Hello. Hola. Bonjour. Welcome to the global marketplace.
Vast populations of newly elevated consumers have drawn western brands across the globe into new markets. Entering these markets requires a great deal of sensitivity. A botched launch can lead to long-term fallout, squandering entire nations of potential consumers.
In 2012 the BRIC powerhouses of economic growth are stalling, curbing a decade of rapid expansion. Major markets like Japan have been in decline for decades. As the emergent classes across these cultures become established so too have their tastes, behaviours and competition for their new wealth. The age of plenty for inbound brands won’t continue unless a new era of innovation can evolve these markets.
This report focuses on enticing markets in Asia and Latin America -the markets we have recently visited- guided by some of our 3000 Sensers, the culture savvy individuals who tap us into their home locations.
1. Brazil’s Aging Youth
Brazil is synonymous with the youthful vibrance of a growing nation. Its burgeoning middle class is well established, positioning Brazil as an attractive market for everything from Cola through to Aston Martins.
This optimistic, social and brand positive image of Brazil holds true although there is another side to the giant of Latin America. Brazil’s growth is in no small part due to its ‘Demographic Dividend’ as smaller families, more working women and higher employment age mean working Brazilians outnumber dependents. This effect is unsustainable as the ageing middle class begin to retire.
Tim Lucas Sense’s partner in Brazil elaborates:
“Brazil, which has always been the country of the future must now come to terms with the fact by 2050 it will be a nation with more people over the age of 65 than currently seen in the world’s oldest nation, Japan.”
“Such a major demographic shift creates a wide range of social and political necessities but also for companies there will be new opportunities and challenges not only in serving the needs of an older Brazil but also in how to engage with this population in an increasingly digital communications landscape.”
“Some brands such as cosmetics giant Natura and the bank Itaú have begun to create products and campaigns aimed at the seniors market but at present they are very much the exception.’
Brazil’s vibrance will always be associated with youth and creativity. Smart brands that pre-empt the coming shift in age distribution and prepare for an older Brazilian market will play a key role in its near future.
2. Argentina: Pride throughout a fall
The Argentinean economy has almost doubled in the last decade with growth of 95% up to 2011 and it represents the largest South American market for US imports at $55m.
Sounds enticing, but closer scrutiny shows a difficult market for western imports.
Argentina has enforced significant taxes on imported goods to curb capital flight. Growth has decelerated as a result with Goldman Sachs stating ‘Argentina now has the weakest economy and the highest inflation in the hemisphere’. This has focused Argentineans on buying cheaper, local goods with strong internal produce becoming a point of national pride.
The recent expropriation of oil giant Repsol’s Argentine operation was enormously popular. Argentines clearly value their local produce and defending their natural resources, a sentiment Starbucks recently learnt all too well.
This proud nature extends to how Argentines choose to present themselves as Helen Jamieson Sense Worldwide’s resident fashion expert discovered on a recent trip:
“We first heard from one of our experts (Tomas Chamorro-Premuzic, PhD Professor of Business Psychology, UCL) that ‘Argentina is the most vain country in the world’ and from interviewing people in Argentina about what their appearance means to them we can understand why this is.’
‘Argentina is a hugely judgemental society, you are judged by others on every detail of your appearance and first impressions count.’
‘This attitude is influenced by a few key factors; one is the popularity of TV gossip shows and magazines where celebrities appearance is ruthlessly scrutinised. Secondly Argentina is a society rooted in Southern European conservatism and Catholicism.’
‘Many schools are military, religious or both meaning children are required to be smart. In business your appearance depicts your status and credibility, in life it’s your family values. One man told us that “these days you’re even judged on the smell of your aftershave.’”
Knowing products sold in Argentina will be pricier due to additional taxes, brands can benefit from premium storytelling, offering the social cache and quality positioning Argentines desire. Building their needs into future products will be essential to succeeding in an uncertain market, whilst the ownership derived from co-creation can appeal to their locally focused tastes.
3. Asian Tiger Cubs
Our research into Millennials globally has highlighted key differences in the mentality of Western and Asian young people. The individual identity and cultural capital valued by European Millennials gives way to a more communal identity and a conspicuous consumption in Asia.
Brands benefit from overt interactions with pop culture more so than in the west where obvious product placement or overbearing sponsorship is distrusted by young consumers.
Seonghee-Yang our well dressed man in South Korea explains further
“Brands that do well here are those that are already popular outside of Korea. They normally generate interest in the [South] Korean market by introducing limited editions or throwing huge parties and promotional events. I think Koreans appreciate this because we are often overlooked due to our bigger neighbours (i.e. China and Japan).”
“In Korea, I think it is often general consensus that matters rather than individual opinions or styles. Celebrities come into this equation. Brands are normally introduced as the best brands from Europe or the US with x and y celebrities as devoted fans. For example, Moscot glasses are known as Johnny Depp glasses and Mulberry bags are called Alexa Chung bags. I think it is about giving the Korean consumers something to talk about and ultimately gain the recognition from their peers.”
To stay ahead of competitors, brands must ensure they have a constant stream of high profile collaborators and the most innovative collaborations with them.
South Korea has the best digital infrastructure in the world and brands who can leverage leading edge technology are welcome, often proving concepts that may soon catch on in the lagging West.
Tesco has pioneered new forms of shopping to great success. Taking ad-space in train and bus stations Tesco displays large interactive ‘virtual grocery stores’. Consumers with some time and a smartphone on their hands swipe through the produce scan it with their tesco app and it can be at their home within 2 hours.
The perfect combination of innovation and situation given commuters are the least likely to want to carry home their own goods. The project is now being rolled out across South Korea with the app downloaded around 1m times and set for a UK launch with a trial at Gatwick Airport this week.
