Appetite for buying British rises as brand values fall

© iStock/chrisbrignell

The value of some Britain’s biggest brands have taken a “Brexit beating” that could leave them exposed to potential buyers.

Research by Brand Finance showed that, on average, the UK’s top brands lost 6% of their value last year. Two of the biggest losers in food and drink were Unilever’s ice-cream brand Magnum (down 47%) and Associated British Foods (down 39%). Tate & Lyle’s brand value also fell 15%, whilst ABF’s Ovaltine dropped 7%.

The most valuable food and drink brand – outside the supermarkets – is Diageo’s Johnnie Walker €3.99bn ($4.5bn), followed by Unilever €3.82bn ($4.3bn). Cadbury, the brand owned by Mondelēz, enjoyed the biggest brand value bump (up 24%) compared to 2016’s figures.

Brand Finance has listed the UK’s top 150 brands by value. As well as monetary values, brand strength and the so-called ‘royalty rate’ are also factored in. The fact that 88 of the 140 brands assessed both last year and this have declined in value is a concern for brand owners, the consultants warned.

A number of factors have contributed to the fall, but chief among them is the devaluation of sterling in the wake of the Brexit vote last June, said Brand Finance CEO David Haigh. This has made British food brands “doubly vulnerable”, he told FoodNavigator.

“The fall in the value of the pound presents a real opportunity for brands domiciled in any country with a strong currency, but the experience of the last months demonstrates that the strongest sources of demand are the US and Asia,” he explained.

'FMCG brands doubly vulnerable'

Unilever recently fought off a bid from the Kraft-Heinz in the US, but ABF was unable to bring the Weetabix brand back to the UK after a stronger bid from America’s Post Holdings. The current spate of acquisitions and the prospect of more raises serious questions about the potential impact on investment and employment, Haigh said.

“FMCG firms tend to manage a diverse portfolio of brands rather than investing their resources in their name brand only,” he continued. “There is strength in diversity but the smaller size of the brands puts them within reach of a larger number of potential bidders. In addition, brands play a greater role in the purchasing decision in FMCG when compared against many other industries, making FMCG brands doubly vulnerable.”

In the aftermath of the failed bid from Kraft-Heinz, Unilever’s boss Paul Polman called for “a level playing field” for British companies and changes to the UK Takeover Code. The government has vowed to publish new proposals to better protect the country’s key brands, but these will now be delayed until after next month’s general election. Passing new regulations will take time, however.

KPMG’s latest mergers and acquisitions (M&A) research, published in March, suggested foreign investors would remain “hungry” for British brands. UK firms will also be in a decent position to make acquisitions of their own and 2017 “could well end up being a landmark year for deal-making”.

James Murray, the firm’s global head of consumer M&A, said in some parts of the industry, businesses are looking to move from being strong in one or two geographies to becoming truly global players. At the same time, large conglomerates are “refining and focusing their portfolios”, he added, citing Mondelēz’s sale of Vegemite to Bega Cheese in Australia as an example.

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