IKEA has topped the Brand Finance Sweden 50 league table with a brand value of more than $24bn after impressive growth of 42% year on year.
Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies. A brand’s strength is assessed (based on factors such as marketing investment, familiarity, preference, sustainability and margins) to determine what proportion of a business’s revenue is contributed by the brand. This is projected into perpetuity and discounted to determine the brand’s value.
Lack of pretention
The strength of IKEA’s brand is built on its associations with much of what is best about the Swedish national ‘brand’, namely; style, simplicity, functionality and a lack of pretention. Though customers grumble about the difficulty of assembling flat pack furniture, IKEA’s striking but tasteful designs, reliability and extremely competitive pricing have assured its position. This year’s rapid brand value growth has been supported by a 20% increase in profits last year combined with continuing creative and effective communications.
Advertising and marketing campaigns range from the whimsical, to the practical, and to the meaningful. The ‘IKEA Retail Therapy’ website was ostensibly created to enable customers to find solutions to their everyday problems as easily as possible. The light-hearted initiative saw the official names of IKEA products replaced with common Google searches such as ‘My Partner Snores’ and ‘How To Get Over Someone’.
The page featured a catalogue of the brand’s products with their original names replaced by the internet searches, in this way offering quick solutions to everyone who searched for an answer to their dilemma online. Campaigns with more of a social purpose have been employed too, including the ‘Where Life Happens’ series, intended to provoke discussion on family issues, such as ageing, adolescence, divorce, and adoption.
IKEA is looking to the longer term too. Brand extension is one route to growth; a chain of IKEA restaurants has been mooted to capitalise on the affection and demand for the brand’s in store food offerings such as its famous meatballs. The ‘internet of things’ is claimed to herald a revolution in domestic life. As one of the most iconic domestic lifestyle brands globally, IKEA has not shied away from the challenge, surveying its customers’ attitudes to the idea of embedding smart systems in furniture to help manage homes.
H&M is second, with a brand value of over $19bn, following 24% growth. The clothing giant is also the country’s most powerful brand with a Brand Strength Index (BSI) score of 86. Emerging online competitors are pushing the H&M Group to look for new ways to attract customers. One solution has been to launch new brands such as COS, Monki, Weekday, or the recently announced Arket. Although at the corporate level this may increase revenue and customer acquisition, the decision not to deploy the core brand and focus attention and resources elsewhere could reduce its strength and value in future.
Ericsson has seen its financial problems reflected in the loss of almost half of its brand value in a year. It has dropped from US$9.5 billion to a 10-year low of just over US$5 billion. Despite this decline, the brand remains a key asset for the business constituting 29% of the total Enterprise Value. Restructuring could help to put Ericsson back on a more stable financial footing, so a stabilisation of brand value in 2018 could be expected. Prudently, new CEO Börje Ekholm has promised not cut the R&D budget as part of the restructuring process. Brand investment of this kind is essential even at difficult times to ensure long term growth.
Bank brands continue to feature prominently in the Brand Finance Sweden 50 ranking with four in the top 10; Nordea (3th), Swedbank (7th), Svenska Handelsbanken (8th), and SEB (9th). However, recently unveiled government plans to increase resolution fees (to aid struggling financial firms) could drive this number down if brands such as Nordea make good threats to move out of Sweden.