Anyone expanding into new markets when building up an international brand is entering a high-speed environment with rapidly changing trends and enormous consumer dynamics. Drivers of this hyper-development can be market reforms, rapidly rising wages, or the emergence of local brand champions. In such an environment, it can make sense to adopt and revitalize an existing local brand. Building your own brand from scratch requires a lot of time and money and can fail due to false assessments. In contrast, the acquisition of an existing brand may require a repositioning, but the considerable growth of the local market will be used much faster. This is described in detail in our new Springer publication “Successful brand development in the major emerging markets” (written in German) by Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).
As a rule, acquisitions and revitalization of local brands preferably take place in product categories such as food, beverages and other consumer goods, as tastes, habits and preferences can be very local and closely related to the local culture. Consumers here have long been familiar with the local brand. Marketing professionals point to three main advantages in connection with the acquisition and revitalization of local brands:
1. Established names with a high level of awareness facilitate market entry
The McDonough School of Business at Georgetown University has shown in a survey of product categories such as beer, hair care and carbonated soft drinks that a significant part of the success of multinational companies in international markets is due to the acquisition of local brands. If the existing brand is established, customers are familiar with it and the distribution channels are in place. The costly establishment of a reputation is unnecessary, or it is at least much more cost-effective with a reorientation. This increases the chances of success enormously and saves important time.
2. A loyal customer base with strong brand loyalty
Time is only one factor to consider. Brand loyalty is another. Many domestic competitors in rapidly industrializing economies are still weak in terms of growth. But they can often refer to a very loyal clientele. This is an important factor for internationally expanding companies, because a loyal local clientele provides the important brand loyalty without having to invest a lot of time and money. If consumers are on average older and more traditional, local brands can even evoke positive memories of their own youth long gone. However, they must be revitalized in the consciousness of consumers and supplemented by other aspects relating to the future.
3. A functioning distribution network minimizes resistance in local channels
One of the best-known examples in international growth markets is a large Indian beverage producer brewing a cola drink to suit the local taste. In 1977, when the Indian government asked Western companies to give up control of their Indian subsidiaries or leave, Coca-Cola withdrew from the country. Indian companies, including Thums Up, tried to conquer the national market for soft drinks. Thums Up dominated the market for 16 years and achieved 35% market share at peak times. But with the reforms from 1991, the government relaxed regulations. Coca-Cola and Pepsi-Cola returned to the Indian market. In 1993, Coca-Cola bought Thums Up and wanted the brand to go out of the market in order to protect its own market share. But the resistance of local traders and consumers prevented this. Following massive protests and a 30% drop in market share, production of Thums Up was resumed. Coca-Cola invested large sums in the brand and took up the earlier advertising campaign with the slogan “Taste the Thunder” again. Bollywood action hero Akshay Kuma became a brand ambassador. The actor Salman Khan, who played an air force pilot, was also engaged. Coca-Cola was thus ahead of a Pepsi advertising campaign in which “Top Gun” hero Tom Cruise appeared. Thums Up took the crown from Pepsi with a market share of 17%. And Coca-Cola was from then on able to attack its competitor in the “Cola Wars” with two different brands.