Printer Friendly

The emergence of the global consumer.

Europe's economic revolution is forcing manufacturers to look at their marketing opportunities in a new way. Six predictions about the future.

For many years I resisted the concept of the global brand. The diversity of language, taste, and customs seemed to me insurmountable barriers to the worldwide marketing and advertising of brands. This certainly seemed true for H.J. Heinz Co. Our company is global, but much of its success is based on the consolidation of distinct regional operations catering to local tastes and customs.

Of course, the Heinz label in known and respected worldwide. It is particularly strong in the United States, the United Kingdom, Canada, and Australia. More recently, Heinz has become a potent brand in Japan, Korea, and China. But 65% of our annual sales come from products that do not bear the Heinz brand. In the U.S., we are known also for Weight Watchers meetings and foods, StarKist tuna, 9-Lives cat food, and Ore-Ida frozen potatoes. An Italian may know us by our Plasmon baby food; a Spaniard by our Orlando brand of tomate frito; a Frenchman by our Petite Navire tuna. In short, Heinz is a world brand, but it is to a greater extent a world of brands.

At first, this situation made me quite skeptical about the notion of the global brand. But subtle, profound revolutions in technology and culture have begun to transform consumer attitudes. They also have caused me to rethink my earlier prejudice against the global brand concept. I would maintain that the communications revolution and the convergence of cultures have now set the stage for truly global marketing. In many respects, the age of the global brand is at hand.

From a financial perspective, Heinz is a company with substantial resources and ample margins. We can employ those resources to spend back on our big brands and support their growth. But how and where we choose to do that spending remains the question of the moment. Marketing has become an almost hydroponic exercise. Exact amounts of nourishment applied directly at proper intervals can produce substantial yields in practically any environment. But one needs the proper vehicle, or vehicles, to make this process work.

My thesis is that there is such a vehicle today that is at once powerful enough to cover immense areas, and personal enough to reach the individual consumer. That vehicle is satellite/cable television. It is a technology that is changing all the rules of global advertising. For those with sufficient resources and resolve, it is the premier instrument for building global brand power.

But what exactly is brand power? The skeptics among us might regard the phrase as a hollow promise. That is an understandable observation but one that I think ultimately cannot be sustained. I believe brands do have power, which we can discern and even measure. When successfully marketed, they can become international symbols of significant import.

We must keep in mind what brands are. The truly great brands are far more than just labels for products. They are symbols that encapsulate the desires of consumers. They are standards held aloft under which the masses aggregate. Brands can extend beyond national boundaries if they symbolize universal desires. Or they may have a more segmented appeal to certain age groups or occupations in a number of nations.

Coca-Cola is certainly among the true branded gentry, the pantheon of brands that have become citizens of the world. It is instantly recognizable as a product for the masses. Its appeal comes from the taste of its product. But it also comes from what this brand represents. It symbolizes youth, vigor, convenience, refreshment. Despite its longevity, this brand is forever contemporary. It is an element of the modern lifestyle and, to a great extent, the American lifestyle. To consume it is to be at one with the spirit of the age.

An impression of a different sort is conveyed by Mercedes Benz. The Mercedes symbol is respected around the world, even by those who cannot afford the product. Status, quality, and precision engineering are the hallmarks of this brand. Gucci is another great status brand that entices consumers of all economic strata.

An electronic soft drink

The Japanese have a number of global brands that mix technical quality and reliability with affordable price. Sony, for one, has become as much a symbol of Japan as the Rising Sun. When consumers think of Sony, they think of the Japanese work ethic and single-minded devotion to consumer satisfaction. The Walkman is an electronic soft drink: convenient, contemporary, and universally appealing.

Global brands such as these are major achievements. But their true power lies not just in their ethos. It lies in their ability to pioneer new market opportunities in response to changing consumer tastes. This is the case with many major brands. The discerning retailer must realize that while local or private labels may help settle occupied territory, the big brands make the initial assault. They use their power to inspire consumer interest and demand, often whether the related products are available or not.

The most dramatic example of this was the recent appearance of the Golden Arches in Moscow. The opening of the Moscow McDonald's was not just a new product launch; it was a social and cultural event of international proportions. The attraction was more than burgers and fries. It was the arrival of an American institution already well known to Moscovites. The McDonald's brand had infiltrated Soviet culture and generated an unstoppable demand for the product and what it represents.

