coke

How to launch a British brand in the US

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We are often asked at The Value Engineers to tackle the big challenges facing global brands. The tension between adapting a brand to cater to the tastes and preferences of local consumers, whilst still maintaining a consistent global outlook is the pinnacle of excellent brand management and where we thrive. One of the questions often considered is this: how does a brand replicate the success it has in one country in another, completely different country?

I have a particular fascination with brands that try and bridge the gap between the UK and US. They say we Brits and the Americans are divided by a common language, and no more is this true than in the world of global brands. Despite speaking the same language and our cultural similarities, companies such as Tesco have shown us that British companies cracking the US is easier said than done. It is not an impossible challenge, however, with brands such as Pret a Manger and Topshop going from strength to strength. So what should a British brand be mindful of when looking to launch in the US? We’ve come up with six points to be mindful of when launching a British brand Stateside that should help steer your brand to success!

Be brutal. Being a British version of a brand that already exists may work in the short-term, but if that is your only real point of difference then you may suffer long-term. So what’s your true point of difference in the US market? A good starting point in understanding your brand’s point of difference is to look at the consumer insight it delivers against. Pret a Manger is a great example of a British brand that successfully identified that in the US they need to deliver on a different insight than in the UK. Broadly speaking, Pret’s UK consumer insight is grounded in the desire for a more premium, high quality lunch offering delivered fast. Yet in the US (and New York to be precise where Pret stores are primarily located) the insight is similar but nuanced, where the desire for a more healthy, premium high quality and fast lunch offer is satisfied.

Is your competitive point of difference in the UK really a point of difference in the US?

Be selective. A country that counts New York, the Rocky Mountains and the Deep South within its borders can almost be treated like many separate countries, all with their own competitor landscapes, diverse consumer bases, and local resources. Which part of the US is most likely to respond well to your brand? Which people? Can deliver your proposition in that part of the US with the resources available there? On reflection the Fresh and Easy proposition developed by Tesco would have perhaps worked better on the East Coast, not the West Coast. Their Fresh and Easy proposition centred on convenience and speed, with stores using self-checkouts to encourage smaller value more frequent trips. Yet on the West Coast, the sheer size of the geography means consumers drive more, shop less frequently and spend more each time. Hence the Fresh and Easy proposition did not quite cater to the existing behaviour of West Coast consumers. The East Coast, which is more densely populated, may have been at better fit for the Fresh and Easy model.

Are you targeting the right people in the right part of the US?  

Be British (or not). A country’s nationality can influence its perceived competence in certain fields. German companies are renowned for efficiency and high performance. Italian companies are known for artistic and creative flair. Japanese companies are seen as technologically advanced. What are British companies known for overseas? And what effect will a British association have on your brand? It is important to decide whether Britishness, and its associated perceptions, will improve or hinder your brand. Topshop have successfully leveraged its British credentials, and in particular its London roots, as a key asset in the US. In fashion, London is seen globally as a dynamic and modern city, and Topshop proudly flies the flag for the UK fashion industry abroad. Their use of British models such as Kate Moss and Cara Delevingne have also helped to build high fashion credibility into the high street brand abroad.

Are your British credentials an asset or hindrance? 

Be consistent. Perhaps the most crucial question of all is to do with logistics. Can you deliver the same product in the US without it becoming prohibitively expensive? The key difficulty some brands face, particularly in FMCG, is the challenge of delivering a consistent product across markets. Of course, one can develop entirely different propositions for each market, but this presents its own challenges. Business in a hyper-connected, globalised world can expose your consumers to how you present the same brand in different countries, which may prove problematic. In 2013 J Crew opened their first UK store on Regent Street in London, and was widely condemned for their pricing strategy, which was seen as much higher than its equivalent pricing in the US. Despite the obviously different cost bases in both locations, J Crew had to ride a consumer backlash over what UK consumers perceived to be a price hike in contrast to their US counterparts.

Can you deliver the same level of product and service in a cost-effective manner?  

Use British produce (or just expertise). To avoid the logistical issues of transporting raw materials from Britain to America, you could use local resources instead. If overseen correctly, and utilising expertise from the UK, brand quality and authenticity could be preserved, enabling consistent delivery. There is however a trade-off. Particularly with FMCG products, consumers can sometimes tell the difference between the same product delivered in two different markets. Will your brand benefit from importing resources, or will importing expertise suffice? This is reminiscent of the Guinness effect, where consumers often perceives that Guinness tastes better in Ireland (which uses water sourced in Dublin) than in their home countries, where it is brewed using local water.

