Category — Global Marketing

New thinking is needed to reach shoppers in emerging markets. By Simon Silvester. Over the past two decades, global brands have spread across the world. Today they fill the supermarkets of Brazil, Russia, India and China, as well as Mexico, Indonesia, Vietnam and the other “Next Eleven” emerging markets. Five of the world’s seven billion people buy them.

But whilst they are successful, these big, global brands all share something in common. Nearly all were invented by Westerners for Westerners, but they are now being sold to customers who are living on $3,000 a year. It’s quite a leap. The consumer they were designed for looks nothing like the global consumer of today … read >>

American airports will become "pop-up cities with no claim to local heritage or culture and bleached of any genuine sense of place," writes Wayne Curtis in a Wall Street Journal review of Aerotropolis by John D. Kasarda and Greg Lindsay (3/2/11). The argument goes that "economic vitality has moved from ocean harbors to river ports to railroad hubs to highway interchanges, and now, to airports." The concept is that an airport can be "a city unto itself … basically an airport-integrated region, extending as far as sixty miles from the inner cluster of hotel, offices, distribution and logistics facilities."

It’s a vision that John Kasarda has been pursuing for "more than a decade" and is already taking shape in "emerging airport cities, including near Memphis, Denver, Detroit, Dubai, Bangkok and some of the 100 new aerotropoli … planned for China within the decade. Memphis, for instance, has become ‘an inland port for goods arriving from Asia, thanks to FedEx and the two million packages that transit its complex every day’." The city’s Chamber of Commerce has even dubbed the airport, "America’s Aerotropolis." Such airports essentially are "routers for goods and people, or as the authors put it, ‘factories for connectivity.’"

The goal is "frictionless air transport" and it has already transformed the fresh-flower industry, for example, as "blossoms and buds move along a smoothly efficient ‘cool chain,’ an unbroken series of refrigerated trucks, cargo holds and warehouses. A once-local product has gone global." Whether this is "worth the greenhouse gases" it produces is another question. So, too, is whether "the aerotropolis can survive a surge in oil prices." Then there’s the matter of whether "people will want to live near airports." The authors admit that airports are "noisy and filthy," but argue that the aerotropolis is more about efficiency than aesthetics, and suggest that those who don’t go along will be left behind.

"Burberry has benefited from globalization, and from its limitations too," reports the Economist (1/22/11). One benefit is that Burberry enjoyed a 27 percent revenue increase in the final quarter of 2010, much of it from a 68 percent increase in sales in Asia. Part of this growth is thanks to Burberry’s acquisition of 50 shops in China that previously belonged to franchisees. But it’s also because of "the rise of Asian rich," and the popularity of Burberry styles there.

The thing is that wealthy and trendy Asians might not have taken to Burberry’s had they been aware of its image back in Britain, where so-called "chavs" — "the stereotypical white working class delinquent looking for trouble" — took to wearing "Burberry baseball caps and jackets" featuring its trademark check pattern. Burberry successfully battled this trend in the UK by playing down the checks on its apparel and busting "vendors selling counterfeit versions of Burberry clothes at discount rates."

Meanwhile, in foreign markets, consumers "continued to see Burberry as the august outfit that clothed Ernest Shackleton for his Antarctic expedition nearly a century ago, not the favored label of a subculture they could barely comprehend. Modern economics and technology allows Chinese, Brazilian and American consumers to buy the wares of a London firm. But it has not made it that much easier to grasp the cultural nuances of another country." Lucky for Burberry, its Asian customers never really knew about chavs.

Fashion designer Tory Burch is building her retail empire by making each store look like it could be her home, writes David Netto in the Wall Street Journal (12/11/10). "An element of home has inspired all my collections," says Tory, whose London flagship store, her 46th, opened recently. As it happens, she was decorating her apartment while creating her first store and the two ideas converged. She says the idea was to share the comforts of home with her shoppers.

