Richard Tomkins: Why Europe is rejecting US brands

Richard TomkinsHow fortuitous. There I was, glumly predicting in this space a year ago that the golden age of global brands was over. Then, last week, I read in the FT that big US brands such as Coca-Cola, McDonald's and Marlboro were suffering a sales slump in what Donald Rumsfeld, US defence secretary, once described as "old Europe".

I bear no personal malice towards big US brands, nor for that matter towards Mr Rumsfeld, but I am sure you will understand when I tell you that the story filled me with a momentary glow of smug self-satisfaction.

The only problem is: to the extent that I was right at all a year ago, was it for the wrong reason?

The question raised by last week's FT story was whether anti-American sentiment resulting from the Iraq war and the torture of prisoners at Abu Ghraib was adding to local difficulties that US brands were suffering in Germany, France and other European markets. US companies tend to dismiss this kind of talk, at least in public, but a study that came out in May this year gave credence to the idea.

NOP World, a market research company that carries out an annual poll of 30,000 consumers in 30 countries outside North America, found in its latest survey that the growing support for American brands seen in earlier years had peaked and gone into decline. The proportion of interviewees saying that they liked American brands had gone down from 30 per cent the previous year to 29 per cent, while those saying that they used American brands had declined from 30 per cent to 27 per cent.

The implication was clear: although the study was carried out before news of the Abu Ghraib prison abuse broke, the concatenation of America's militarism, its unilaterism on issues such as the Kyoto treaty on climate change and its high-profile series of corporate scandals had dented the country's image, and with it, the image of its consumer brands.

A year earlier, my take had been a bit different. Then, too, many US brand owners were struggling. But I took this as a reaction to the ideas set out in 1983 by Harvard Business School's Theodore Levitt in his influential essay The Globalisation of Markets.

Prof Levitt argued that, as improved communications and technology shrank the world, cultural preferences would disappear and people's tastes would converge. The corporations that stood to gain most from the trend were those that exploited the economics of simplicity and supplied this single, global market with standardised consumer products that were the same wherever they were sold.

Sure enough, when the Berlin wall and other barriers to world trade came down, consumer products from the west, particularly the US, poured into the world's newly opened markets - and people long-denied the forbidden fruits of Coca-Cola, McDonald's and Marlboro eagerly lapped them up.

In many countries, however, the novelty of these newly accessible global brands soon wore off. People of modest means found them far too expensive to buy on a regular basis. Consumers also started taking greater pride in their cultural identity, intensifying the preference for local, as opposed to global, products.

In short, Prof Levitt turned out to be wrong. Although homogenisation did affect some product categories - mainly in the technology sector where functional attributes tend to count for more than emotional or cultural preferences - globalisation led not to monoculturalism and a convergence of tastes but to the emergence of a global culture embracing an enormous increase in the range of choices available to consumers. Now, people can buy products from all over the world, expressing their preferences and indeed their identities by choosing from a vast array of local, regional and global brands.

On balance, I still think this increase in the range of choices and the fragmentation of tastes poses a greater threat to the likes of Coca-Cola, McDonald's and Marlboro than anti-American sentiment. I just do not believe that many people are in a frame of mind to think much about US foreign policy when they are thirsty and wondering which soft drink to buy.

And there is evidence to back this up. According to a global brands survey involving 3,300 consumers in 41 countries cited in September's Harvard Business Review, people may say they are against American products - but when it comes to making purchasing decisions, anti-American sentiment has a negligible impact. The three factors that do matter are: quality (the idea that if a brand has become world-famous, it must be good); the sense that, by consuming a global brand, the user becomes part of a like-minded global community; and the extent of the brand owner's commitment to social responsibility.

That said, if you were inventing a global brand today and could choose anywhere in the world as its country of origin, would you honestly pick the US? For a technology product, the answer might still be yes. But for a consumer product with greater emotional content?

For as long as anyone can remember, the US has stood as a metaphor for freedom, tolerance and democracy, and American brands have been the beneficiaries of that image. Recent anti-American sentiment may be regarded as an aberration and insufficient to impinge much on America's underlying brand equity. But if the result of this week's US presidential election signals that the anti-American sentiment is likely to persist, it would be surprising if big US brand owners were not quietly wondering at what point their country of origin would become a liability instead of an asset.