Acquisition and Revitalization of Local Brands
Welcome back to our series on the 25 strategies that will support your brand building and business development activities in key emerging markets. Today we want to explain that it can make sense to acquire local brands and revitalize them when you are facing a rapidly moving market.
In some industries or product categories within emerging markets, consumption dynamics are shifting so quickly, it can make sense to take over existing local brands, revitalize – and, if necessary, re-position – them to save time and money and capitalize on that market’s growth story as fast as possible. Usually, the acquisition and revitalization of local brands takes place in categories such as food, beverages or other consumer goods as tastes, habits and preferences can be very local and closely related to the local culture. This approach is also more popular in the middle market, as there are usually fewer local brands that enjoy a luxury or top premium appeal in the key emerging markets.
A major driver for acquiring and revitalizing a local brand is speed and accelerated market access. In China for example, political support for rising wages, labor-market reforms and the increasing role of private enterprises is likely to further lift urban incomes significantly in the years to come. In such a high-speed environment with its rapidly shifting currents, it can make sense to acquire an existing brand. Industry reforms and major events like the FIFA World Cup in Brazil and the Summer Olympics in Beijing can shake and revitalize whole markets in a way that forces foreign brands to move much quicker than initially anticipated.
But time is only one factor that needs to be considered. Loyalty is another. While many domestic competitors in rapidly industrializing economies are still weak, they can have very loyal customer bases. In general, the commonly cited advantages of acquiring and revitalizing a local hero brand are as follows:
- an established name that already enjoys high awareness
- an existing, loyal customer base (usually among more traditional consumers)
- a functioning distribution or less resistance in local distribution channels
- positive image associations (usually linked to aspects of local culture or national feelings)
This strategy is usually applied in the mass market where many consumers still know the brand from past experiences. If consumers are older and more traditional, these brands might even evoke some warm feelings about the old days of someone´s own youth. Therefore, these brands might already have built relevant associations in the consumer’s mind that now need to be revitalized and complemented with other relevant aspects.
Brand revitalization is defined as a strategy that aims to recapture lost sources of brand equity and identify and establish new sources. Such a strategy can include product modification or brand re-positioning.
One of the better known examples is Thums Up, a major Indian cola brand with local taste. When India´s government ordered Western companies in 1977 to hand over control to their Indian subsidiaries or leave, Coca-Cola left. Several Indian companies tried to capture the national soft drink market. One of them was Thums Up, launched in 1977 by Parle, a food and beverage company in Mumbai that currently is India´s largest manufacturer of biscuits and confectionery. Thums Up ruled the Indian market for 16 years. After the launch of reforms in 1991, the government started to loosen controls. Coca-Cola and Pepsi re-entered the country. Coca-Cola bought Thums Up from Parle in 1993 and wanted to terminate the brand in order to protect Coca-Cola in India. But resistance from loyal distributors and consumers foiled the attempt. After strong protests and a 30-percent loss in market share, Thums Up was re-introduced. Coca-Cola invested heavily in the brand and revived its “Taste the Thunder” campaign, naming Bollywood action hero Akshay Kumar as new brand ambassador. Now Thums Up is ahead of Pepsi in India.
With slower growth in Europe and North America and a simultaneously expanding middle class in key emerging markets, Western companies are now trying to more quickly tap into emerging markets. Taking over local brands has become popular. Georgetown University´s McDonough School of Business has published research that shows the acquisition of local brands as critical to international expansion strategies. The researchers used data from Euromonitor and studied product categories like beer, hair care and carbonated soft drinks in the BRICs markets. They found that a significant part of the success multinational companies enjoy in emerging markets is derived from local brand acquisitions.