The "2016 Best Global Brands" Ranking Is Out — 9 Things Worth Noting

Apple is first, technology keeps getting more valuable, carmakers are rising across the board, luxury brands are struggling... The only two Chinese brands on the list are Huawei and Lenovo.

No surprise: Apple is once again the world's most valuable brand.

This is the fourth year running that Apple has topped Interbrand's "Best Global Brands" ranking. Coca-Cola lost the top spot in 2013, after holding it for 13 years.

Interbrand is a brand consultancy owned by Omnicom Group. Every year it publishes its ranking of the world's top brands in BusinessWeek, offering a workable way to put a price on that intangible asset, a brand. The list is one of the most influential of its kind.

Compared with BrandZ Top 100, another ranking that also measures brand value, Interbrand leans harder on financial analysis and excludes companies whose international business makes up too small a share of revenue. So the brands here are more global, and the ranking may match your own sense of the business world more closely.

Take Apple and Coca-Cola again. These numbers make the idea of brand value easier to grasp. In Interbrand's 2016 ranking, Apple's brand is worth US$178.1 billion against a market cap of US$619.1 billion (as of October 9) — 28% of the company. Coca-Cola's brand is worth US$73.1 billion against a market cap of US$179.6 billion (as of October 9) — 40%. Coca-Cola, in other words, leans more heavily on its brand. Put an identical cola on the market and strip away the red logo and the classic bottle, and the magic is gone. Apple is different: the moment a product appears that can compete with the iPhone, Apple is in trouble.

For many companies, as for Coca-Cola, the brand is the single most valuable thing they own. It largely decides customer loyalty, the odds of standing out in a product category, and how big a premium you can charge.

Plenty of things shape brand value, and financial results and global reach are really outcomes rather than causes. Put simply, brand value tracks market demand and what people want to buy. So Coca-Cola's falling brand value looks on the surface like a direct result of shrinking revenue, but the deeper reason is this: people used to equate Coca-Cola with happiness, and now they remember the sugar. Apple replaced it for the same kind of reason — smartphones have taken over our lives, and the iPhone is still, for now, the one that leads on innovation.

Interbrand's theme this year is "Anatomy of Growth." Chief Content Officer Paola Norambuena writes in the report: "In 2015 we saw a lot of simplification — from strategy to structure — as successful brands consolidated their businesses to become more agile and focused." Reality was harsher than she makes it sound. Over the past year, many brands on the list faced hard choices: buying new companies, shedding old assets, remaking their image.

The ranking shows what industries and markets went through in the past year. Stretch the timeframe to a decade and the forces that shape brand value stand out even more sharply.

First, Who's in the Top 10

Most of this probably matches the brand presence you felt over the past year. Not much of a surprise.

Apple and Google, the two tech giants, are still near the top. McDonald's, dragged down by a slump across the whole fast-food industry, fell out of the top 10 for the first time. Coca-Cola held third place, but its brand value dropped 7% from last year.

The Value of Technology Is Still Exploding

Set the 2016 top 10 against the 2006 list and the most visible change is that Intel and Nokia are gone, and Apple and Google now hold first and second.

More striking still is how fast tech companies have multiplied and climbed. Five of the top 10 brands are tech: Apple (1st), Google (2nd), Microsoft (4th), IBM (6th), Samsung (7th). Five more tech brands made the Top 100. Tech is also one of the fastest-growing categories on the list — by Interbrand's estimate, its brands are worth US$623.19 billion together, up 8.3% from last year.

Technology's power shows up mostly in how it reshapes, and sometimes wrecks, older industries, and through them, how people live. Interbrand's report calls this change over the past year "the lines are blurring more and more". Big traditional brands now run on IBM's cloud, ship their own apps through the App Store, and buy more ads on Google and Facebook.

Brick-and-mortar industries are slowly adapting to what tech companies have brought, and starting to see it as part of the brand experience — cars and retail, for instance. After years of first ignoring the internet, then fearing it, then hunting for a way to reinvent themselves, plenty of these companies spent the past year talking about the digital experience.

How the Auto Industry Is Evolving to Survive

Car brands nearly took over this year's list, and autos were the other fastest-growing category. Fifteen car brands made the ranking, worth US$256.604 billion together, up 9.5%. Toyota and Mercedes-Benz placed in the top 10, and Nissan, Mercedes-Benz, Porsche, Audi, Ford, Kia, BMW, Land Rover and Hyundai all grew more than 10%.

"That's admirable for an industry that could easily be bogged down by massive infrastructure, complex manufacturing and corporate culture. Even as the pace of change accelerates exponentially, many car brands are working hard to answer what consumers want, take on technological change, and get the world to see cars in a new light," Interbrand director Daniel Binnes says in the report.

Even so, these leading carmakers cannot be entirely comfortable. A recent IBM study found that 86% of respondents worldwide expect to buy or own a car in the next decade, but only 50% of young people will use a car as their main way of getting around. Several forces are slowing the industry's growth and threatening its place as the leader in transport over the next 10 years.

As cities grow, owning a car is neither as appealing nor as necessary. According to the mobility data firm INRIX, the number of Americans who drive is no higher than in 2005, but their total time behind the wheel is 6.9 billion hours more than last year.

Young people would rather use cars than own them. Value, convenience and efficiency now beat prestige, luxury and status. That is why a brand like Tesla joined the list this year: to young people it stands for sustainability and the potential for a breakthrough.

