Supermarkets' brand value took a £3bn knock in 2012

The brand value of the major UK supermarkets took a £3bn tumble in 2012, with only Sainsbury’s bucking the trend and increasing in value, a study has found.

Research by Brand Finance on the value of the top 50 brands of British origin found that The Co-op, Tesco, Morrisons and Asda lost a combined total of over £3bn in ‘brand value’ in the 12 months to 31 December 2012. Tesco accounts for nearly half of this fall with the study outlining the retailer’s troubled foray into the US market as the principle cause.

“The failure and subsequent halting of ‘Fresh & Easy’ stores in the US has stunted Tesco’s growth; meanwhile the lack of investment in UK stores due to foreign distractions has caused tired interiors and lack of differentiation from competitors. Five years ago Tesco were able to attract all classes through superior product offerings at all price levels, but increasing signs of confused positioning has seen them struggle,” said CEO of Brand Finance David Haigh.

“The failure and subsequent halting of ‘Fresh & Easy’ stores in the US has stunted Tesco’s growth”

David Haigh, Brand Finance

According to the study Sainsbury’s brand value increased by 3% to £3.9bn during 2012.

“For Sainsbury’s, 2012 was a year like no other. Not only did we sponsor several key Diamond Jubilee events, our brand value rose following our landmark sponsorship of the Paralympic Games. No other brand had previously taken the opportunity to sponsor the Paralympic Games solely, and this had an extremely positive impact on how Sainsbury’s is viewed by our customers,” said Sainsbury’s head of sponsorship, Mark Given.

The study values a brand by gauging the cost that a third party would have to pay to license the use of that brand. This cost is calculated by benchmarking the strength, risk and future potential of a brand relative to its competitors. It also takes into account financial metrics such as net margins, average revenue per customer, marketing and advertising spend, as well as qualitative measures such as brand affection and loyalty. This is then applied to revenue figures to determine a brand’s value.

This means that it may be possible for a fairly weak brand with large revenues to have significant brand value while an extremely strong brand – because it caters to a niche market – may not.