Over US$500 Billion across Food and Drink Industries at Risk from Marketing Restrictions

• Brand Finance has estimated that a global imposition of marketing restrictions across the alcohol, confectionary, savoury snacks, and sugary drinks industries could result in a whopping US$521 billion loss to businesses
• PepsiCo would lose the most on company level, with a potential loss of nearly US$62 billion, but rivals Coca-Cola could see the single largest loss on brand level with estimated US$43 billion at risk
• Top alcohol companies face 100% revenue exposure. AB InBev would lose the most in absolute terms, with nearly US$40 billion of value at stake. Of Diageo’s brands, Johnnie Walker would be the second worst hit, losing US$3.5 billion
• Original market research into opinions on brands and marketing restrictions, conducted among over 6,000 consumers across 12 countries worldwide, including over 500 surveyed in the UK, shows 70% – 90% levels of awareness of positive impacts of brands
• Little appetite for sweeping marketing restrictions – fewer than 10% of consumers felt there should be a ban on TV advertising, billboards, in-store demonstrations, or distinctive packaging
• Consensus that marketing restrictions aggravate the illicit trade problem – 80-90% of consumers acknowledge the role that brands play in supporting legal sales channels

Following the introduction of marketing restrictions for tobacco products and repeated calls to extend the legislation to more sectors, Brand Finance once again analysed the potential impact of such policies on food and drink brands. The latest Brand Finance Marketing Restrictions 2021 report – building on the analysis conducted in 2017 and 2019 – estimates potential loss to businesses at over US$500 billion and seeks to understand popular attitudes to brands and marketing restrictions thanks to insights from an original global consumer survey.

Over US$500 billion at risk

In the latest report, Brand Finance analysed the potential damage across alcohol, confectionery, savoury snacks, and sugary drinks brands which can result from the imposition of marketing restrictions across the globe. The analysis models the impact on enterprise value from potential reduction in the added value that brands contribute to the business – known as brand contribution.

The report looks at nine of the world’s biggest food and drink brand-owning 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 nine major brand-owning companies could lose a total of US$267 billion in enterprise value should marketing restrictions be implemented. On average, the companies in question could each lose nearly a quarter of their enterprise value and over 50% of brand contribution.

Looking beyond simply the nine companies analysed, and extrapolating this to the entire endangered industries globally, alcohol, confectionary, savoury snacks, and sugary drinks brands could lose a whopping US$521 billion.

David Haigh, Chairman and CEO of Brand Finance, commented:

“Brands are integral to how the world operates. In times of crisis, brands – especially those most valuable and strongest in their categories and markets – become a safe haven for capital. Well-managed, innovative, and reputable brands are what the global economy turns to in the hour of need. Severe marketing restrictions are catastrophic, not only for brands, but for all stakeholders, from consumers and society, to investors and governments.”

Losses to soft drink giants

Given the importance of brand in the soft drink industry, imposing plain packaging or further limitations on advertising would cause severe damage. PepsiCo would lose the most in absolute terms among all companies studied, with a potential loss of nearly US$62 billion. PepsiCo’s flagship brand Pepsi is estimated to suffer the most within its portfolio, with US$23 billion at stake. However, The Coca-Cola Company’s flagship brand, Coca-Cola, would stand to lose US$43 billion – considerably more than bitter rival Pepsi and any other brand in the analysis. It constitutes the majority of the US$57 billion potential loss estimated for the company.

Top alcohol companies face 100% exposure

Alcoholic drinks giants, AB InBev, Heineken, Diageo, Pernod Ricard, and Treasury Wine Estates could face 100% revenue exposure should marketing restrictions be imposed on their sector on a global scale, due to their portfolios consisting entirely of products that would be affected by the legislation.

Diageo’s portfolio could lose US$24.9 billion as a result of marketing restrictions – amounting to 71.6% of the entire value that Diageo’s brands contribute to the business. This is the highest proportion among all companies analysed. World-famous Scotch whisky brand Johnnie Walker has the second most at stake amongst all brands in Diageo’s portfolio with US$3.5 billion in danger.

Global survey on attitudes to brands and marketing restrictions

Given the risks to brands from marketing restrictions, over 6,000 people were surveyed across 12 countries globally – including over 500 from the UK – with respondents asked their opinions on brands and marketing restrictions.

Additionally, 13 CMOs, who are currently or who were recently overseeing brand marketing in leading organisations in the sectors covered in the research, were interviewed about the contribution that brands make to economic and social wellbeing, as well as their concerns about marketing restrictions.

British attitudes to brands

Globally, and across the UK, the general public recognise the positive impact of brands, both on their everyday lives, as well as on wider societies and economies.

Although UK respondents’ perceptions about the impact of brands is less favourable than the global sample average, over 80% of UK respondents agree that brands encourage product quality, improve choice, make a contribution to the economy, and acknowledge the role of brands in limiting illicit trade. Over three quarters of British respondents also agree that brands support the media and the job market.

Jane Reeve, Chief Communication Officer, Ferrari, commented:

“Strong brands support stronger economies which support employment.”

Which of these impacts do you think brands provide or encourage?

High expectations that brands should be a force for good

Consumers expect brands to be a positive force in society. They do not want brands that are silent on the causes that matter to them and there is a general expectation that brands should be doing their part to support society. As such, 72% of British respondents expect brands to provide superior product safety and production standards and 68% expect brands to undertake ethical sourcing and supply chains.

Doug Place, CMO, Nando’s – Africa, Middle East, South Asia, commented:

“Whether it’s environmental concerns, labour practices, renewable energy…we should leave the world in a better place as a result of our brand, not worse.”

What do you expect from brands?

Little appetite for sweeping marketing restrictions

Both the general public and CMOs understand that brand benefits can only be delivered if brands can market themselves, from product quality control to the added value for society.

The survey shows that consumers do not generally seek curbs on the most frequent marketing channels, regardless of product category. Across the global sample, fewer than 10% of consumers felt that there should be a ban on TV advertising, billboards, in-store demonstrations, or distinctive packaging – with little variation across product category.

Only a third of British respondents would support the most extreme form of marketing restrictions – plain packaging – across the industries at risk.

Consumers are brand literate but will not forego their own interests under the influence of marketing and advertising. Consumers are aware that brands are there to help them make informed decisions.

Marketing restrictions aggravate the illicit trade problem

Marketers and consumers are wary of over-regulation, as marketing restrictions – in particular plain packaging – can facilitate fraud and present a danger to consumers.

Shiyan Jayaweera, Head of Marketing, Lion Brewery, commented:

“Low-quality and illegal products are made up to look like a regulated beverage, which is confusing and endangers consumers. It is not easy to tell the difference between established brands and illicit products.”

Consumers emphatically acknowledge (80-90% agreement across markets analysed) the role that brands play in supporting legal sales channels, as well as helping to navigate between real and fake goods – and this brand literacy helps explain why most accept that brands should be allowed to promote themselves in a responsible fashion.