV 2016: $ 6,082m BV 2015: $ 7,743mBrand Rating: AAARank 2017: 5 2016: 9 BV 2016: $ 3,406m BV 2015: $ 2,186mBrand Rating: AAA-125+11%-21%Rank 2017: 6 2016: 11 BV 2016: $ 3,104m BV 2015: $ 2,104mBrand Rating: AARank 2017: 7 2016: 7 BV 2016: $ 2,593m BV 2015: $ 2,308mBrand Rating: AA-Rank 2017: 8 2016:17 BV 2016: $ 2,497m BV 2015: $ 1,538mBrand Rating: AA+Rank 2017: 9 2016: 10 BV 2016: $ 2,339m BV 2015: $ 2,141mBrand Rating: AA+6789+48%+12%+9%+56%Rank 2017: 3 2016: 3 BV 2016: $ 5,512m BV 2015: $ 3,797mBrand Rating: AA+3Rank 2017: 4 2016: 5 BV 2016: $ 3,826m BV 2015: $ 2,453mBrand Rating: AA+4+56%Rank 2017: 10 2016: 20 BV 2016: $ 2,186m BV 2015: $ 1,232mBrand Rating: AAA-10+77%+45%+62%Dubai Islamic Bank, whose brand value is up 136% on 2016. This growth has been aided by its strength in the Islamic banking sector. Dubai Islamic Bank has the largest brand value contribution from Islamic banking of any bank brand; US$580 million of its US$1.9 billion total brand value. The Middle Easts most valuable bank brands cannot quite match DIBs rate of growth, but have nonetheless put in a strong performance. Qatar National Bank, the Middle Easts most valuable bank brand is up 56%. QNB completed the acquisition of Turkeys Finansbank this year and continues to strengthen its position not just in the Middle East but in Africa and Asia too. Commenting on the results, Yousef Darwish, QNB GM Communications, stated, “We are extremely proud to confirm our dominant position as the leading bank in the Middle East and Africa, and it great to get confirmation from the Brand Finance Brand Finance Middle East 50 April 2017 11.Brand Finance Middle East 50 April 2017 10.Executive Summarydata that our hard work on positioning and building the brand, across the 3 continents and more than 30 countries where we operate, has paid off. It remains a key focus area for QNB Group to