by Ailsa Wingfield. The entry of multinational companies (MNCs) into new markets, while a boon for local consumers who gain access to a greater range of products, may sometimes cause the demise of local companies that are suddenly faced with daunting foreign rivals which have an array of advantages, including vast financial resources, diverse talent pools and sophisticated technology infrastructures, supply chains and operating practices. But, just as David slew Goliath (not the other way around), many local companies have not only survived the multinational competition but thrived. Indeed, many local companies’ flexibility and agility, as well as their superior grasp of the domestic operating environment, have propelled them past their global rivals.
One of the most interesting findings from one of our recent Nielsen reports that focused on Global Brand Origin and the dynamic between local vs global brands found conclusively that home-grown brands maintain a powerful hold over local consumers, with a brand’s country of origin cited as equally important — or even more important — than other purchasing criteria such as price and quality.
What this means is that, in a crowded retail environment, brand origin may be an important differentiator between brands, making it an extremely valuable asset for both global and local companies. Ultimately, the brands that deliver on a strong value proposition and connect personally to consumers’ needs will have the advantage in any given market.
“Country of origin is as important as — or even more important than — other purchasing criteria such as price and quality.”
Many consumers appear to have strong preferences about the origin of the products they buy, but how important is this attribute, really, when they consider a purchase? How does it stack up against other selection factors?
The short answer: It matters — a lot — with more than four in 10 global respondents (46% on average) saying brand origin is as important as nine other purchasing drivers, including selection/choice, price, function and quality. And more than one-quarter (28% on average) says brand origin is more important than other selection factors.
In South Africa, 84% respondents felt that brand origin was “more or just as important” as a product being on promotion, with the same figure saying a brand’s origin superseded the selection of products available and 82% saying a product’s origin was more or just as important as a product’s packaging, with the same figure recorded for its price.
In terms of the top-three decision factors for local consumers choosing a global brand vs a local brand, 54% choose global vs 53% local due to better price/value. Interestingly, a product being on sale or part of promotion comes in second in SA at 41% of respondents citing it as a reason to choose a global brand and 40% local, followed by a positive experience with the brand (42% for global brands, 35% for local) and better product benefits (33%, 25%).
It’s therefore clear that SA perceptions about a brand’s country of origin shape not only their purchase intentions but match and frequently surpass other key purchasing drivers. That said, it’s important to note that sentiment varies by category, and leveraging a powerful brand presence needs to be managed carefully, regardless of whether it’s global or local.
“South African perceptions about a brand’s country of origin shape not only their purchase intentions but match and frequently surpass other key purchasing drivers”
Local consumers display ‘seriously South African’ brand allegiances
In terms of specific food and home product categories, 64% of SA respondents in the study were quick to reveal that they chose to buy local brands over global brands because they want to support local businesses and the economy. However, when it came to durable and electronic goods, there was a clear preference for global brands which are perceived to offer the latest innovations (67%) and products of superior quality (56%). The same preferences were seen when it came to online product shopping for durable and electronic global products and local brands for consumable products.
While the majority of South Africans said they preferred buying global brands for the latest innovation (67%) and higher-quality product (56%), this was offset by global brands being perceived as more expensive (74%).
For the foods we eat, shoppers love local
When it comes to choosing fresh foods, South Africans clearly display a preference for choosing local brands over global brands in the categories of meat (77% vs 7%), vegetables (76% vs 17%), fruit (74% vs 6%), milk (74% vs 7%) yogurt (60% vs10%) and seafood (60% vs 10%).
This is because local brands often have an advantage in markets dependent on highly fragmented traditional trade, as they generally have local distribution networks and established relationships with retailers. In addition, local brands often cater best to local taste preferences and have the added advantage of lower prices.
“Local brands often have an advantage in markets dependent on highly-fragmented traditional trade”
This is true for SA consumers in the categories of water, juice, tea, coffee, crisps, crackers and biscuits, where local brands top the list once again. Fifty-seven percent of respondents say they prefer local juice brands vs 10% preferring global brands; with the remaining 27% saying brand origin was not important. Similar preferences were seen in the water category, with 52% vs 8% preferring local brands; and the tea and coffee category with 44% vs 26% preferring local brands.
Winning in the Beverages and Snacks categories is therefore all about understanding and innovating around local tastes and eating habits. Local companies often have a deeper understanding of consumer tastes in their market and can respond more quickly to changing needs. Therefore, they are typically adept at developing products that appeal to these particular preferences.
Global brand advantage in beauty & electronics
Where global brands win over local consumer rand expenditure is seen in the cosmetic environment, due to advantages in specialisation, assurance of quality, and identity with a strong social cachet. Thirty-seven percent of SA cosmetics purchasers prefer global or multinational brands, compared to 18% who prefer a local brand. South Africans also prefer global brands for shampoo and conditioner (36% vs 29%); deodorant (39% vs 28%) and razors (30% vs 23%)
Global brand advantage for electronic goods comes as no surprise as not many local brands may compete with high product-development costs, reflected in a SA preference for global brands in mobile phones (70% vs 8%), computers (71% vs 6%), televisions (69% vs 8%) and cameras (60% vs 7%).
Digital drivers: a world of products at your door
One of the fastest-growing influencers on the global vs local product face off is ecommerce, which has created an even more-complex retail environment for brands. In a borderless online world, multinationals and local players not only compete on the same turf but also with companies that may be thousands of miles away.
So what categories are consumers searching for and buying online, and are they different based on brand origin? Overall, respondents’ online shopping habits reflect their brand preferences. For durable categories, respondents are more likely to search for and buy global brands than local ones. When it comes to products we put in our bodies, however, the trend is reversed. Just as consumers are more likely to prefer local food and beverage brands in general, they’re also more likely to shop for local brands in these categories online than for global ones. Forty percent of SA respondents say they search for and buy local food and beverages online, while only 8% say they shop for global food and beverage brands online.
“In a borderless online world, multinationals and local players not only compete on the same turf, but also with companies that may be thousands of miles away”
Winning hearts and carts — globally and locally
Overall, it’s clear that, in many markets, multinationals and local players are squaring off face-to-face in a battle for consumers’ hearts and carts. And while both have strengths, neither have an automatic growth advantage.
Global and multinational brands wanting to expand their footprint in SA would do well to give local teams more autonomy in product development in order to respond to rapidly evolving consumer needs. This could be pursued via partnerships with local-market experts and companies with regulatory, infrastructure, supply and distribution experience, along with investment in local talent for product development, production and marketing strategies.
For local brands wanting to meet the challenges of global competitiveness in the local market, they could look to internal challenges, such as the development of leadership knowledge; the standardisation of operations to improve efficiency; and the investment in skilled talent and financial incentives on par with the market in order to keep employees satisfied.
Local brands could also use their advantages of consumer knowledge and localised decision-making to innovate in both unmet and emerging needs, and focus on getting products to market ahead of the competition. Ultimately, however, their emphasis should be on embracing their home-grown benefit of SA national consumer pride in buying local products and the convenience and freshness of locally sourced ingredients.
Ailsa Wingfield is head of thought leadership across Nielsen’s Emerging Markets, with responsibility for building strategic foresight through knowledge creation and thought-leadership content development. She has extensive experience in Africa, having worked with global and local brands in multiple countries across the consumer good and telecommunications industry.
The article first appeared in the 2016 edition of Brands & Branding in South Africa, an annual review of all aspects of brand marketing — consisting of case-studies, profiles, articles and research. Editorial contributions and sponsored brand profiles accepted until early August for the 2017 edition. Copies of the current edition are still available — buy one here.