Should you import British resources or just British expertise?

Be timely. You may have the perfect brand and the perfect proposition. You may have wrestled with costs and logistics to deliver the ideal product to consumers. But if you are too early or too late then it may not be much use. Timing is everything, and despite the clear similarities, the UK and US can be at vastly different life stages depending on the markets you look at. Take coconut water for example- in 2003 Vita Coco created the category in the US. Over 10 years on and the category at large is at a significantly developed stage in the US, with the likes of PepsiCo and Coke battling it out for supremacy. Head to the UK however, coconut water has only really entered the mainstream consciousness in the past few years. A new entrant in either market would be mindful of this and therefore adopt very different strategies to succeed.

Is the US market in the right life stage for your brand?

If you’d like to find out more about our experience managing global brands, do get in contact by emailing tom.speed@thevalueengineers.com.

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Cadbury’s Creme Egg- Why Firms Must Embrace Irrationality

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Have you tasted a Cadbury’s Creme egg recently? I have. And I can’t taste the difference between the one I ate this year, and the one I ate last year. Now maybe my taste buds aren’t refined enough to pick up the subtle changes in the taste profile (despite being a chocolate aficionado as I revealed in a previous post about Hotel Chocolat). And as any good market researcher would tell you, a qualitative study of 1 (i.e. just me) is rarely robust enough to make broad generalisations. Nevertheless the media circus surrounding Kraft’s revelation that the chocolate shell of a Cadbury’s Creme Egg is now no longer Dairy Milk chocolate but “standard cocoa mix chocolate” is bewildering to me, at least from a taste perspective. To prove how different the new Creme Egg chocolate tastes, the BBC broadcast a taste test with renowned chocolatier Paul Young to demonstrate just how dastardly Kraft had been.  Yet, when you get down to it, I’d suspect that, like me, few non-professional chocolate eaters would be able to taste the difference.

So why all the fuss? Why are consumers reacting so negatively to the recipe change despite my theory that they can’t really taste the difference anyway? This story draws distinct parallels with the infamous New Coke story, in which Coke reformulated their recipe in order to compete with the supposedly “better-tasting” Pepsi, which in fact alienated their core consumers who thought it sacrilegious to change the original Coke formula. This classic marketing story (which if you don’t know can be found here) has set a premise in marketing that the recipes of well-established products with significant brand equity should not be tinkered with, for fear of a mass consumer revolt. From a marketer’s perspective, this leaves you with little room to manoeuvre if your input costs go up and squeeze your margins, or the competitor landscape changes to make your product’s ingredients less popular. The difficulty is that when the media gets wind of a change, it tends to generate a consumer backlash even if consumers themselves were otherwise unaware. Somewhat amusingly, this can take some time (case in point: Heinz reduced the salt in its HP Sauce in November 2010, but it wasn’t until September 2011 that anyone noticed.)

Why did Coke’s consumers react so negatively to New Coke, a supposedly better-tasting drink? And why, also, are consumers reacting just as negatively to the Creme Egg chocolate change? To solve this mystery, let’s look at the situation from two perspectives: through the eyes of  Creme Egg manufacturer Kraft, and through the eyes of Creme Egg consumers.

From Kraft’s perspective, changing the chocolate recipe to presumably a cheaper quality chocolate than Dairy Milk lowers their costs. In order to quell any fears about potential taste changes, I imagine Kraft ran focus groups, testing the new and old recipes, and concluded that, like me, consumers can’t really tell the difference between the two and so wouldn’t mind if they changed the recipe. What a result! We can use cheaper chocolate and consumers will still buy it! (Cue much back-slapping, job-well-done-ing and a celebratory drink down the pub).

From a consumer’s perspective, the Cadbury’s Creme Egg is a treat. It is a chocolate with a strong ritual attached to it (Do you eat it whole? Do you bite the top off and lick the filling?). It is a chocolate with deeply nostalgic memories attached to childhood and the run up to Easter. It is a chocolate than, unlike most, can only be bought in the first four months of the year. This limited time sale period generates a heightened sense of anticipation and satisfaction when you eat the first Creme Egg of the season. And now you’re telling me you’ve changed the chocolate of my favourite treat. The treat I always look forward to every January and have looked forward to every January since I was a child, and OH WHY CAN’T YOU JUST LEAVE IT ALONE.

