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FT-Apr17-eMag 5 FOOD BRANDS EXPERIENCE CHALLENGING YEAR An up-and-down market and the impact of health concerns on food choices made 2016 a difficult year for the world’s major food brands, the Brand Finance Food & Beverage 2017 report says. The world’s top four food brands have lost brand value over the past year, with those involved in significant confectionary lines having the most difficulties as concerns around health eat into revenues. Kraft, Hershey’s, Mars and Nestle lost 4%, 10%, 14% and 17% respectively of their brand values in 2016, and the trend appears to be global as Chinese snack food manufacturers Want Want and Master Kong dropped significantly as well. Kellogg’s brand value dropped 3% in the face of demand for cereal faltering as consumers explore a wider variety of breakfast options. Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies, resulting in brand portfolio values of the FMCG corporate giants. It says the dairy segment has held up better than the food sector as a whole in the past 12 months, with the year’s fastest growing food brand being Australia’s largest dairy brand Devondale. “Its brand value is up 35% year-on-year to US$1.5 billion,” Brand Finance chief executive David Haigh says. “Devondale’s growth is the result of changing consumer tastes and growing demand in South East Asia. Asia’s growing taste for dairy bodes well for (major Chinese producer) Yili. “It is barely known in the West, but thanks to marketing initiatives such as sponsorship of China’s Olympic team, it scores very highly on brand equity measures such as consideration, familiarity and recommendation in China, its domestic market. Yili is now the world’s second most valuable (and the strongest) dairy brand.” Who’s on Top? Nestle is the world’s most valuable food brand, even though its value has fallen 17% year-on-year to US$19.4 billion. Brand strength is also down, leading to a downgrade to AAA-, after the company was hit by the pervasive trend for healthier, more natural food, leading to lower demand for sugary products. “Chinese consumers are equally concerned with childhood obesity,” Haigh says. “The trend is not universal however, with Cadbury and Fererro both growing by 24%.” Haigh says dairy is the most significant sub-sector in terms of brand value, accounting for six of the top 20 multi-category giants. Dairy is struggling with constraints in supply, a stagnation of demand in western markets and a new diversity of value drivers beyond the traditional factors of price and taste. “Increasing numbers of consumers are now acutely conscious of production safety, nutritional content and corporate social responsibility,” Haigh says. “In this challenging environment, Danone – the world’s most valuable dairy brand – has seen brand value decline marginally to US$7.9 billion. Profit forecasts are down and the firm is aiming to cut one billion Euro of costs by 2020.” Yili is in second place, and is the world’s strongest dairy brand. “The strength of Yili’s brand is broadbased,” Haigh says. “It scores highly on wellknown brand equity measures such as consideration, familiarity and recommendation, but scores for brand inputs are particularly high.” Asia Pacific is predicted to account for 63% of dairy growth in volume terms between 2016 and 2021, so Yili has significant scope for brand and business value growth. Wilmar, the Singapore-listed ingredient and oil producer, is the only non-Western brand on the league table of the most valuable food brand portfolios, and Haigh says it aims to control its entire value chain from plantation through harvesting to refining and even shipping. “This has enabled it to efficiently and reliably deliver to customers and build strong relationships. Its brand is highly vulnerable to criticisms over the sustainability of its operations, however – having been accused of labour abuses, land-grabs of indigenous territory and deforestation in Indonesia.” Unilever’s total portfolio value of $US42.9 billion is more than double that of KraftHeinz, which recently attempted a surprise takeover of the Anglo-Dutch company. Dozens of its brands such as Marmite, Colmans and PG Tips have achieved ‘national treasure’ status in the UK and beyond, Haigh says. “The bid appears to confirm the vulnerability of British firms to takeover by foreign counterparts emboldened by the fall in the value of the pound following the Brexit vote.” N E W S

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