"Only two or three years ago, anything with a foreign name was automatically thought to be better," said Simon Little, client services director at Lintas Warsaw. "But [now] consumers are showing a preference for lower priced local brands that have been improved and repackaged."
Western brands have not entirely lost their cachet-Polish consumers, for example, will snack on local potato chip brands at home but give a Western brand as a gift-but they are no longer infinitely desirable at any price.
International ad agencies are so concerned about the trend away from international brands that Grey's Dusseldorf-based Central and Eastern Europe division has done its own study, "Are Western brands losing their steam in Eastern Europe?" Based on about 100 focus group interviews across Eastern Europe over the last two years, Grey found that sales of local brands are soaring. The reason: an enormous price advantage over international brands and improved quality.
"East European consumers are coming of age and watch very carefully whatever they buy and spend," said Bernd M. Michael, Grey CEO.
For example, a pack of Philip Morris' Marlboro cigarettes costs $1.06, while a pack of local Polish brand Sobieski is 60 cents. A Michelin tire sells for $56 to $74, compared to Barum Co.'s Barum tires in the Czech Republic at $26 to $38.
"Marketers have already reacted by heavy price cuts on international brands of up to 20% to 30%," said Thomas Heidenreich, managing director of Grey's Central and Eastern Europe division.
In Poland, a national survey recently carried out by Warsaw-based research company Demoskop found that consumers now believe local products are equal and in some cases superior to international brands, a sign of growing consumer patriotism.
It's not all bad news for Western marketers. The trend back to local brands is largely confined to packaged goods. Categories like consumer electronics, household appliances, computers, luxury goods and upscale cars belong to multinational marketers because local products, if available at all, have traditionally been dire. Brand names like Sony, Philips, Volkswagen and Mercedes-Benz have not lost their shine, Mr. Heidenreich said.
And in many cases, international marketers are benefiting from the surge in local brand sales-because they own them.
Many of the most popular local brands are made by former state-owned companies that were snapped up by Western marketers, including Nestle, Procter & Gamble, Unilever and BSN, during the early 1990s privatization boom. Much of their appeal is due to major reintroductions with new packaging, catchy advertising and improved fragrance, flavor or formulation.
Nestle's Czech confectionery business Cokoladovy recently relaunched a local brand rather than introduce a new western one. "Nestle repackaged all the local brands and improved the formula slightly," said Gabriel Fulopp, managing director, Lintas Prague.
No matter how well their own local brands do, multinational marketers still want to create a market for their higher margin premium price international products. "Our job is to justify the price difference," said Mr. Heidenreich.
After early mistakes, ads are being more carefully crafted to stress added value and local culture.
In Catholic Poland, where menstruation is virtually a taboo subject, viewers were shocked when Procter & Gamble aired commercials from D'Arcy Masius Benton & Bowles, Warsaw, for Always sanitary protection products. A two-in-one shower gel did not go over very well either in Poland, where people take baths, not showers.
With Eastern consumers most interested in being shown the basic use of a product in ads, Grey helped boost the share of CPC International's Knorr bouillion cubes literally from zero to 24% of the category in Poland with a local spot showing a chef chasing his impertinent assistant with a heavy saucepan when the helper fails to realize that all he needs is superior quality Knorr. Local competitor Vitana is 20% cheaper and still the category leader with a 56% share-but a few years ago Vitana had 100% of the market.
Juliana Koranteng and Kristin Hohenadel contributed to this story.