The post-COVID-19 impacts

• Brand Finance Lanka Valuation Manager Aliakber Alihussain summaries the key trends by sector

Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect it has on Enterprise Value. Based on this, we estimated the likely impact on Brand Value for each sector and classified them into three categories – limited impact (0% brand value loss), moderate impact (10% brand value loss) and high impact (20% brand value loss). 

This is illustrated in the attached graphic, with some other trends to look out for:

On-line revolution

Brands offering in-home or remote working solutions have observed an immediate uptick in demand. 

These include food and grocery delivery apps which has seen a huge surge in demand for their services during the lockdown period. Consumers may now have got used to the convenience of home delivery and those brands which can quickly adapt to continuing to provide this service may have a major advantage in the long term.

Import brands will need to brace for a new environment

With the introduction of restrictions on goods due to the foreign exchange crunch, there will be an impact on brands that rely on imports. Hence retailers of electronic items and motor vehicles will be under pressure. 

The absence of imported food and drink items will also curtail choice in supermarkets but is likely to be offset by an increase in consumer traffic due to worries on health and safety in wet markets.  

Major exports and hospitality industry preparing for the worst

In light of the expected recession which will hit global retailers, Sri Lankan apparel exporters will have a major impact. Preliminary indications are that they will shrink in size by about 40% according to leaders in the industry. Tea, knowledge services and rubber products would be less exposed and may in fact thrive. 

The hospitality and travel industry will be severely impacted with no long term solution in sight. There will be no easing up on social distancing until there is a vaccine introduced and people have the confidence to travel once again. 

All conglomerates negatively impacted, some more than others

Whilst conglomerates have a portfolio of businesses, some will be more impacted than others. Those which are well diversified across sectors will be able to pull through, while those reliant on hospitality and lifestyle retail will be significantly impacted. Conglomerates with healthcare in their portfolio will be more resilient.

Sectors with an upside

However, it’s not all negative, some industries are set to see an upside from COVID-19. Telecommunications is set to thrive from the increased need for connectivity, personal care brands are to also have an increased demand with people becoming more conscious of personal hygiene. Established food brands and other basic necessities will also see a spike in demand as people shift to buying their trusted brands in the wake of economic uncertainty.