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Sponsors Could Lose Up to $100 billion in Brand Value from FIFA Scandals

28 May 2015
This article is more than 6 years old.

VISA, McDonalds, Coca-Cola, Hyundai, Budweiser and Adidas are among the major companies that have set out to build their brands through association with international football, the World Cup and the now embattled organisation that oversees it, FIFA.

For a fee now in the region of $24-$44 million a year, the sponsors have guaranteed exposure to a global audience well in excess of a billion consumers and association with the world’s most loved sporting event.

There has no doubt been a significantly positive effect on their brands over the years. Brand values for the top sponsors currently total nearly $100 billion (Coca-Cola: $35.8 billion, McDonlads: $22 billion, Hyundai motors: $8.6 billion, Kia: $5.2 billion, VISA: $8.5 billion, Gazprom: $7 billion, Adidas: $6.8 billion, Budweiser: $4.3 billion).

These billion dollar valuations refer specifically to the value of brand rather than the business entity, so theoretically all of this value could be lost as it is intangible and contingent upon reputation and continuing consumer goodwill. That goodwill is ebbing away and only a comprehensive overhaul of the governance of the organisation is likely to reverse it.

Accusations of endemic corruption within FIFA are becoming not just widespread but impossible to ignore. The sands are rapidly shifting, making any kind of association with FIFA increasingly risky for a brand’s reputation. Negative headlines now surround not just FIFA itself but the sponsors too. With FIFA apparently deaf to calls for change, activists and social media users are turning their fire on the top tier sponsors, accelerating the reputational risk.

FIFA’s own brand is in the most imminent danger of all, being heavily contingent upon the support of its partners and sponsors. It is down to $2.8 billion, having lost $400 million in the last few days alone as the result of the arrests and subsequent negative attention. Even broadcast revenues could be under threat as the possibility of relocation of World Cups in Russia and Qatar creates significant uncertainty. A boycott of FIFA by national football authorities has even been mooted, which would lead to the collapse of FIFA’s $12 billion franchise.

Brand Finance CEO David Haigh comments, “Sponsors have partnered with FIFA in order to build their brands, not have their reputations tarnished. The kind of activities that are alleged to have been going on could destroy billions of dollars of brand value. A lot depends on what happens in the next few days but without knowing how quickly FIFA are going to clean out the Augean stables, my recommendation to the major sponsors would be to move towards the exit. As for FIFA, if Blatter were to stand down with immediate effect, that go a long way to securing its future and we estimate it would add over half a billion to FIFA’s brand value.”

ENDS

Robert Haigh, Communications Director

T: +44 (0)2073899400 M: +44 (0)7762211167 r.haigh@brandfinance.com

David Haigh, CEO

T: +44 (0)2073899400 M: +44 (0)7885153725 d.haigh@brandfinance.com

Note to Editors

Brand Finance releases the 2015 edition of the Brand Finance Football 50, its annual report on the world’s most valuable football brands (and the brands associated with them) on June 8th. To find out more information in advance, please get in touch.

About Brand Finance

Brand Finance specialises in the management of intellectual property. Its brand valuations help marketers to design their campaigns, boards to evaluate business strategy and investors to assess potential acquisitions thoroughly. It defines a brand as “a marketing-related intangible asset (including a combination of names, terms, logos and designs) intended to identify and create distinctive associations about a product, service or organisation.” Brand value is “the total future economic benefits attributable to a brand.” That is determined by estimating the likely future sales that are attributable to a brand and in turn what a company would have to a pay to use the brand if it did not control it, a process known as the ‘Royalty Relief’ method.

For more information on Brand Finance, our corporate brand valuations and our methodology, please see our Global 500 report.

Media Contacts

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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