4. Speaking Chinese
Sounds simple enough, but little about entering the Chinese mainland ever is. Politics aside, a common shortcoming is simple linguistics in the face of a complex mix of Mandarin and Cantonese with untold local variations.
As a result China is a market where local expertise is essential. Vincent Chau our cultural translator in China explains:
“Learning Chinese – especially local language and idioms, not just Mandarin – building reputation, showing in-depth cultural knowledge and a status within the target audience are all key to entering China”
Vincent highlights two – perhaps surprising – icons in the great American fast food tradition as success stories: KFC and Pizza Hut. Both of whom have customised their menus to serve their Chinese customer. While KFC benefited from being first into China and presenting a product Chinese palettes understood (…chicken) David Novak CEO of parent company Yum! Foods stated success was down to the fact ‘we stayed in touch with consumers’ needs’.
The company replaced unpopular mainstay sides of coleslaw and mash with seasonal root vegetables including shredded carrot, fungus and bamboo shoot. They even went as far as changing the meat in their burgers to a darker chicken, unpopular in the west but doubling sales in China.
Maintaining brand integrity, benefiting from western curiosity and most importantly modifying their offering to better suit Chinese tastes KFC enjoys market dominance in China.
Positioning is also a key factor of success. In a tea-drinking culture Starbucks positioned itself as a hub for China’s busy and aspiring professionals. A space to be enjoyed by upwardly mobile Chinese in between office and home.
Chinese would rarely drink coffee at home – especially relatively expensive Starbucks – people were eager to be seen in the aspiring light Starbucks had created. Stores filled up and Starbucks branded cups are publicly displayed as signifiers of success and personal advancement – even if the customers replace the contents with a drink more to their tastes.
As a result of this strategy Starbucks have grown at a rate of 1 store every 4 days in China throughout 2012.
5. Divining the unsaid in Japan
Japan is amongst the biggest, most advanced markets in the world but presents a complex series of contradictions for inbound brands to crack. Spiritually-minded, technologically obsessed, Japanese obsession with all things future facing is balanced by a love for heritage and tradition.
On top of this a lot goes unsaid in Japan but discerning those latent needs requires a sympathetic approach. Asking a Japanese consumer if they like a product will often lead to a polite yes, whether they like it or not. An iconic product launch failure from General Mills targeted at the Japanese housewife demonstrates the value of genuine qualitative research with local expertise.
Drawn to the Japanese rising middle class, GM identified the Japanese housewife as the perfect customer for their home baking products. They pulled the numbers and hit their first issue; Japanese homes rarely contain an oven, tricky to sell their oven-bake cakes to then. Undeterred GM found that every household has a rice cooker and set about modifying their home bake cake products to work in the device.
With much R&D GM achieved the impressive feat and the product taste tested well. They had done everything right, except getting up close and personal with the people they aimed to serve.
The product sold fairly well but experienced no repeat purchases. GM had totally misunderstood the Japanese relationship with rice and their rice cookers. Rice would often be cooked in one go to cover several meals for the day and stored in the rice cooker itself, preventing it from being used for home baking.
More importantly the importance of rice in Japan which has deep cultural significance was ignored. Fresh white rice is symbolic of Japan itself, pure and unadulterated by foreign influence. The fact the Western product was perceived to negatively effect the taste of subsequently cooked rice was simply intolerable to the Japanese families. Ten years later GM’s baking products still had little penetration in Japan
6. India’s Cultural Kaleidoscope
What many brands fail to understand is that even if your brand is a household name across the world new consumers in new markets may not know or care. Blankly transplanting your business from Detroit to Delhi is a sure-fire route to failure.
Our researcher in India Ameya Desai explains:
“For a country with a population of over one billion and a burgeoning middle class, the importance of understanding local sensibilities cannot be overstated. Often marketers overlook cultural preferences, differences in tastes, religious sentiments, habits ingrained over generations and even the weather when they introduce their products to a market like India.”
“When Kellogg’s was launched in India they disregarded the fact that Indians prefer having hot milk instead of cold, and cornflakes turn soggy in hot milk. They also ignored the fact Indians are used to eating traditional fare like parathas or idlis for breakfast, if at all they do have breakfast.”
“Indians prefer their juices sweet. Though Tropicana – and perhaps Kellogg’s too – is sticking to their guns, and intending to change preferences over a period of time.”
“McDonald’s, however, is a brand that has got things right. The largest selling dish at McDonald’s Indian outlets is McAloo (burger made of potato), a vegetarian and uniquely Indian variant of the burger. They don’t serve beef at all, and even discontinued mutton when they realized there aren’t many takers for it.”
Innovation is key to success in these markets and co-creating with local consumers and innovators presents the greatest chance of entering successfully. Brands who enter by utilising their existing strengths but incorporate an understanding of local culture, needs, motivations, tastes and attitudes have a strong platform to make the most of these new consumers.
If brands do not innovate in a tactful* manner to their host markets they are primed for disruption by the creativity and ingenuity of local players as well as their international competitors.
Join us next time, when we explore the local cultures of innovation around the world that can inform innovation culture in your business. From India’s ‘Jugaad’ frugal modification to Brazil’s creative excellence and Africa’s rising hacker culture that led to breakthrough revolutions in banking.
If you need to understand a new market in this way or need to reinvigorate an existing product drop us a line at firstname.lastname@example.org.
1. A keen sense of what to say or do to avoid giving offense: skill in dealing with difficult or delicate situations.
2. Keen sense of what is appropriate, tasteful, or aesthetically pleasing; taste; discrimination.