Next Global Brands Arriving from Emerging Markets

Discussion
Jul 31, 2009
Tom Ryan

By Tom Ryan

The days of
global dominance by Western brands may be numbered. Research from a U.K.
consulting firm predicts that due to shifts in global economic wealth,
many of the next mega brands are likely to emerge from Asia, the Middle
East or South America.

Wolff Olins,
the consultants behind the London 2012 Olympics
logo and the Product Red campaign, highlighted five food and drink brands
from emerging markets that have the potential to become global brands.
They consist of Juan Valdez Café, a Colombian coffee chain; Almarai,
a Saudi dairy and fruit-juice company based in Riyadh; Patchi, a Lebanese
boutique chocolate chain; ChangYu, China’s biggest wine producer; and
United Spirits, India’s largest liquor group, which owns Scotch whisky
Whyte & Mackay.

“It used to
be possible to be a global brand by dominating the U.S. market,” Melanie
McShane, a strategist at Wolff Olins, told the Financial
Times
. “That’s
changing rapidly. Now you have to be number one in Asia.”

Bain & Co.,
the Boston-based consultancy, similarly forecast last year that the number
of companies based in emerging markets featured in the FT
Global 500 –
a
ranking of the biggest corporations will
increase from roughly 10 percent in 2001 to around 25 percent in
2015. Bain attributed the change to what it called a “seismic shift” away
from developed markets.

According to
Bain’s estimates, representation from Western Europe in this group is
expected to stay largely constant over the timeframe, but Japan and Australia
could see their totals fall by around a third. The number of firms based
in the U.S. and Canada is expected to erode from around half to under
40 percent by 2015.

Satish Shankar,
a Singapore-based partner with Bain & Co, told the Financial
Times
that
established western consumer goods brands were being forced to “battle
it out” with emerging market brands. In response, PepsiCo last year bought
Lebedyansky, Russia’s largest juice group, and Unilever picked up Inmarko,
Russia’s biggest ice cream brand. Coca-Cola was blocked this year by
Chinese regulators from acquiring Huiyuan, China’s biggest juice group.
Diageo is in talks over acquiring up to 15 percent stake of India’s United
Spirits, while PepsiCo this year formed a joint venture with Almarai
in Asia, Africa and the Middle East.

Last week’s
release of the 2009 Superbrand survey of the U.K.’s top 500 consumer
brand was still dominated by Western names such as McDonald’s, Krispy
Kreme, HMV, Microsoft, Google and the BBC.

Discussion Questions:
Do you expect to see more global brands coming from emerging markets?
If so, when and how should Western brands – especially U.S.-based ones
– respond?

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7 Comments on "Next Global Brands Arriving from Emerging Markets"


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Dr. Stephen Needel
Guest
11 years 9 months ago

I think we need to separate who owns what from what sells. As foreign ownership increases, those companies may well become big players on the western stage. However, I think it less likely that they will bring emerging-nation brands into the western countries. Owning a major brand in Russia or China may be a great move for a western-based organization–that doesn’t mean the brands get exported.

Nikki Baird
Guest
Nikki Baird
11 years 9 months ago

The reality of global demographics says this must be true, especially as emerging markets become consuming powerhouses in their own right. I think success or failure of those brands will depend in part on how much or little their home governments protect them. Companies like Pepsi, Coke, P&G and Unilever have global capabilities that are significant, and have developed extensive expertise in localization and local preferences for both products and marketing across countries. So while it is tempting to be wary of a Western, global powerhouse coming in and taking over a beloved local brand, there is also something to be said for tapping into the experience and capabilities they have already accumulated–especially over learning it all for yourself the hard way.

Sid Raisch
Guest
Sid Raisch
11 years 9 months ago

Do the brand names Toyota, Honda, and Nissan sound familiar? Let’s also consider the other brands these companies own–Lexus, Scion, Acura, and Infinity. Consider electronics, farm and lawn & garden equipment. It’s surprising they haven’t already owned retail store racks and shelves. You’ve got to give them credit for starting at the top with big-tickets and buying their way down.

Tim Henderson
Guest
Tim Henderson
11 years 9 months ago

There’s no stopping the emergence of global brands from emerging markets – and it shouldn’t stop. Today’s consumers are global consumers, and they have an unquenchable thirst for new and unique products – some of which come from emerging markets. And I have to believe the competition will only help US brands to think more creatively about products that can differentiate their offering.

Jerry Gelsomino
Guest
11 years 9 months ago
I believe there are significant opportunities for innovation and the emergence of creative brands coming from Asia as alternatives to Western brand dominance. So far the research I am doing shows that there are as many inventive solutions swirling around this part of the globe as there are in Europe and North America. Unfortunately, the media, movies, lifestyle magazines, etc. have portrayed Western lifestyle filled with Western-based goods as the ultimate pathway to living a superior lifestyle. I think the economy, greed and abuse reflected in the economy have tarnished that vision. A professor at a local university told me it has been a matter of infrastructure. “If a company is making money duplicating Western brands, and there is no interest in alternative, innovative new products, why invent something new? When demand begins to emerge for our own products, you will see a heightened amount of innovative new brand introductions.” Also, everything I read says China/Asia has the power and potential, but it needs talent to help market local brands to the world. I expect… Read more »
Christopher P. Ramey
Guest
11 years 9 months ago

The divide is too wide. It is only common sense to expect emerging brands from previously remote regions of the world. But, the worthy brands/products are more likely to be bought by one of the superbrands rather than topple them.

Shilpa Rao
Guest
11 years 9 months ago
This is not a surprise; most brands mentioned above have their manufacturing base or sourcing origins in emerging markets, mainly for cost benefits. Most products in US come with a tag “Made in China/India.” It’s not a very distant future, as the wealth equation shifts, that global brands emerge from these markets. It is true, it will be a while before these brands are accepted as “premium” brands in western countries, but as the wealth equation shifts, some of these could also be acquired brands. For example Jaguar & Land Rover (premium auto brands in UK) were acquired by Tata Motors, an India-based company. Not just is automotives, but also in beverages where Pepsi and Coke have dominance, a brand like RED BULL, a pick-me-up drink for workers in South East Asia which became a trendy vodka mixer in Europe, has set its mark. Airlines like Emirates (Middle East), Singapore airlines and others have also made their mark in the western world. In a truly global economy, which we are heading towards, it wouldn’t really… Read more »
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