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Local brands can strike back


Local brands can strike back

The criticism of local brands has therefore been exaggerated (Kapferer, 2001) and their strength underestimated. Because they tried to replace local brands with global brands too quickly, Procter & Gamble and Danone were forced to back-pedal and try to win back the customers they had lost. It should be remembered that pro-global propaganda was a oneway street and did not brook any form of opposition.

However, it is worth considering how many leading brands are in fact not local. The leading brands on a number of markets – fruit juices, beer, cooking oil, butter, cheese – are all local brands. It could be argued that these are traditional products, but it is significant that in Korea and Japan, the number one hamburger is not McDonald’s or Burger King, but Lotteria (an offshoot of the Lotte department stores).

The same is true in Belgium where Quick is still the market leader, more than 10 years after the US giant penetrated the Belgian market. The paradox is explained by the ‘first mover advantage’. In these countries, it was the local brands that established the hamburger restaurants and the market for which they became the referents. There is no difference in the structures of these competitors, but the key factor of the success of any restaurant is its position – when McDonald’s arrived in Korea and Belgium, the best sites were already taken.

Today, many global brands affirm that they try not to appear global. This is certainly true in the case of Danone, which is in fact legally the local brand in four different countries. The Danone brand, the result of an innovation, was created in Spain in 1919 by Isaac Carasso, who named it after his son (Danon is the Catalan diminutive for Daniel). Danone was registered in France in 1929, while Dannon Milk Products, Inc. was created in New York in 1942 by Daniel Carasso, who had emigrated to the United States.

The brand was subsequently extended to Mexico. In each of these four countries, Danone or Dannon is regarded as a local brand. Strangely enough, according to its directors, the German brand Nivea also aspires to be perceived as a local brand even though it is one of the most widely distributed brands in the world. The same applies to the Danish brand Velux, the number one roof window manufacturer, Bic, Garnier and others.

In 1998, the trend was for globalisation at all costs, and having bought the Czech company Opavia, the Danone group decided to replace this local brand with its own global brand. However, Danone had seriously underestimated the strength of the local brand and had to back-pedal. Opavia had more than 70 per cent of the market share in the Czech Republic. During the communist era, the only ‘treat’ available to the Czechs was biscuits, and Opavia had become their friend and ally.

Last but not least, Opavia was also the name of a Czech town, which made it a patriotic brand. All these factors were difficult to appreciate when legislating from a distance. Each country has its own icon brands and globalization simply cannot afford to ignore the consumer.

The international study referred to earlier (Schuiling and Kapferer, 2004; see page 468) identified the levers specific to local brands – confidence and proximity. These are key factors of success if the local brand also knows how to market its products effectively.

Developing local brands

Since many brands are and will continue to remain local, how can they be developed in the face of international competition? The strength of local brands has already been demonstrated (Schuiling and Kapferer, 2004) and their strong points compared with global brands. But confidence and proximity will not provide indefinite protection – they have to be maintained, and the strategies that maintain them are therefore particularly important.

But it is equally important to address the weaknesses of local brands – a lack of innovation, fun and fashion, according to the new, younger generation of consumers. Local brands also suffer from a number of weaknesses and limitations at management level, and these are outlined below:

The first is often inertia – too used to simply being there, because of their history rather than their ambition, local brands often lack energy because they lack ambition. The brand therefore needs to be revitalised from within, and its aims, mission statements and advantages clearly redefined.Local brands are often too widely dispersed. It is therefore crucial to refocus resources on certain markets or market segments in which they can hope to dominate or at least be joint market leaders. They also have to accept the need to part with some of their business in order to concentrate on the segments with the potential to dominate the market. Alternatively they can target niches, small but profitable markets, in a way that the multinationals are unable to do.Local brands often lack innovation – they rely too heavily on loyalty as a driver of preference and have therefore lost their relevance because their products are no longer modern enough or sufficiently well adapted to meet present-day demands. It cannot be said often enough that innovations are the lifeblood of a brand. There are several types of innovation. Some demand huge investments in R&D and are beyond the scope of local brands, while others are more closely identified with the user values of the products and are therefore more accessible. A third type is related not so much to basic research (new active ingredients) as to the search for new concepts that are linked to a consumer insight.Local brands tend to have an established form of management. There is a need to bring in new managers who relate to and therefore understand the new markets and segments, who can identify consumer insights and convert them into ideas.Local brands are too self-restricting. In an age that glorifies globalisation, there is little in the way of advice or articles to support local brands (Kapferer, 2001). They therefore run the risk of being too selfrestricting, as in the case of the Norwegian company DBS, a local market leader in the bicycle sector. DBS did not think it would be able to sell modern mountain bikes under its own name, in the face of competition from Giant or the US company Cannondale. In fact, it was a huge success – consumers were delighted to be able to buy quality products throughout Norway (due to the extended distribution of the brand), under the national brand name. Of course, there are always people who will only buy international brands, but it is important to take account of the less obsessive majority.There is another form of geographical selfrestriction. There is no reason why a local brand should not seek opportunities for growth in neighbouring countries, which are often familiar with the brand or have cultural similarities that favour its assimilation. Thus, it is quite natural for local Estonian brands to be sold in Lithuania and Latvia, or for Polish brands to be sold in Hungary and the Czech Republic. But the geographical area can extend further afield. One of the key factors of the success of small and medium-sized enterprises is their assimilation at international level very early on in their development (Simon, 2000). It is significant that in the case of Wal-Mart, the world’s leading distributor, a development team travels the world in search of innovative products that will differentiate the store’s ranges from those of its competitors and add an element of surprise for customers. This was how the microcompany Lorina, which had relaunched the ‘orange crush’ drinks popular in the past, was spotted at a trade exhibition for new products and then referenced in the United States a year after its creation. This referencing with a mega-distributor is often tied to an exclusivity agreement that guarantees a certain continuity for a brand’s international development.Finally, local brands must not appear local. Except in the case of ethnic or traditional craft products linked to a particular region, modernity is expressed via cultural integration. Who knows whether or not Hollywood chewing gum is a local brand? Or Gemey, Dop, Tango or Wall’s ice cream? The top three brands in the world’s largest market in terms of volume (France) for Scotch whisky are all local brands. Certainly these whiskies come from Scotland, where whisky is produced to excess, but these brands were created by wines and spirits merchants – two low-price brands, based essentially on trade marketing (William Peel, Label 5), and a mainstream brand (Clan Campbell). It was these brands, less expensive than the big international brands, that enabled the French market to double in size in the space of 15 years.

A good example of management of local brands against increasing international competition is Amore Pacific, Korea’s dynamic and leading cosmetics company, and strong market leader thanks to a wide brand portfolio. How did Amore Pacific strengthen its brand proactively?

First, the brands are allocated by distribution route: one brand, one channel. This includes the very dominant direct sales channel (door to door or through customer-led parties), a channel imported brand cannot penetrate for it requires a know-how and resources it will not possess.Second, small brands have been merged into larger ones, to create mega-brands and reach a higher critical size, a condition of higher marketing investments.Third, brands are permanently nurtured by innovations.Fourth, local brands do not look at all local. La Neige for instance aims at the youth market, with a French looking name and capitalises on its proximity to French customers. Hera (the name of a Greek goddess) is a direct competitor of Lancôme and Estée Lauder: as such it is strongly visible in all premium department stores as in the duty free zone of Korean Airports.Finally, Amore Pacific has extended its best brands to other countries. La Neige has been successfully launched in Hong Kong and Shanghai, as Hera. There is a growing demand in Asia for Asian brands that understand Asian women better than western imported ones.

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests