Brand stability in a tumultuous environment

Ruchi Gunewardene and Aliakber Alihussain review the year’s band valuation results

As countries across the world find themselves under major stress, first managing the ebb and flow of COVID-19 and now the fallout from the global economic crisis that the Ukraine-Russia conflict is causing, businesses are compelled to adapt through what is becoming a tumultuous decade.

Sri Lanka in particular is sitting on an economic precipice, which has put businesses under severe pressure. Businesses that have built reputation and recognition through their brands are however, in a better place to weather the storm. This is because customers are seeking assurances and stability in their everyday brand purchases or business relationships, rather than experimenting with the unknown.

 

It is in this context that we are reviewing the results of this year’s most valuable brands.

adapting to changing times The Brand Finance Most Valuable Brands Index is evolving with the times to reflect external changes in the business environment. Several factors impact the brands featured in our table.

The increasing importance of the Colombo Stock Exchange (CSE) in the midst of volatile economic conditions should be noted with investors backing financially sound stocks. This makes managing the brands these companies own much more important.

The CSE has also attracted many new listings over the last year or so, which has provided a fresh set of customer facing businesses in the index.

One such brand is Prime Residencies. We also see the emergence of the first e-commerce brand with Kapruka. Although it is listed towards the bottom of the index, Kapruka has the potential to move up the table, due to the rapid adoption of e-commerce in Sri Lanka.

This year, we have introduced an important new sector – viz. investment banks. They play an important role in economic activity, which is captured in the index for the first time.

These changes on the Brand Finance Most Valuable Brands Index ensure that it is constantly adapting to reflect the Sri Lankan brand landscape, and staying in touch with changing markets and customer trends.

Top-line results Despite the severe economic constraints the country is operating within, there’s been a marginal increase in brand value of one percent. This reflects the resilience of the featured businesses and their performance in very difficult circumstances.

However, this reflects a decline in brand value growth from the previous year (2.6%), which is alarming. Although the country has come through the worst of the pandemic, it now faces multiple macroeconomic issues due to the foreign currency crunch – even before accounting for the impact of the Ukraine-Russia conflict.

Once again, Dialog (with a brand value of Rs. 54 billion) is the most valuable brand in these tumultuous times. Despite the economic challenges, the telecom industry was one of the early winners during the pandemic. Customer reliance on data, voice and other digital services to remain connected has enabled Dialog to sustain its financial performance during the year.

Despite a technology brand being at the top, the banking brands continue to dominate the Sri Lanka 100 index. They account for 44 percent of the total brand value compared to other sectors.

Strong and weak sectors Building materials saw phenomenal growth in brand value (by 23%) and emerge as the fastest growing sector in 2022. Import restrictions of nonessential items – including building materials – and favourable interest rates on housing loans combined to drive steady demand for these brands in the domestic market.

Brands that responded swiftly to this increasing demand through timely investments in technology, developing infrastructure and expanding production capacity emerged as winners in this year’s brand valuations.

Tourism related sectors such as hospitality and airlines continue to be among the weakest with decline in brand value compared to pre-pandemic levels. New COVID-19 variants, border and mobility restrictions to control the spread of the virus, and limited international tourist arrivals continue to hinder the financial performance of these brands.

However, as Sri Lanka reopens its borders for international travel along with the steady roll out of vaccines, consumer confidence may recover. But the sector has to continue to adopt health and safety protocols, and reinforce its brand through innovative customer experiences.

winning brands While Dialog retains its place as the most valuable brand in Sri Lanka for the fourth consecutive year, it is closely followed by BOC with a small margin of Rs. 136 million separating the two.

Commercial Bank has moved up in rankings to become the third most valuable brand (its brand value appreciated by 7%), overtaking People’s Bank.

As a leader in mobile telephony services in the country, Dialog has continued to report robust financial performance despite the challenges imposed by the pandemic. The brand’s earlier work on digitalisation has helped cushion its financial performance against the unexpected surge in network traffic, and increasing capacity and coverage needs of customers.

Keells supermarket overtakes Dialog this year in becoming the strongest brand in the top 100 with an ‘AAA’ brand rating. Keells has played a pivotal role in keeping the supply chain going throughout the pandemic. Over the last year, the brand has demonstrated its strength in shifting the retail landscape, expanding its online capabilities to better serve a strong customer base.

Meanwhile, LANKATILES emerges as the fastest growing brand in the top 100 on the back of a 48 percent increase in value. Import restrictions and the brand’s swift response to the changing operating environment – through increased capacity and launch of new designs – has enabled LANKATILES to maximise on this opportunity.

Among the top 10 brands, SLT-Mobitel has recorded the highest value growth of 23 percent. Since the unification of SLT and Mobitel a little over 12 months ago, the brand has benefitted through the impact of greater synergy. Through its unified approach, SLT-Mobitel has leveraged integrated technologies, unlocking access to multiplatform telecom applications and solutions, offering customers a new world of telecommunications and lifestyle impacting experiences.

Banking sector The banking sector continues to play a pivotal role in maintaining a healthy financial system in the country. This year sees an increase in the value of banking brands despite the turbulent economy, as they continue to meet fast-growing consumer demands and have established efficient cost management systems.

The overall brand value of the sector grew by three percent. It now accounts for 44 percent of the Sri Lanka 100 cumulative brand value (including the addition of three new investment banking brands to the table).

For the third consecutive year, NDB claims the title of the fastest growing banking brand with a growth of seven percent. NDB’s continuous efforts to digitise, and net revenue growth underpinned by sound business strategy, have boosted its brand value growth.

BOC retains its position as the most valuable brand within the sector with a marginal increase in brand value.

Commercial Bank’s rise in the rankings is primarily due to being the strongest banking brand with a BSI score of 86.7 and an ‘AAA’ brand rating. The stronger the brand, the higher the potential value it can generate in the future.

The bank’s attempts to differentiate its product offering through a digitally driven banking environment – for example, ComBank Q+, which is the first GR code-based app, coupled with other digital transformation strategies – together with its strong network of branches are a major contributor to its strength.

Supermarkets Indeed, supermarkets continued to thrive during the year with a total brand value growth of nine percent. Keells, Cargills Food City and Arpico Super Centre saw an increase in brand value this year while Sathosa declined.

Keells continues to be ranked as the most valuable supermarket brand with a brand value of Rs. 28 billion. Over the last three years, the brand has doubled its physical presence to more than 120 retail outlets. It has also ramped up its online capability with a fully revamped platform, enabling more diverse offerings and real-time stock availability among other features, to provide a faster and better shopping experience.

Supermarket brands that have been agile in adapting to and utilising technology have enjoyed solid gains despite the pandemic, in both value and strength.

Insurance sector The pandemic has driven insurance brands to accelerate their investment in digitalisation to improve customer experience and personalisation – a change that has been long overdue.

The general insurance sector saw its collective brand value increase by one percent in 2022. Slowing growth prior to COVID-19, combined with the impact of the pandemic and import restrictions on cars, has stifled the value of general insurance brands.

However, as travel restrictions began to ease, vehicles were back on the road, creating the need for people to travel safely by avoiding public transport.

This resulted in a rebound of the motor insurance segment in early 2021.

In addition, the industry also witnessed an increase in other categories such as fire and marine, as businesses and manufacturing reverted to operating at full scale in early 2021, thus helping general insurance businesses to grow their premiums.

Sri Lanka Insurance General has retained its position as the leading general insurance provider with a brand value of Rs. 4.1 billion. It is closely followed by Ceylinco General Insurance with a brand value of 3.6 billion rupees.

Life insurance brands grew at a faster rate with the segment’s total brand value increasing by nine percent in 2022. The life insurance sector has seen notable growth in the last five years, which is reflected in the double-digit value growth across most brands. The sector has shown a promising uptick in premium growth with demand increasing as consumers see the need for critical life protection, following the outbreak of the virus.

Ceylinco Life retains its position as the leading life insurance provider with a brand value of Rs. 3.8 billion, closely followed by Sri Lanka Insurance Life with a value of 3.2 billion rupees.

Janashakthi Insurance is the fastest growing brand in the sector. Growth in financial performance driven by active involvement in innovative insurance solutions has enabled the brand to climb in both value and strength in the Sri Lanka 100 rankings.

Future challenges During times of great uncertainty, building brands that consumers trust is what should drive marketing decision making.

This calls for a long-term view by adopting a brand blueprint or well-defined strategy, and strengthening the brand management process with rigorous systems to track and monitor the impacts of investments, which are hard to come by.

Greater impact with lower budgets is what management needs to work towards.

In these times, it is particularly important to also understand customer sentiment and proactively help make their lives easier. This is in the light of the current situation that customers face with fuel, gas and fertiliser shortages directly impacting the livelihoods of many Sri Lankans.