This may explain why major brands command such high multiples in the marketplace. Major companies like RJR Nabisco Inc., Beatrice Co., and Grand Metropolitan PLC have paid premiums in the billions in order to acquire major brands or to be acquired themselves.

In the case of great brands, familiarity breeds respect. The imperative for the clever marketer is to cultivate brand recognition, instill consumer trust, and motivate consumer desires.

Such motivation is now possible on a scale hitherto undreamed of, thanks to the revolution in communications technology. The first test case for this phenomenon was the U.S. During the '50s and '60s, the great U.S. mass market was unified through television. The juggernaut of TV advertising brought major brands to practically every household. The media flood could not be contained by national boundaries. Soon American television crossed into Canada, creating an international television market.

While significant, this development was only the first step. The advent of cable and satellite television has sparked a further media explosion during the past decade. Over the past 10 years, the number of local U.S. television stations has jumped from 622 to 1,446. With cable and satellite transmissions, the number of channels available to U.S. households has soared. The average U.S. household has 31 channels today -- four and one-half times the European average -- and this is expected to double by the end of the decade.

Equally important is the speed with which this phenomenon has occurred. Barely 22% of U.S. homes were wired for cable in 1980. By the end of the decade, the total had leapt to near 58%, on its way to 75% by the year 2000. Communications technology has reached a critical mass, and the momentum of its expansion is astonishing.

Critical mass is forming

The example of America is instructive for us here. Europe has been denied a varied television menu for decades. One might compare conditions here with that of the U.S. 20 years ago. But satellite/cable technology is changing all that, and the critical mass is being formed. At present, there are nine satellites beaming about 40 channels across Europe. This number may increase to more than 100 by 1992. The addition of another satellite is expected, with one-third of the European marketplace receiving scores of channels by mid-decade.

For now, the audience is limited but the trend is clear. Satellite/cable television is expanding public access to more varied programming. The Netherlands may well serve as a paradigm for Europe's TV revolution. Approximately 80% of Dutch households can receive one or more of three German channels. About half can tune in Belgian channels, 45% are able to receive Italy's RAI, while 28% can get France's TV5. The BBC is at the low end, with 15% penetration. In short, TV technology means viewing on an international scale.

Nature and media abhor a vacuum. These new media outlets are looking for programming, and much of it will be international. Thus, consumers will not only watch advertisements for products, they will also watch programs that are, in effect, advertisements for different lifestyles. One can see this already in European broadcasts of American hits like "Dallas," "The Cosby Show," and "Wheel of Fortune." Television will further homogenize the cultures of the developed world. It will in turn generate the cosmopolitan aspirations best satisfied by global brands.

There is a parallel to this in the history of branded manufacturing itself. Brand names became powerful as nations became developed. Transportation technology combined with mass production to enable manufacturers to reach national markets. Radio and television united countries and homogenized their languages and cultures. The stage was set for mass marketing of big brands.

A similar scenario is unfolding in Western Europe. The Single European Act of 1992 is removing barriers to transportation and commerce. The capacity for transnational production is available. The final step in the process will be mass communication. And the technology of satellite/cable TV will make that possible. The Euro-consumer is about to emerge.

We can already see how communications technology has globalized social and political trends. Instead of years or months, some events or trends are echoed within days. Some are even simultaneous, such as Earth Day. Indeed, the Green movement is a classic example of global trendsetting. It is a powerful, if somewhat diffuse, philosophy with subscribers on every corner of the globe. When StarKist in the U.S. announced its dolphinsafe tuna policy, it became a national media event, and other tuna manufacturers in Europe and Australia followed suit within hours.

Another global trend of interest to us is the health and wellness phenomenon. Fitness and nutrition have become international issues as the developed nations get progressively older. Middle-aged spread is part of the human condition. Therefore, health and wellness have become issues of worldwide dimension within the past decade.

Consumerism is itself a trend with global momentum. Consumer consciousness has begun to reach into what we used to call the Eastern Bloc. Last March, the A.C. Nielsen Co. released a remarkable, pioneer study of consumer attitudes in the German Democratic Republic. This survey concluded that consumers in GDR know some important Western brands better than they do brands from their own country. They even know some brand names better than West German consumers do. Young GDR consumers could spontaneously name many West German brands.

A vivid example of this pent-up demand has come with the collapse of the Berlin Wall. From February 1990 (when Coca-Cola made its entry into the GDR) until June, more than three millions cases of Coke were sold to eager East Germans.

