Following the introduction of marketing restrictions for tobacco products and repeated calls to extend the legislation to more sectors, Brand Finance has again analyzed the potential impact of such policies on food and beverage brands.
The latest Brand Finance Marketing Restrictions 2021 report, Based on analysis conducted in 2017 and 2019, estimates potential losses for businesses at over US $ 500 billion and seeks to understand popular attitudes towards brands and marketing restrictions using information from a global survey original to consumers.
In the last report, Brand Finance analyzed the potential damage to brands of alcohol, confectionery, salty snacks and sugary drinks that may result from the imposition of marketing restrictions around the world.
The analysis models the impact on business value of the potential reduction in added value that brands bring to the business, known as brand contribution.
The report examines nine of the world’s largest food and beverage branded companies: AB InBev, The Coca-Cola Company, Diageo, Heineken, Mondelēz International, Nestlé, PepsiCo, Pernod Ricard and Treasury Wine Estates, as well as the industry as a whole.
The top nine brand-owned companies could lose a total of US $ 267 billion in enterprise value if marketing restrictions are implemented. On average, the companies in question could each lose nearly a quarter of their enterprise value and more than 50 percent of the brand’s contribution.
Beyond the nine companies analyzed, and extrapolating this to all endangered industries in the world, brands of alcohol, confectionery, salty snacks and sugary drinks could lose $ 521 billion.
“Brands are an integral part of the way the world works. In times of crisis, brands, especially the most valuable and strongest in their categories and markets, become a safe haven for capital, ”said David Haigh, CEO of Brand Finance.
“Well-managed, innovative and trusted brands are what the global economy is turning to when the need arises. Tough marketing restrictions are devastating, not just for brands, but for all stakeholders, from consumers and society to investors and governments. “
Losses for the soft drink giants
Given the importance of the brand in the soft drink industry, imposing plain packaging or other advertising restrictions would cause serious damage.
PepsiCo would lose the most in absolute terms of all the companies studied, with a potential loss of almost US $ 62 billion. Pepsi, PepsiCo’s flagship brand, is estimated to be suffering the most within its portfolio, with $ 23 billion at stake.
However, The Coca-Cola Company’s flagship brand, Coca-Cola, is said to stand at risk of losing US $ 43 billion – far more than bitter rival Pepsi and any other brand in the analysis.
It constitutes the majority of the estimated potential loss of US $ 57 billion for the company.
Global Survey of Attitudes Towards Brands and Marketing Restrictions
Considering the risks to brands associated with marketing restrictions, more than 6,000 people were surveyed in 12 countries around the world. Respondents asked for their views on brands and marketing restrictions.
In addition, 13 marketing directors, who currently or recently supervised brand marketing in leading organizations in the sectors covered by the research, were asked about the contribution of brands to economic and social well-being, as well as on their concerns about marketing restrictions.
Global attitudes towards brands
The general public recognizes the positive impact of brands around the world, both on their daily lives, as well as on societies and economies at large. Over 90 percent of those surveyed agree that brands encourage product quality and improve choice, and almost as many emphasize the role of brands in limiting illicit trade.
At least three-quarters of those surveyed also recognize the positive impact of brands on the economy, labor market, media, environment and supply chains.
“Strong brands support stronger economies which support jobs,” said Jane Reeve, director of communications at Ferrari.
High expectations that brands should be a force for good
Consumers expect brands to be a positive force in society. They don’t want brands that are silent on the causes that concern them and brands are generally expected to do their part to support society.
For example, 79% of respondents expect brands to deliver superior production and product safety standards, 74% expect brands to undertake ethical sourcing and supply chains, and 73 % expect big brands to have better employment practices than small businesses.
“Whether it’s environmental concerns, labor practices, renewable energy… we should leave the world in a better place with our brand, not worse,” said Doug Place, CMO, Nando’s – Africa, Middle East, South Asia.
Little appetite for sweeping marketing restrictions
The general public and CMOs understand that brand benefits can only be delivered if brands can market themselves, from controlling the quality of products to adding value to society.
The survey shows that consumers generally do not look for restrictions on the most frequent marketing channels, regardless of the product category.
In the global sample, less than 10% of consumers believed there should be a ban on TV advertising, billboards, in-store demonstrations or signature packaging – with little variation across product categories. products.
Consumers are in control of brands but will not give up their own interests under the influence of marketing and advertising. Consumers understand that brands are there to help them make informed decisions.
What are the marketing restrictions?
Marketing restrictions are all regulations imposed on legal products regarding the expression of the brand’s identity and communication with its customers.
Marketing restrictions can range from the requirement of health warnings, the introduction of advertising rules, the imposition of targeted taxation, to interference in the visual mark, to plain packaging.
Besides tobacco – where strict restrictions have been put in place in many markets around the world – food and drink brands operating in segments deemed unhealthy are at high risk of being affected by marketing restrictions.
The introduction of strict marketing restrictions, such as restrictions on advertising and plain packaging, undermines a brand’s ability to differentiate itself from others in the market, thereby reducing the value it brings to the business.