Brand Valuation in emerging economies and smaller markets like Malta can be quite different from the traditional approach used in larger, more established regions. While limited data availability and market volatility can complicate assessments, they also create opportunities for businesses to develop a competitive edge. By tailoring valuation models to local realities, businesses are better positioned to estimate the true value of their brands and capitalise their potential.
Key Obstacles in Emerging or Smaller Markets
- Limited Availability of Reliable Financial Data
In many emerging markets, obtaining comprehensive financial records, consumer data, or detailed market reports can be challenging. With fewer third-party resources available, businesses often need to develop their own internal data through customer surveys, internal analytics, or specialised market research initiatives. While these efforts can be time-consuming, they lay the groundwork for more accurate and credible valuation assumptions.
- Market Volatility
Currency fluctuations, inflation, geopolitical risks, and regulatory changes contribute to the complexity of brand valuation. Companies need to implement adaptable financial models that can be quickly revised in response to external factors like tax policy changes, shifts in market demand, or advancements in technology. Since a single policy change or global trend can significantly impact consumer behaviour, maintaining adaptable strategies and regularly reviewing financial assumptions is essential for accurate forecasting.
Opportunities for Stronger Brand Equity
- Local Identity as a Value Driver
Brands that build localized strategies and align with cultural values and consumer preferences can achieve significant value appreciation. Rather than solely emphasizing heritage or traditional elements, successful brands tailor their messaging, products, or services to align with national identity, societal trends, or consumer priorities. Whether through sustainability efforts in environmentally conscious markets or marketing that reflects cultural preferences, brands that integrate seamlessly into local consumer dynamics gain stronger loyalty and pricing power.
- Being an Early Innovator
Operating in a less developed market presents an opportunity to establish leadership before competition intensifies. This “first-mover” edge becomes invaluable, enabling firms to shape consumer perceptions, set pricing benchmarks and secure key partnerships. As new competitors eventually join, the established brand enjoys a head start in both market share and brand recognition.
Refining Valuation Methods for Local Dynamics
- Customizing Relief-from-Royalty
Traditional royalty-based valuation methods, such as the Relief-from-Royalty model, require careful adjustment when applied to emerging or smaller markets. The key challenge lies in determining an appropriate royalty rate benchmark, as global averages may not reflect local market conditions. Country-specific factors such as taxation policies, regulatory stability, and industry norms can significantly influence licensing agreements. To improve accuracy, businesses should analyse comparable regional licensing agreements, assess prevailing market conditions, and adjust discount rates to reflect local economic realities
- Scenario-Based DCF Analysis
Building multiple “what-if” scenarios into Discounted Cash Flow (DCF) models allows businesses to account for uncertain market conditions. For example, companies operating in markets with unpredictable regulatory changes or volatile demand can model different economic environments, while exporters may assess risks related to currency fluctuations or trade policies. This approach enhances valuation precision by incorporating both best-case and worst-case scenarios, helping businesses navigate uncertainty more effectively.
- Adjusting Risk Premiums
For businesses operating in smaller or emerging markets, discount rates often need adjustments to reflect unique challenges. Rather than applying a generic risk premium, companies should incorporate industry-specific factors such as supply chain disruptions, regulatory hurdles, and higher transportation costs. Capturing these elements within valuation models ensures a thorough risk assessment and prevents oversimplified calculations that may result in optimistic projections.
- Proprietary Data Gathering
When third-party market analytics are scarce, businesses should invest in proprietary data collection. Leveraging point-of-sale systems, customer satisfaction surveys, and digital engagement metrics can provide critical insights into spending habits, brand sentiment and emerging trends. Integrating these findings into valuation models enhances accuracy of forecasts and identifies hidden growth opportunities.
Brands in emerging or smaller markets should look beyond traditional valuation methods by employing scenario planning, data collection, and understanding regional conditions. These strategies enhance resilience, uncover growth opportunities, and ensure sustainable development.
Kris Bartolo
Partner
