P&G’s Olay tops world’s top 50 cosmetics brands

P&G’s Olay comes out as the most valuable global beauty brand in Brand Finance’s first list of the Top 50 Cosmetics Brands. Some of the others might come as more of a surprise in this valuable industry study.

The beauty sector continues to thrive despite the harsh economic conditions in some markets. Many companies are seeing dramatic increases in growth in China and India, and luxury brands like Christian Dior, Chanel and some of the Estée Lauder brands are doing extremely well in emerging economies, comments Mary-Ellen Field, consultant to Brand Finance.

Independent brand valuation firm Brand Finance has compiled its first list of the top 50 most valuable cosmetic brands in the world. Each brand’s valuation result is calculated by creating a balanced scorecard of financial, risk and brand equity measures (the ‘Brand Strength Analysis’). This analysis is then used to allocate an appropriate proportion of future sales to the brand, calculating a financial value for the brand.

The Brand Strength Analysis provides a rating for the brand’s strength (eg AA-) which is based on a similar concept to credit ratings for public companies.

The brand values are heavily influenced by both profit margins and sales volumes. As a result, brands like Softsoap and Aveeno, while not having high profit margins, do have relatively high sales volumes (over $ 1 b and over $ 2 b respectively) ensuring they are included in the top 50. This means they have a larger brand value than a niche luxury brand that may be perceived as an excellent brand, but only targets a very small consumer base and therefore has low sales volumes.

For example, a brand like Crème de la Mer has a very high price point and would have very high brand equity scores. However, due to the relative size of its sales compared to the brands in the index, it does not feature in Brand Finance’s Cosmetics 50.

“As this is a global league table, popular brands in the US score very highly as many of these brands have sales of over $1bn a year,” says Field. The same is true for some Asian brands, or brands popular there. “Whilst there are lots of fantastic brands in the beauty industry, many of them have very small sales in comparison to the ones on this list,” adds Field.

Another significant factor that affects the brand value is the delivery channel – i.e. whether products are freely available to consumers or restricted to limited, more specialist channels. For example, Matrix, a professional brand owned by L’Oréal, has substantially smaller distribution volumes than other brands within L’Oréal’s portfolio.

“This table provides interested reading for all cosmetic industry professionals, and especially for marketing executives managing the brands,” says Brand Finance analyst Ioannis Lionis. “Our analysis is a point-in-time valuation of the trademarks that each of these companies makes use of.

Since there is extensive licensing of different brands in the cosmetics industry, we have multiple commercial examples on which to base our analysis, leading to a fair, albeit indicative, valuation of those trademarks.”

P&G dominates the masstige sector with its Olay and Gillette brands, though P&G does not rank highly as a brand. For Avon and L’Oréal however the company name is very much the brand.

Global companies are increasingly adapting to meet the demands of newly emerging markets across the globe, with these companies looking to target all ages and cultures. The more they are able to adapt their brands, the greater the potential.

1 Olay: Pride of place

Following humble beginnings in the South African home of chemist Graham Wulff in the 1950s, the Olay brand has become a globally recognised skin care giant, part of P&G’s product portfolio and number one in Brand Finance’s list of top 50 cosmetics brands.

The brand’s classic Oil of Olay Beauty Fluid still forms a cornerstone of the Olay line-up, which today, thanks to a number of diverse product launches now occupies both a top end masstige positioning as well as maintaining its foothold in the mass market.

There are four core ranges: Definity, containing a glucosamine complex that helps reduce the appearance of skin discolouration, age spots and lines and wrinkles; Total Effects, which claims seven anti-ageing effects including brightening, hydrating and evening out skin tone; Complete, a collection of skin enhancing products including tinted moisturisers; and Regenerist, Olay’s answer to ‘younger looking skin without drastic measures’.

New products include SPF30 Flawless Skin Cream, Olay’s highest SPF in a skin care product. In the US, the brand has also launched Pro-X, a range of professionally tested anti-ageing products and electrical beauty items.