"You know … bring your children, let them roll on the sofa," says Tory. "You may be shopping, but why shouldn’t you feel as comfortable as you feel at home?" Each store is unique, but based on Tory’s style. The stores are designed by architect Daniel Romualdez, the same guy who designed her apartment. "I try to imagine how Tory would live in a given location," he says, adding that he doesn’t think it costs any more to create a store as an apartment than as a standard store." The payoff is that if people are comfortable, they’ll stay, and if they stay, they’ll buy.

That theory is taken to an extreme at Tory Burch’s boutique in Seoul, South Korea, where there’s "an upstairs ‘apartment’ above the selling floor with no shopping at all. This area is called the Salon, and includes a library, living room and walk-in closet inspired by the design of Tory’s New York digs." As David Netto notes, "real marketing genius in fashion nowadays means you can put a name on any product in the world, and people will know what it means. If anything can do that for a business, it’s a great looking retail store. Or 50."

Long derided as sugary schlock, Koshu wine from Japan is being reinvented for the world market, reports Corie Brown in the New York Times (10/27/10). Koshu has been around for about 150 years, and it has a bad reputation because traditionally it’s been made with "damaged and rotten" fruit, rendered somewhat palatable with heavy doses of sugar. But an American enthusiast, wine importer Ernest Singer, sees potential for Koshu as a dry wine that can be "light and crisp with subtle citrus flavors."

In fact, Ernest thinks that Koshu is "a match for Japan’s cuisine." He’s been on the Koshu trail for nearly a decade now, working with "a clutch of family-owned Japanese wineries … under the banner Koshu of Japan." Among them is Shigekazu Misawa of Grace Wine, which had been making bad Koshu for generations. "Koshu is two-thirds of all we make," he says. "And we needed to make it better." Changes include planting the vines differently (in rows, not canopies) and "getting rid of the grape’s bitter skin early in the process." And no added sugar.

The result, so far, is a simple, bone-dry wine, with low alcohol content. One Koshu, a 2004 vintage made at Grace Winery, went over well with Robert M. Parker Jr., the wine critic, who "gave it a score of 87/88 on a scale of 100." But the wine has yet to go over big in Japan, where "wine drinkers are slow to believe that they are worth their price tags of $20 and up." Koshu is an even tougher sell in the US, where it is not yet readily available, but can cost $50 a bottle at restaurants. Ernest Singer remains optimistic, however: "I’ve been in Japan for 50 years," he says, adding, "this movement is going to blossom."

President Obama’s popularity may not exactly be soaring at home, but in Ghana his likeness is selling a lot of biscuits, reports Will Connors in the Wall Street Journal (10/7/10). Obama Biscuits, as they are known, actually are selling like hotcakes. Produced by United Biscuit Ltd., they come in three varieties: regular, ginger flavor and the latest, ChocObama. Its package bears an image of Mr. Obama, and can be found in small roadside shops across Ghana."

"This is the best idea I’ve ever had," says Marc Skaf of United Biscuit in Ghana, which turns out 2.8 million biscuits a day, 60 percent of which are Obama Biscuits. "In America, he is not popular right now," says Marc. "But here he’s still popular and I don’t think that will be changing anytime soon." Marc also notes that a Chinese company is now "exporting Obama crackers to Ghana from China," and so he now plans to start making Obama crackers, too.

Marc’s main growth hurdle is the rising price of flour, but Marc is expanding his factory and planning an ad campaign. The trend toward Obama-branded products began with the president’s 2009 visit to Ghana, when "hundreds of shops, bars, restaurants and hotels adopted the Obama name." Since then, the Obama "brand" has turned up on "bottled water, bubble gum and beer." In Ghana’s capital, Accra, there’s an "Obama Hotel where a portrait of the president hangs in the busy lobby; guests can stay in the Joe Biden room." The White House had no comment on any of this.

Nike retail chief Jeanne Jackson sees big global growth in small local stores. An exclusive Q&A interview by Tim Manners. (more)

"The objective is to do business, not just with the top of the pyramid," says Franck Riboud, chief executive of Danone SA, in a Wall Street Journal piece by Christina Passariello (6/29/10). That’s quite different from the outlook Franck brought to his job ten years ago, which was a tight focus on affluent consumers. But wealthier markets are sluggish, and so today — as of last year, anyway — 42 percent of Danone’s sales "were from emerging markets — up from just six percent ten years ago." Danone has accomplished this in fits and starts, beginning in 2004, in Indonesia.