Consumers can have strong emotional attachments to iconic brands. It doesn’t really matter that they can’t taste the changes made to the chocolate, it’s the fact they know there is a difference. For them the product is now not the same as the one they have grown to love. This may demonstrate a certain irrationality, but from a brand perspective this is understandable and should not be underestimated. A brand at its essence is a promise to deliver a certain product or service, and a good brand consistently delivers on that promise time after time. Changing the chocolate breaks the consistency, weakening the promise and making consumers feel short-changed. Therefore by considering consumers as purely rational beings, rather than appreciating the irrationality arising as a result of consumer’s emotional attachment to the brand, Kraft have missed the point, explaining the current consumer backlash they are facing.

Now it’s all well and good saying that Kraft must revert back to the original recipe, maintain the status quo and not rock the boat with cost-saving recipe tweaks, and I would NOT recommend that Kraft engage in cloak-and-dagger changes without informing their customers that they are doing it. However, I appreciate that in a world of input cost fluctuations and such, it is not always feasible for Kraft and other corporations to stick to the status quo.

So what would I recommend to Kraft? Ironically, if in a few weeks they reverted back to the original Creme Egg (with the associated fanfare) they may well see a surge in demand by “giving the people what they want”. I reckon they’ll win a lot more customers in the long run by not messing around with the chocolate recipe and consider other cost-reduction strategies. Embracing the irrationality of consumers and how they react to your brand is crucial in informing a successful consumer-centric strategy.

But reducing the number of Creme Eggs in a pack from 6 to 5? A bloody disgrace.

 

Like what I’ve written? Disagree entirely? Good, bad and ugly, leave a comment in the comment section below! I’d love to hear your thoughts.

 

COKE BUYS MONSTER-A NIGHTMARE FOR RELENTLESS AND BURN?

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To buy or not to buy. That is the question.

Apologies to the Shakespeare aficionados amongst you for the blatant bastardisation of perhaps the bard’s most famous quote.

However, it is a question that many corporations often ponder (presumably with a copy of Hamlet to hand) when considering how to defend themselves from a young upstart in their industry, or when judging how best to enter a new market. Do you pour your resources into building a brand, or do you save yourself the hassle and buy up a rival?

The former seems exciting, and the creative amongst you wouldn’t undoubtedly be chomping at the bit to launch a new brand with all the vim and vigour of a start-up. Yet a new brand is unproven and unfamiliar to consumers, and with this comes an inherent risk of failure. The alternative, buying another company outright means you acquire a key strategic asset in their brand. A proven, ready-to-market brand with an identity in consumers’ minds and a consumer base with which it resonates is surely an enticing prospect. But such acquisitions do not come cheap, and thoughts immediately go to how best reclaim the significant investment.

These musings were undoubtedly swirling around the minds of Coke executives when they decided to purchase a 16.7% stake in Monster, the energy drink brand, a few weeks ago for $2.15bn (£1.28bn). The move will be great for Monster, who will surely benefit from Coke’s behemoth global distribution network. Coke will probably do well out of a stake in Monster too, which is the largest energy drink brand in America, and the only real global competitor to Red Bull.

But spare a thought for Relentless and Burn, the two existing energy drinks brands in the Coke portfolio. Much like a kid with a new toy, Coke has cast aside its existing play things and plumped for something new and shiny to take on the energy drinks market. In recent years Monster has powered ahead of Relentless in terms of market value in the UK (£108.1m vs. £59.9m) with Burn energy drink not even making the top ten. And with the positioning of Relentess, around the alternative music scene, feeling like a subset of Monster’s broader positioning around alternative music and sports, one wonders what the fate is for these lesser energy drinks brands within the Coke portfolio. Is there room for all three brands? Will they be repositioned, catering to an even smaller niche to accommodate their bigger brother? Or will they end up on the scrapheap, their assets consumed (ironically) by a turbo-charged Monster?

To me, the Monster brand has always felt more dynamic and exciting than its Coke contemporaries, with an underground grit that Red Bull had, but seems to have lost in recent years as it has gone more mainstream. So I approve (if they care) of Coke’s decision to buy, not build, its way to greater success in the energy drinks market. However, I suspect that Relentless and Burn will be sleeping less easily with this Monster nearby.