Fair Exchange: Nurturing & growing global brands in SA
by Erna George (@) Reading about Taste Holdings’ struggle with Starbucks not only brought back memories of my days working on global brands and being part of a global agency network but of my latest experiences importing loved global brands.
Global ties in any of these forms are tough to manage. While the principles you must adhere to, or the pitfalls you work to avoid, go beyond the principles of brand building, these are critical to a marketer’s decision-making to enable brand success. It’s not simply a case of bringing a well-established brand to South African shores as a guarantee of growth profits; it’s a fine balance of the mix and the costs. Operational and management elements are critical hurdles to overcome and, in some cases, continue to manage.
Global vs local — control and coordination
Global owners often have clear models for operating, clear brand strategies and growth agendas with clear milestones. These are critical for consistency and measurability — things such as factory requirements for local operations and quality, pre-set communication programmes, auditing procedures or prerequisites for certain raw materials to be sourced from established global suppliers for consistency and economies of scale (exchange-rate permitting. of course). The balance between global control and localisation is a fine one to achieve.
When I worked on a mayonnaise category project in The Philippines, I noted how much sweeter the taste profile of mayonnaise was in this region (ratified by consumer research). Even known global brands were somewhat tweaked for local tastes. Without this change, failure was guaranteed.
Global controls must be implemented with a healthy respect for local nuances. So, this could apply to other elements such as sales channels, how packs perform in use to impact pack formats and, obviously, communication (I still remember Vanish ads where the lips moved completely out of sync with the voiceovers). A level of flexibility to tailor relevant areas for local success is critical.
Some areas must be about the right controls, while other must be about seamless coordination. Think on social media, where whatever is being done on brand x in Japan is easily visible by someone in Brazil; finding a golden thread for the brand is critical as the brand is being managed in multiple corners. But we also must remember those brand-names that don’t translate well across cultures; similarly, some messaging must be tailored for best effect. A system to get localised elements reviewed with global teams is a must but is tough as time is short (particularly for digital elements); local nuance isn’t easy to convey and there aren’t enough rules for this changing environment we live in.
It is often that strategy must be centrally controlled but the execution may require some flexibility. In addition, developing good relationships with an equal powerbase between the local and global teams, with recognition that each view is important in its context, will seal the deal.
A distinct costing model
You would think that, with the mix mostly developed, the setup costs would be somewhat muted but this isn’t the case. While operating in the local arm of a global corporate selling a global brand, where the recipes and packaging may be mostly lifted and shifted, this may be the case yet a level of localisation will always be required. When having to import from one of a few global production facilities or having to contribute revenue cashed up to head office in US dollars or euros, the costs and relativities are somewhat different. You can work harder and sell more agency hours or higher-value projects vs your global counterparts, yet the exchange-rate effect makes your efforts seem pathetic — disheartening for progression seekers.
While many products rely on a level of globally sourcing, full importation brings the challenge of not being offset with other costs across the formulation, production or pack. Global changes to packaging or ingredients which may have only a couple of cents difference in US dollars will have a far greater impact on profit margins and price-increase percentages on our shores. This is further exacerbated by freight costs and potential custom duties. I remember the custom duties on a single pack of a grocery item being almost R5, making the price point vs local competition a significant challenge to justify.
Other costs that need to be considered are royalties or licenses which also need to be added and projected going forward. Think of Starbucks premium pricing and the store set-p costs limiting further expansion and impacting ROI. Global-made-local is a fundamentally different costing model. and the resulting price and potential fluctuations must be considered in great depth. Pricing strategy and product or pack size must be carefully considered within the local context to allow for sustainability.
Getting it here — the operational challenges
Marketers will need to work very closely with procurement on this one. Demand forecasting is always a challenge but, for imported products, this becomes more critical. There’s nothing like a 16–18-week supply chain to make availability one of your top challenges. When you have to be in a queue to get your local version packed, the opportunities for quick-win promotions are less likely. If a new import, establishing run rates by channel and at the detail of right range (pack, flavour etc) must be a primary focus as you can’t sell what you don’t have and there’s no need to explain why writing off expensive finished goods is best to avoid. This gives limited shelf-life products a different dimension to deal with. Project timelines and considerations are different; to alter packaging, eg, the timeline must include global team inputs and approvals. Planning promotions for global brands is required six months to a year in advance in some cases, especially for seasonal. Operations need clear systems, clear owners and oversight.
The global–local game is only going to become more prolific and more SA brands will embark on the globalisation journey, so best marketers get this admin and skill under the belt.
- Develop strong negotiation skills alongside polishing your persuasion to drive relevant localisation (and all of this over telecoms or video conferencing)
- Cost accounting or relevant increased interactions with finance and procurement will be critical to planning
- Due diligence to assess global brand feasibility must consider brand relevance in addition to all possible cost implications
Global brands are exciting, working with global teams can offer strong learnings and you will need to up the focus on finance and procurement workstreams. Don’t underestimate the impact of the change in focus or emphasis in your planning but enjoy the ride.
After starting at Unilever in a classical marketing role, Erna George (@) explored the agency side of life, first as a partner at Fountainhead Design, followed by the manic and inspiring world of consultancy at Added Value. She has returned to client-side, leading the marketing team in the Cereals, Accompaniments & Baking Division at Pioneer Foods. Her monthly “Fair Exchange” column on MarkLives concerns business relationships and partnerships in marketing and brandland.
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