The myth of the global consumer

As incomes rise around the world, will consumers everywhere hunger for the same luxury products? Or will local tastes win out?

In 2012, Kraft Foods announced that it was changing the name of its snacks division to Mondelez — a made-up word that combined the Latin for world, "monde," with "delez," a Spanish-sounding stand-in for "delicious."

The move caused a lot of second-guessing but, as Kraft CEO Irene Rosenfeld explained in a press release, the idea was to reinforce the "truly global nature of this business."

Undergirding the decision were concerns about the global currency of US brands. Was Kraft built to travel beyond America’s borders? And if Kraft was dropping the cookie-cutter approach, should other American brands do the same? At a time when China is eclipsing the US as the world’s economic superpower, is it time for US brands to follow Mondelez’s example and play down their American roots?

At the same time, attempting to integrate a global brand into a local culture is getting trickier. "It’s becoming much harder to integrate because consumers are getting smarter and savvier," says Christina Hloros, vice president and associate head at The Futures Company’s Global Monitor. "You have to really understand the nuances and the core values."

There’s no clear answer, but the hegemony of mostly US-based brands is facing its biggest challenge yet. As the US represents a smaller share of the global market, brands from elsewhere are elbowing their way on to the world stage. For instance, for the first time, mainland China is producing global brands that stand toe to toe — financially, at least — with those from America. There’s no Chinese Coca-Cola yet but, in recent years, Lenovo, Alibaba Group and Tencent have become major players, while Xiaomi is eyeing an entry to the US and Europe.

The good news is that, if you’ve been spending your summer worrying about the situation in Greece, you may not be aware that the world economy is humming along nicely — and is poised to get better. According to a study by AT Kearney, global spending on consumer goods is projected to grow by $12 trillion (43%) between 2010 and 2020. There has been a compound annual growth rate of 3% for such spending since 1990.

As prosperity blesses a greater proportion of the world’s population, one concern among marketers is whether they will all develop the same habits and propensities to spend such income. Is there such a thing as a "global consumer?"

The answer is twofold. Yes, people tend to desire the same things as they reach a comparative level of affluence. However, there has been some pushback in the past few years against global brands as some consumers yearn for products developed locally — at least in some categories.

"There are some categories and segments that are more homogeneous and some less," says Doug Holt, the chief executive of Cultural Strategy Group and author of How Brands Become Icons. He believes sometimes you can "cheat" and ignore the peculiarities of a particular market and get away with it. On the other hand, he says, there are "some that, if you ignore the country context, you will certainly fail."

Maslow’s hierarchy and Apple
Research shows that there is something of a collective consciousness. That is, people generally want the same things when given the opportunity. In psychology, Abraham Maslow outlined a hierarchy of needs in 1943 that has been generally accepted as universal. That is, once you provide basics such as food, clothing and shelter, people crave love, esteem, self-actualization and self-transcendence.

Through a marketing lens, this means consumers in more developed economies tend to care less about product attributes than how those products make them feel, which is why US advertising often caters to self-actualization and self-transcendence. For instance, Nike’s ads don’t dwell on how bouncy its running shoes are but, instead, challenge consumers to "Just do it." Coca-Cola doesn’t talk about how
delicious and effervescent its flagship soft drink is; it promises happiness.

While Maslow’s hierarchy applies in a general sense, though, there are individual differences in consumption patterns. As AT Kearney’s report notes, Chinese consumers spend a much larger "share of wallet" on education and less on alcohol and tobacco than Americans have traditionally. Indians earmark four times as much for communications and twice as much on transport than Pakistanis, but Pakistanis spend four times as much on food.

Despite those discrepancies, Hana Ben-Shabat, a partner in the consumer retail industries practice at AT Kearney, says a consumer hierarchy fits a predictable pattern: food and shelter, followed by clothing, then entertainment. "Then it becomes more experiential — going on vacations and so forth," she says. There are also examples in fashion that illustrate people want the exact same things all around the globe. (I learned this recently when I found a sweatshirt I had my eye on at an H&M in New York on a rack in Berlin.) "I think there is a global consumer because we have more and more global brands," Ben-Shabat says.

The Internet has ensured there are no longer backwaters where outdated fashions can thrive. "You can be in China or Azerbaijan and watch Milan Fashion Week online," she adds. "We’re starting to see consumers around the world wanting to purchase the same thing."

A great beneficiary of this phenomenon is Apple, whose iPhone and Apple Watch can be described as fashion accessories. Other winners include luxury car brands such as Mercedes-Benz and BMW, as well as the aforementioned H&M — although high-end clothing brands are in a more precarious position.

Local influences
Apple has had a fairly easy time with China: The company now sells more iPhones in China than in the US. Hloros says that’s not necessarily the norm. In the past three or four years, there has been a move in some developing markets away from multinational brands and toward local ones. "There’s more emphasis on the intangibles," she explains. "What the brand stands for, its values, whether it gives back to the local community, whether it represents them as an individual."

A recent study by Bain & Company underscored this preference. The survey of 1,400 Chinese consumers found that 45% planned to buy new, emerging brands over the next three years.

