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Royal Baby No. 3 is Great News for British Brands

05 September 2017
This article is more than 4 years old.

Brand Finance CEO, David Haigh, comments on the benefits the youngest royal-to-be will bring to British brands and the UK economy as a whole.

“It is a tremendous marketing opportunity for producers and retailers of baby products who can build their promotional campaigns around the good news from Kensington Palace, but the economic impact of the royal children grows with them. Over the years, the youngest Royal Baby will continue to boost the sales of clothes and toys brands they wear or play with. In this sense, they will have a very similar effect on British businesses, as their older siblings and mother, the Duchess of Cambridge, whose Midas touch turns to gold every brand she is seen endorsing, especially in the fashion industry.”

“In addition, the forthcoming birth of the new prince or princess comes with benefits to tourism and Britain’s image abroad, and is already drawing the attention of the world to London. Many visitors who come to the capital for pomp and circumstance hope to see the royal children during their parents’ official engagements. Similarly, when the kids join William and Kate on a visit abroad, like recently in Poland and Germany, they generate incredible interest among the media and the general public.”

In 2015, Brand Finance valued the annual contribution of Princess Charlotte and Prince George to the UK economy at £101 million and £76 million respectively. To estimate what the royal children could bring the UK economy in their lifetimes, assuming they will continue to have the same positive effect as they do today, these contributions were projected into perpetuity and discounted to a net present value of £3.2 billion and £2.4 billion respectively. It is to be expected that Royal Baby No.3 will have a similar effect on British brands and brand Britain, and boost the total economic benefits delivered by the Monarchy today.

In 2016, Brand Finance calculated the overall contribution of the Royal Family to the UK economy in that year to be £1.1 billion. This value projected into perpetuity and together with the Monarchy’s tangible assets (the Crown Estate, the Duchies, the Crown Jewels) amounted to £58.4 billion.

ENDS

Note to Editors

David Haigh, CEO of Brand Finance, is available for interviews.

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Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Associate Communications Director
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast 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 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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