To set themselves apart, carmakers are racing to write new standards. They boast about their innovation and tie their brands to hybrid powertrains, self-driving systems and connected cars. Whether it is Nissan's "Intelligent Mobility," Audi's "Intelligence is the new rock and roll," or Volvo's Intelligent Driver Information System (IDIS), the industry is innovating around turning the car into a smart device. The point is not to make the car the ultimate driving machine, but to make you "the ultimate driver," as BMW's Ian Robertson put it.

For Some Brands on the List, the Crisis Outweighs the Honor

Coca-Cola kept third place. More discouraging is that its brand value fell 7%, steeper than last year's 5%. By Interbrand's math, Coca-Cola peaked at US$81.56 billion in 2014, then slid hard for two straight years to this year's US$73.1 billion.

Over the past year Coca-Cola has worked to put distance between itself and an unhealthy image: reformulating drinks, buying up non-carbonated brands, even trying to unload its bottling plants. For now, it still needs a new way to win young people back.

IBM is worse off. Like Coca-Cola it held its place, sixth, but its brand value fell 19%, the steepest drop of any brand in the Top 100. After climbing from 2000 to a 2013 peak of US$78.81 billion, it has fallen to US$52.5 billion — roughly where it stood in 2005.

Four brands joined the ranking for the first time this year. Along with Tesla and Dior, HP and Hewlett Packard Enterprise were tagged "NEW," and in their case that is not good news:

HP split in 2015 into Hewlett Packard Enterprise and HP, aimed at the enterprise and consumer markets respectively. HP took the fading PC business; Hewlett Packard Enterprise became something like a smaller IBM.

Both entered the ranking as new brands, at No. 44 and No. 48. Last year HP, undivided, ranked 18th.

For Other Brands, Things Are Looking Up

McDonald's is probably the clearest case. It fell out of the top 10 for the first time, but the drop in its brand value narrowed from 6% last year to 1%. Things are improving. The crisis is not over, though: all-day breakfast, long held up as the breakthrough, did lift sales, but when second-quarter U.S. same-store sales growth came in under Wall Street's expectations, the stock fell.

McDonald's also faces a very strong rival in Starbucks (we explained why the two compete in this article). Starbucks sits at No. 64, still well behind McDonald's at No. 12, but its brand value grew 20%, and the climb shows no sign of stopping.

"H&M's Brand Value Equals Four Pradas"

Fast fashion is still doing extremely well. Zara and H&M are both worth more than a long list of luxury houses, while five of the nine luxury brands on the list lost value.

In a report last June, the real estate services and investment management firm JLL (Jones Lang LaSalle) noted that luxury brands like Gucci once refused to sit on the same mall floor as fast fashion. Now they may ask to be placed next to H&M and Zara.

H&M and Zara rank 20th and 27th. Between 2008 and 2016 H&M's brand value climbed from US$13.84 billion to US$22.68 billion; Zara's went from US$5.955 billion to US$16.77 billion.

And no, Uniqlo is not on the list. It never took root in Europe or the United States, which disqualifies it under Interbrand's test for a global brand.

Nor is there any so-called affordable luxury. We wrote in this article about how those brands blow through like gusts of wind — trending fast, replaced just as fast.

Hermès Is the Only Luxury Brand That Grew More Than 10%

Hermès's brand strategy, long called conservative, is what kept it growing while the rest of the luxury business struggled. In the first half of 2016 revenue rose 11% to €827 million, and the company still opens only one or two stores a year. That steady pace has proved an effective way to protect a high-premium brand. CEO Patrick Thomas said in 2011: "If you told me I had to double Hermès's profits, I could do it tomorrow. But within five years, you would have destroyed 'Hermès.'"

Last year Richemont chairman Johann Rupert threw cold water on the industry. Speaking at an international luxury-brand summit, he said: "What keeps me awake at night is how society will cope with structural unemployment and envy, hatred and class war. Rich people will not want to show off. If your child's friend's parents lose their jobs, you are not going to buy your child a car to flaunt."

The Financial Times called the current luxury slump a "reckoning." Young people are buying so-called affordable luxury instead — but when the people talking it up are the luxury conglomerates themselves, it looks a little like dropping a rock on your own foot. So Interbrand has defined "Meta-Luxury" to mark off a category above ordinary luxury brands.

Interbrand puts Hermès in that category, alongside Bulgari and Château d'Yquem. "Meta-Luxury is the economic reflection of a culture that pursues perfection." This quiet, opulent kind of luxury stands apart, raised to the top of the industry's pyramid.

Few Chinese Brands, But the Chinese Market Matters

You may have noticed that the only Chinese brands on the list are Huawei and Lenovo. Baidu, Alibaba, Tencent and China Mobile are all missing.

That starts with Interbrand's criteria: a brand has to earn more than 30% of its revenue outside its home market to be considered at all. The standard lays bare how little Chinese brands have gone global.

Until two years ago, no Chinese company had ever appeared on this ranking. In 2014 Huawei became the first to make the club, at No. 94. The top brand in China's domestic ranking that year was China Mobile, a company almost nobody outside the country has heard of.

You could also argue that the Chinese market is simply big enough that many Chinese companies can do well on domestic business alone. That is part of why sportswear brands jumped this year: Nike and Adidas together account for US$32.9 billion in brand value, the third-fastest-growing category. Besides the athleisure trend, which has people wearing sportswear in more places, another important reason is that both companies grew by double digits in China.

Over the Past Decade, Who Disappeared From the List?

Nokia. Dell. Marlboro. Gap. Motorola. Kodak. Rolex. Heinz and Kraft. Levi's. Kellogg's. UBS. Harley-Davidson...

All of them are gone from the Top 100.

If you want to find more on your own, here is the full Top 100 ranking.