Feature
Live local, shop global
26 June 2010
It is predicted that out of 500 of the world’s hottest brands, one third will come from emerging markets by 2015. Domestic brands that have conquered the challenging home markets of India, China and Taiwan could easilybecome a threat to the world’s best-known companies as many now turn their attention to Europe and the US.
Forget Coke versus Pepsi and Mac versus PC. The next big brand battles could well be Almarai versus Master Kong and Chery against Geely.
The increasing sophistication in developing markets is starting to make a huge impact on the global brandscape when domestic brands decide to pursue international aspirations. Nimble, hungry, and already successful in some of the world’s most challenging markets, they’re what Interbrand calls “the fresh breeze emerging from the storm”.
“Brands from emerging economies will increasingly become household names,” says Graham Hales, global chief communications officer, Interbrand. “Technology makes it easier for every brand to expand its global footprint.”
The findings echo research by US business consultancy Bain & Co, which estimates that one third of the FT Global 500 companies could come from emerging markets by 2015, thanks to what it calls a “seismic shift” away from developed markets.
DRIVE MY CAR
The automotive sector is the first to see it. “A massive shift in the competitive landscape will see China and India emerge as major players,” says analyst Deloitte in its report ‘Accelerating Toward 2020’, which predicts that in a decade’s time just 10 motoring groups will account for 90% of global sales.
Indians aren’t the only drivers excited by the idea of Tata’s $1,000 car, or Mahindra & Mahindra’s road and farm vehicles, which have seen the company make it onto Credit Suisse’s ‘27 Great Brands of Tomorrow’. Geely, the Chinese fridge manufacturer turned carmaker, haslittle over a decade’s experience in motoring, but the company’s founder is aiming to sell two thirds of production outside the country in the future. It has already made headlines with a deal to take over Volvo from Ford. Chery, the first Chinese carmaker to export its vehicles, is another to watch.
A new wave of food and drink brands are also poised to take off, with consultant Wolff Olins tipping four brands destined for global stardom: Chinese winemaker ChangYu; Indian liquor group United Spirits; Lebanese chocolatier Patchi; and Almarai, a Saudi dairy and fruit juice company.
Its fifth is Colombian coffee chain Juan Valdez Café, already present in the US, Spain, Chile and Ecuador. Its intellectual property director, Luis Fernando Samper, says: “We are confident we can make in-roads in other Latin American countries and the Caribbean. We also see opportunities in coffee-consuming countries in Northern Europe and the Middle East.”
As it expands, the new Starbucks knows it must sell not just quality coffee and ambience, but a story. “We have Forbes’ billionaires to excel at conveying how Juan Valdez coffee has an environmental and social meaning linked to its origin.”
Taiwanese-owned Tingyi Holdings is a huge seller on mainland China – it has 51% share of the Chinese instant noodle market and 43% of ready-to-drink tea sales. Its ambition now is to overtake Coca-Cola as the world’s biggest beverage maker within five years.
We might also keep an eye out for Beard Papa cream puffs from Japan, O’Mango frozen yoghurt from Korea, and ArArAt brandy from Armenia.
“Our long-term ambition is to carve a niche for the ArArAt brand and our whole category of Armenian brandies in the drinks market internationally, competing primarily against French brands,” says Sergey Ivanov, brand director, ArArAt, at Pernod Ricard Rouss. Starting with Russians and East Europeans in their home countries, the brand draws on its Armenian heritage with an online film campaign, commissioned by Amsterdam Worldwide. Since its launch in January it has had 1.5 million hits, mostly by Russians, “but the campaign has resonated strongly with audiences in Germany and the US,” says Ivanov.
INTERNATIONAL CALLS
Electronics and telecom brands are also heading west. Following its launch of mini fridges aimed at American students and extra-large washing machines in Pakistan, Chinese appliance maker Haier now has foreign sales of $3.3bn a year, outweighing domestic revenues. Appliance maker Gree, meanwhile, has a presence in more than 100 countries and makes a third of its money outside of China.
South African telecommunications group MTN has been expanding across Africa and the Middle East with more than 40 million subscribers across 21 countries. India’s Bharti Airtel is going in the same direction. China’s Huawei has expanded throughout Asia, the Middle East, Africa and Latin America and is now focusing its energies on growth in the US and Europe. Rival mobile handset maker ZTE now generates just under half of all revenue
from overseas.
Chinese search engine Baidu, which utterly dominates at home, has begun a service in Japan and has growing brand recognition worldwide. Its eCommerce cousin, Alibaba.com, has already opened an office in the UK.
I THINK I'LL STAY HOME
What’s almost as intriguing as the number of emerging brands is the fact that so few have even tried to go global. Leonie Ki runs a private equity fund in Hong Kong and is former chairman of the Association of Accredited Advertising Agencies in China. “The government would like to see Chinese brands go worldwide… but with the domestic market of 1.3 billion consumers most enterprises are saying the Chinese market is good enough.”
Succeeding with a brand launch abroad takes huge investment in marketing. LG, for instance, wants to increase its marketshare in LCD televisions to 15% this year and become the world’s second-biggest mobile handset maker within two years.
The company has injected $113.5m extra into its European marketing budget and spent big on sponsorship with a five-year deal with Formula One and the naming rights to the Birmingham, now LG, Arena in the UK. Senior manager of LG’s insight marketing team, Hyun Kyung Yoo, says non-Western brands may have 50 years’ experience, but in Western eyes they’re still earning their credentials.
“Emerging brands start getting in by being cheaper,” says futurologist Ian Pearson. “If you’re buying a hard disk drive you may as well buy an unknown brand because it’s cheaper. But you’re not going to buy a car based on an ad and a few good reviews.”
Forbes billionaires
The changing shape of Forbes’ Top 10 Billionaires reflects the shifting balances of economic power
1 Carlos Slim Helu, Mexico
Net worth $53.5bn
Source of wealth: Telecoms
2 Bill Gates, US
Net worth $53bn
Source of wealth: Microsoft
3 Warren Buffett, US
Net worth $47bn
Source of wealth: Berkshire Hathaway
4 Mukesh Ambani, India
Net worth $29bn Source of wealth:
Reliance Industries (petrochemicals)
5 Lakshmi Mittal, India
Net worth $28.7bn
Source of wealth: ArcelorMittal (steel)
6 Lawrence Ellison, US
Net worth $28bn
Source of wealth: Oracle
7 Bernard Arnault, France
Net worth $27.5bn
Source of wealth: LVMH
8 Eike Batista, Brazil
Net worth $27bn
Source of wealth: OGX (mining, oil)
9 Amancio Ortega, Spain
Net worth $25bn
Source of wealth: Zara
10 Karl Albrecht, Germany
Net worth $23.5bn
Source of wealth: Aldi
BRIC vs traditional players
Number of places on Forbes’ list
BRAZIL 18 | 29 UK
CHINA 64 | 403 US
INDIA 49 | 53 GERMAN
RUSSIA 62 | 22 JAPAN
M&M VIEWPOINT
As Western brands hunt for the ‘next billion’ consumers, their attention inevitably turns to the densely populated BRIC and Next 11 markets. But rest assured, these markets are not necessarily easy wins. The Google China example, which dominated much of Q1 2010, demonstrates that there are plenty of cultural issues to overcome. Of even more importance is the strength of local brands that could pose real challenges. The global brandscape is changing. Both brand values and consumer acceptance will determine at what speed.
Jo Bowman