Danone’s first such product was a 70-gram bottle of yogurt selling for ten cents, which was an instant hit, "selling 10 million bottles in its first three months." It remains "one of Danone’s most popular products in Indonesia, where the average per capita income is $11 a day." Less successful was Shoki Doi, a vitamin-fortified seven-cent yogurt sold door-to-door by local women, on commission. Factory delays, milk price spikes and a lack of profits for the women means that Shoki Doi is now sold largely in "urban stores, not rural villages as planned."

Aneel Karnani of the University of Michigan says the Shoki Doi experience isn’t unusual: "Companies overestimate the size of the market and end up selling to the middle class, not the poor." But Franck Riboud sees it differently: "Learning to make a nutritious product that can be sold for eight cents without a loss helps us when we put in place a volume strategy, even in mature markets," he says. Two years ago, in Senegal, Danone launched Dolima, a 50-gram pouch of yogurt "that consumers could tear open to squeeze out the yogurt." It’s been hugely successful and Franck is now thinking that "cheap yogurt sachets" might be a worldwide hit.

As Tommy Hilfiger’s star faded in America, it rose in Europe, which gave the brand a second chance back in America, reports Eric Wilson in the New York Times (5/16/10). Not long ago, things had gotten so bad for the Hilfiger label that "the company seriously considered selling his clothes at Walmart." When Macy’s placed orders, it was for "stretch cotton poplin dress shirts … because that’s what was selling from other designers." But at the same time, Hilfiger’s licensing business, headed by Fred Gehring (formerly of Ralph Lauren) began taking off in Europe.

This gave Hilfiger the proverbial second chance at a first impression, returning the label to its original image — "bright, preppy clothes and premium prices, but none of the hype." The fashions were "sold in more than 4,000 small stores from Spain to Germany" and "grew to more than $1 billion at the same time sales in the United States were falling." However, Fred Gehring remained worried that "the designer’s problems in America would eventually cross over to Europe," and engineered taking the company private.

Fred’s next move was "a deal with Macy’s to carry the line exclusively in exchange for more desirable placement in its stores and help with marketing." Macy’s now says Hilfiger is one of its strongest-performing lines. Hilfiger has since "opened a new flagship store on Fifth Avenue … And the business is now highly profitable, earning about $300 million annually, largely thanks to the European operation." It was acquired by Phillips-Van Heusen about two weeks ago for $3 billion, "nearly seven times what Phillips-Van Heusen paid for Calvin Klein in 2003."

"In the end, kids are the same all over the world. They see an ice cream truck, they come running," says Alex Conway in a New York Times piece by Vincent M. Mallozzi (4/15/10). Alex would know: His grandfather, James Conway, helped start the Mr. Softee franchise, selling soft-serve ice cream from trucks, back in 1956. The trucks are still going strong "in Washington Heights, Coney Island and neighborhoods in between," although they’re no longer permitted by law to ring their bells while they’re parked.

Ironically, that’s the only time they are permitted to ring their bells in China, where Mr. Softee is globalizing with five trucks in Suzhou, "an ancient city of more than six million people about 50 miles west of Shanghai … and one in a nearby city, Taicang." The idea of Mr. Softee in China occurred when Alex’s former college roommate, Turner Sparks, noticed that, despite "a deluge of American fast food franchises" there was nothing like Mister Softee. In fact nobody was selling anything at all out of trucks.

So, Alex filled out lots of forms and brought his cone-headed logo to China, under the name "Ruan Xin Xian Sheng," which translates into Mr. Soft Heart "because there is no Mandarin word for Softee." He also adjusted flavors to include kiwi and red bean blast, "a rice-cake-flavored ice cream covered with red beans and topped with whipped cream." That’s one of Mr. Soft Heart’s biggest sellers — and sales have doubled "every year since the first truck started rolling three years ago." Alex now plans to expand to Hangzhou and Wuxi.