Such episodes convey the prospect of not just a Euro-consumer but a global consumer. We may soon find that a German student has more in common with a Canadian student or a Japanese student that he does with a German businessman. The significance of consumer stratification across national lines should not be lost on retailers, manufacturers, or marketers. It has not been lost on Heinz.

The way I see it now, and in spite of my earlier skepticism, manufacturers have a new method for leveraging certain of their brands on a global scale, if they wish to do so. New television technology will give them the means to produce a single commercial, dub it into several languages, and beam it across one or more continents. Eurosport already broadcasts athletic events in six languages. Why not do the same with product advertising?

We have seen already how brands create markets. The process of multi-channel mass TV marketing that has been developed in the U.S. will be replicated and amplified on the European continent. Manufacturers will take their big, global brands directly to consumers, who will in turn seek them from their local retailers.

Heinz, with its ketchup and baby food, and Weight Watchers are candidates for membership in the branded gentry. They can appeal to those universal aspirations that mark the modern, global consumer. With satellite/cable communication as their catalyst and passport, these big brands will be ready to take their place as citizens of the world in the decade ahead.

The communications revolution will overtake us whether we like it or not. Consumers want more than price, because they see more than price. They also want convenience. They want variety. They want selection. They want quality. And they want to mimic lifestyles of other countries with which they identify.

Protectionism is a waste of time and a futile waste of resources. Whether its form is manufacturers seeking tariffs among nations or retailers increasing slotting allowances, the erection of cost barriers distorts markets and misallocates resources. This in turn thwarts creativity and stifles innovation.

The markets in France and West Germany, in particular, have developed certain restrictive retail distribution practices, which have retarded the growth of consumer choice and -- let us not forget -- retail opportunities. Such trade practices reduce the range of choice for the consumer. But they do not stifle the consumer's range of desire. Thus, a contradiction is produced when the consumer becomes global while the retailer remains nationalist for local profit reasons.

We should take to heart the example of recent history. We already have seen the great political changes inspired by global communications. The whisper of freedom in one country is heard a continent away. Likewise, the aspirations of consumers in one country are shared by more and more of their counterparts in the major markets of Asia, North America, and Europe.

Six predictions

In sum, we cam make the following six predictions about the future:

1. We are unquestionably at the dawn of a revolutionary age in communications.

2. Communications technology will globalize consumer aspirations throughout the world.

3. Satellite/cable systems will enable manufacturers to market select brands directly to the world's consumers.

4. Global social trends will feed consumer desires for global brands -- the "McDonaldization" of the world is at hand.

5. Global brands will build and develop global market opportunities.

6. Finally, and most importantly, manufacturers, and retailers must stand ready -- not as adversaries but in a new spirit of partnership -- to satisfy the emerging needs of the global consumer.

Europe's economic revolution is forcing manufacturers of all sorts to look at their marketing opportunities in a new way. In the years ahead, a local perspective will not be sufficient; a European perspective will be required. Spurred on by the communications revolution, this European perspective will take an ever-stronger hold. Europe -- rather than Germany, Britain, France, or Italy -- will be the market. As the idea of Europe takes hold, it will represent another step forward in the global progression of major brands.

The wall is down. Europe beckons. The global market lies just ahead.

Dr. Anthony J.F. O'Reilly is Chairman, President, and Chief Executive Officer of H.J. Heinz Co. This article is adapted from remarks he made to a 1990 food industry meeting held in Berlin.
COPYRIGHT 1991 Directors and Boards
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Chairman's Agenda: Acquiring in Eastern Europe
Author:O'Reilly, Anthony J.F.
Publication:Directors & Boards
Date:Jan 1, 1991
Words:2582
Next Article:'Go there and get the business.' (interview with PepsiCo's Chairman of the Executive Committee Donald M. Kendall on business opportunities in Eastern...
Topics:


Related Articles
Does business need to adjust its agenda?
Ball Corp. to purchase part of Continental Can.
History Kind to Public Broadcasting.
K-C makes investment in Poland. (Nonwovens News).
International reach stretches from EU to Latin America, Middle East and Asia.
Youth media.
The construction chemicals market: steady gains are forecast for mature markets while China is experiencing exponential growth.
Interior architectural & decorative coatings market: as paint makers in the U.S. and Western Europe struggle to make money under current market...
Health, convenience and environmental concerns drive beverage consumption trends.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters