Johnnie Walker’s brand value hits US$4.37bn

Johnnie Walker has extended its lead at the top of the BrandFinance Drinks 50 from US$400m to a staggering US$2 billion. The annual study, conducted by brand valuation agency Brand Finance, ranks the World's biggest drinks brands by their brand value. This year Johnnie Walker has seen its brand value increase by a colossal 80% to US$4.37bn.

A glance at Diageo’s annual reports reveals the brand was valued at $1bn when the company was formed in 1997. Over the last 15 years an emphasis on big ideas based on innovation, supported by the now iconic ‘Keep Walking’ advertising campaigns mean Johnnie Walker has marched ahead of international rivals.

The exceptional growth of more exclusive variants such as Blue Label and the newly introduced Double Black, which commands a 20% premium over Black Label, has been a key feature this year while F1 sponsorship and the ‘House of Johnny Walker’ initiative have supported this ‘premiumization’ and boosted visibility in key new markets.

The BrandFinance Drinks 50: The World’s Most Valuable Drinks Brands

Ciroc the Party

The increasing demand for exclusivity continues with Ciroc, which has seen the largest jump in position, rising 16 places to 19th. An 82% increase takes its brand value to US$550 million. Celebrity Sean ‘Diddy’ Combs is the brand’s part owner and spokesperson and has been able to successfully position Ciroc as the ‘celebration’ drink. Case sales were 2.1 million in 2012 compared to only 400,000 four years ago. In terms of both case sales and brand value, Ciroc is now the 2nd largest super premium vodka brand in the World behind Grey Goose.

Rising from the East

Unlike Western economies, emerging markets continue to display significant growth in spirits consumption. This is best exemplified by the performance of Moutai, Wuliangye and LuzhouLaojiao which are three of this year’s fastest risers. In fact, Moutai has become the 2ndmost valuable drinks brand as a result of strong domestic demand. However, the Chinese government’s latest crackdown on corruption and wanton spending, initiated by new premier, Xi Jinping, has seen entertainment budgets slashed. Since 40% of Baijiu sales are reliant on public expenses, this has a significant effect on overall revenues, most acutely in the first quarter of 2013. The challenge for local Chinese brands will be to try and expand their markets beyond China to insulate against evolving legislation changes and the instability wrought by anti-corruption drives at home.

Is Diageo Overpaying for United Spirits?

Another Asian brand to have had a strong year is McDowell’s, which has seen its brand value rise by 34% to US$533mn. Total case sales of McDowell’s variants (rum, whisky and brandy) rose by 12% to 53.4m. Due to its sheer size and growth, the Indian spirits market remains a very attractive proposition to the large multinational producers. It is therefore no surprise that Diageo is following in PernodRicard’s footsteps in acquiring a major Indian drinks company. Diageo is looking to buy United Spirits, which controls nearly 60% of the Indian drinks market, including McDowell’s. If it succeeds, Diageo will be able to leverage United Spirits’ unrivalled distribution network to facilitate further expansion of its global brands, especially Johnnie Walker. Diageo’s CEO Paul Walsh, due to step down in July, has spent the last three years negotiating with his counterpart at United Spirits, Vijay Mallya, and will be eager for the deal to be completed as soon as possible. There is a risk that the desire to secure such a tempting prize and seal his legacy may cause Diageo to overpay for United Spirits.

Champagnes Lose Their Fizz

Moet & Chandon continues to lead the champagne and wines table with a brand value of US$1.26bn, US$361m clear of its nearest rival. However, the champagne brands in the table have been stagnant in the face of declining case sales. This mirrors the global Champagne market which has been struggling due to uncertain economic conditions, especially in France, the key market for Champagne.

Gallo has bucked the trend of the stagnant wine sector and grown its brand value by 14% to US$900m, driven by the launch of variants such as Summer Red and a Merlot Rose. The biggest mover in this sector is Concha y Toro which has seen its brand value increase by 35% to US$663m following the acquisition of the declining Californian winemaker Fetzer Vineyards.

The BrandFinance Champagne & Wine Top 10

Summary

This year’s biggest story is undoubtedly the confirmation of Johnnie Walker as the pre-eminent global drinks brand, whose phenomenal growth has been supported by iconic advertising, innovation and careful segmentation.

A further, crucial factor however has been the demand from Asian drinkers. China’s thirst for spirits has, despite occasional hiccoughs, grown rapidly. Domestic brands have also benefitted from this boom, but huge potential remains. They must not only recapture domestic market share, but increase margins and begin to export themselves.

Brand Finance, CEO David Haigh comments: “Though the Chinese market is exerting an ever increasing influence on the global drinks trade, the BrandFinance Drinks 50 is still dominated by western brands. Chinese brands are still making tentative steps to gain the trust and affection of international consumers, but interest in the country’s language, culture and customs is laying the foundations for their continued success in ‘the Chinese century’.”

4 July 2013 - Felicity Murray