Rebecca Brooks, a founding member of Alter Agents Market Research, says this phenomenon is also playing out in the US right now. "In the '80s or '90s, when people had extra income to spend, they all wanted the same status symbols," she says. "That’s eroding." Brooks points to Gwyneth Paltrow’s widely loathed blog Goop, which advocates for artisan brands such as Alex Mill sweaters and Loeffler Randall shoes.

"She’s not putting up Bentleys and Rolexes," Brooks adds, noting that Paltrow’s penchant for locally sourced, handmade goods echoes that of other one-percenters around the globe.

Hloros says research began to show in 2012 that local brands were taking share from multinationals. "What we were finding was that, in these emerging markets, like China, India and Brazil, yes, they were absolutely open to outside influences," she says. "But there was also a really strong connection to their own culture that was making more room for local brands."

That said, sometimes consumers mistook multinationals as local brands. "If you are a multinational who has done a really good job indigenizing yourself within the culture, consumers may see you as a local brand even if you’re owned by a large multinational in some other country," Hloros explains.

She believes those shifting attitudes set the stage for the rise of Xiaomi, a Chinese smartphone-maker that some have compared to Apple, and the Indian auto-maker Tata. "It’s not just that consumers in those markets are open to local brands, but those brands have become a lot more sophisticated and able to compete with the more established brands," Hloros says.

The cyclical history of global brands
If you have followed the thinking behind global brands, what Hloros is saying may sound familiar. Even during US brands’ postwar hegemony in the '50s and '60s, the thinking in marketing circles was that US brands had to customize their offerings for local markets. In a landmark essay in the Harvard Business Review in 1983, Theodore Levitt proposed that marketers should do away with this practice of multinationalism and, instead, offer "globally standardized products that are advanced, functional, reliable and low-priced."

Levitt argued that technology made this possible as it promoted a "converging commonality." That is, because of global mass media and air travel, consumers across the world were aware of global brands and desired them. Corporations could take advantage of this by pumping out products on a massive scale and realizing economies of scale. "The world’s needs and desires have become irrevocably homogenized," Levitt wrote. "This makes the multinational obsolete and the global corporation absolute."

Local companies, Levitt said, wouldn’t be able to compete with global corporations, which could undercut them on price. Though "widely lambasted by marketing academics as a recipe for a boringly homogeneous global village," as another Harvard professor, John Quelch, wrote in the Harvard Business Review 20 years later, Levitt’s essay was influential among captains of industry, who transferred P&L responsibilities from local markets to the mother ship and did away with products that were tailored for local markets.

The strategy was remarkably successful. As Quelch noted, global trade almost tripled between 1980 and 2000.

However, in about 2000, the process stalled as emerging markets such as China and Eastern Europe rediscovered their fondness for local brands. Partially, this was fueled by a backlash to American brands and US cultural imperialism, particularly in Western Europe and the Muslim world. For instance, Levi’s jeans, a symbol of such imperialism, lost market share to Spain’s Zara and Italy’s Diesel. This was the height of the turn-of-the-millennium backlash epitomized by Naomi Klein’s influential book No Logo.

In Germany, for instance, a website urged consumers to boycott US and UK brands and offered hundreds of alternatives.

Global corporations reacted quickly. Under its chief executive, Douglas Daft, Coca-Cola announced a "think local,act local" marketing strategy and began adapting marketing messaging to local tastes. At the same time, Coke and Philip Morris (now Altria) began buying up local brands to further the same strategy.

The backlash didn’t last long. As Quelch predicted, China led a renaissance for global brands and began producing its own brands with worldwide stature.

Quelch tells Campaign that global brand loyalty follows a very predictable pattern. When the economy is strong, global brands do well. When it is not, the pendulum swings back to local brands. "When economic times are good, people feel optimistic and open-minded and have the money to spend on global brands," he says.

Allen Adamson, the chairman of North America for Landor Associates, makes the same observation: "When there’s a recession, global brands don’t do as well because they’re more expensive."

So is there a global consumer?
This leads us back to the original question: is there such a thing as a global consumer? The answer is: It’s complicated.

Holt says that there are some categories that are more homogeneous and some less so. In general, clothing, autos and electronics tend to be more homogenized, and food is probably the least so.

On a broad level, that might explain why Apple seems to be having an easy time of globalizing its brand, while Kraft felt the need to rename itself Mondelez. Experts agree that food is the category that is most resistant to globalization. Even McDonald’s serves items such as the Sakura Teritama Burger, a pork burger drenched in teriyaki sauce, in Japan and hosts vegetarian restaurants in India.

Such overtures have had limited success. Thanks in part to food scandals in China and Japan in recent years, the Golden Arches has posted global sales declines lately. The fall in sales is compounded by a shift in tastes in McDonald’s core US market toward more ostensibly healthy fare such as Chipotle.

McDonald’s troubles illustrate the high stakes for brands playing on a global level. You can’t just perfect a concept in your home market and export it abroad any more. Self-actualization these days means asserting your individuality by spurning legacy brands. Paradoxically, consumers are converging toward commonality, but that commonality is increasingly based on being more of an individual.

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