Writing on anything to do with the coronavirus has a limited lifespan. It is a moving target. But patterns are emerging that will probably have a long-term effect in relation to businesses across the globe.
Brand Finance, a UK-headquartered international brand consultancy, has compiled a report that identifies most affected brands in Europe. The big, depressing headline is that companies are likely to lose about €1-trillion in brand value as a direct result of the virus, with the effects likely to be felt well into 2021.
But there is some light at the end of the tunnel, according to brand valuation consultancy Brand Finance CEO David Haigh. “It is not all doom and gloom. Some brands will fare better under Covid-19: Amazon, Netflix, WhatsApp, Skype, BBC and BUPA are all booming.”
Brand Finance analysts summarised the stock market’s view by assessing the outbreak’s effect on enterprise value, as at March 18, compared to start of the calendar year. Hardest hit sectors are airlines, leisure and tourism, aviation, aerospace and defence. Moderate-effect industries include logistics, mining and tobacco, while low-effect industries include food, pharmaceuticals and soft drinks.
Look at the increasing fleet of perfectly airworthy temporarily-redundant planes parked in the boneyards of US deserts. Airlines are reporting shutdowns of between 80% and 100% of capacity with only cargo flights still operating.
Another high-effect victim is luxury apparel, enjoying a strong year before the outbreak. While product demand may have been slowing in China, it still provides the highest spend on luxury, comprising one third of global luxury brand purchases.
Closure of air borders and airports, with their myriad tax-free offerings, immediately dampens demand for luxury items. This is seen within China itself as well as externally, with a huge portion of Chinese luxury goods shopping occurring outside China itself. And a quick bounce-back in the very upper retail sector is not a given, considering the rapid wealth destruction recently seen on global equity market.
One area doing well out of the mayhem is the work from home revolution. Long-hailed as a solution to traffic gridlock and exorbitant office rentals, the reality is that before the pandemic only a few enlightened companies had allowed staff to work from home in big numbers. Remote conferencing applications such as Microsoft’s Skype/Teams and major competitor Zoom have been inundated with sign-ups as the outbreak prompted office closures and meeting cancellations.
Zoom Video Communication, Zoom’s listed parent company, now has a market capitalisation of $42bn and its share price has more than doubled to over $150 per share in the past few weeks. It has capitalised on Microsoft’s inability to keep Skype relevant in the cut-throat world of remote video conferencing.
And of course home food delivery brands such as Deliveroo and UberEats have seen demand skyrocketing in the US, UK and Europe, though sadly not in SA, where such activity is confined to strictly online supermarket delivery during lockdown.
The media and film industries have experienced mixed effects. While many people are whiling away the time watching Netflix and other videostreaming apps, content has suffered. Sporting events that bring in huge advertising have been cancelled and production on films and TV series postponed.
Jeremy Sampson, head of Brand Finance in SA, tells me we have a replicate trend, with most affected local industries being airlines, restaurants, hotels, bars, tourism, car rental, some retail, alcohol and tobacco. “Now if you have a parent with deep pockets —depending on how long this goes on — you will take the pain and survive, but perhaps in a reduced form.”
Like Sampson, we all want sectors employing the most people to be allowed back into business as soon as possible. And the ban on alcohol and cigarettes should be lifted to improve the national mood. He implores that we safeguard lives as well as the best sectors of our economy.
“When the recovery comes, and it will, we can be part of it. Don’t forget we missed the last one.”
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