As multinationals push forward into new geographic territories with powerful brand names, they are facing a new breed of consumer. A consumer who is price conscious and skeptical about whether brand names are worth the extra cost. A consumer who is asking, "Why should I pay more for your brand?"
The confrontation is fanned by retailers who are more aggressively promoting their own private label products, thereby offering an even greater challenge to global marketers.
Global agency Young & Rubicam believes that one way marketers can meet that challenge is to look into consumers' hearts and minds. Using that as a starting point, Y&R has come up with a ranking of the top brands by current status and another ranking projecting growth potential. The ranking-appearing exclusively in Advertising Age International-was developed from indepth interviews with 25,300 consumers in 16 countries as part of the agency's first BrandAsset Valuator research. Essentially it indicates how brands stack up in consumers minds now and what potential they hold for the future.
"We know a lot about how brands have worked in the past. But now more than ever, there is evidence that our knowledge of brands isn't enough for these times," the agency said. "And it isn't enough to manage the future."
The agency points out as evidence the continued high failure rate for new brands and products, the increased power of retailers, the strength of private label and the price conscious consumer. "Our marketing plans still often depend on perceptions of brands and consumers we once had every reason to believe were timeless," according to Y&R.
Coke on top
While it's not suprising that Coca-Cola emerges as the most dynamic brand in the world-in both rankings-other names indicate that the traditional package goods megabrands are being surpassed in growth potential by leisure industry standouts, such as sports shoes and entertainment vehicles like MTV and Disney.
The old reliables-Japanese goods, high tech products and some packaged goods brands-are scoring dangerously low in vitality, a key indicator of growth potential.
Following Coca-Cola as the leading brands in "stature," or current strength, are Kodak, Sony, Mercedes-Benz, Pepsi-Cola, Nestle, Gillette, Colgate, Adidas and Volkswagen. The "stature" group's signal is different from the one being sent by top brands in "vitality," or growth potential: Nike, Adidas, Sony, Ferrari, Reebok, Disney, Porsche, Pepsi-Cola and Mercedes-Benz.
Stature vs. Vitality
The stature ranking is a combination of the esteem in which the brands are held and consumers' familiarity with them, while vitality is based on the perceived relevance of a brand as well as how distinct or unique it is. (See Page I-26 for methodology.)
One of the hottest brands in the world is Nike. Although Nike only scores 34th on the stature ranking and Reebok doesn't appear at all, a reflection of their relative youth as international brands, Nike is No. 2 behind Coke in the vitality ranking, followed by Adidas and Reebok at Nos. 3 and 6.
Entertainment is another key category for global growth. MTV, the only media property to make either ranking, ranks No. 29 in the vitality ranking and Twentieth Century Fox squeezes into the top 50. Disney is No. 21 in stature but soars to No. 7 on the vitality ranking.
"Nike is not just another shoe," said Jim Williams, senior VP, director of strategy & research, Y&R Europe, and head of Y&R's BrandAsset Valuator study. "It stands for an attitude and way of life that people respond to. Nike is seen as a dynamic leader, modern, individual."
"So many brands become conservative and take a defensive position," he said. "Big brands often go to sleep, become institutionalized. They get accountants running the company who think more in terms of risk management and that is reflected in product strategy. Nike, for example, is still acting like a challenger."
Stature=Big ad bucks
Brands that score high on the stature ranking are usually big spenders on marketing and advertising, while the brands that do best on vitality are built on an idea and are more likely to win creative awards for advertising, Mr. Williams said.
Japanese brands fared particularly badly on both rankings, with Sony the only brand to make the top ten. Twelve Japanese brands, almost all cars or consumer electronics, made the top 50 stature ranking but only five-Sony, Panasonic, Canon, Pioneer and Seiko-scraped into the vitality ranking's top 50.
By contrast, five of the top ten brands in each ranking are of U.S. origin and 21 out of 50 on the stature list and 19 of 50 from the vitality ranking are American.
"The Japanese first broke into copiers, cameras, and cars but they are not seen to have created a real, strong branding differentiation," Mr. Williams said. "They competed on innovation, production technology and lower costs, [often] creating a big corporate brand like Mitsubishi that did everything. The technology of the rest of the world is beginning to catch up. They're vulnerable."
High tech brands like computers are also missing from the rankings, presumably because of low brand differentiation and little relevance to much of the world's population.
Package goods, beware
Six of the top ten brands in the stature ranking are packaged goods brands, but only two, Coke and Pepsi, score in the top ten for vitality. Gillette, Colgate, Nestle and Kodak all drop out and Gillette and Colgate don't appear at all in the top 50 for vitality.
If ideas are behind the products with the greatest potential for growth, the place to look for emerging international megabrands is fast-growing brands in developed markets ripe for at least regional development.
"Some of the most exciting brands are established in one country and moving into others, like Snapple and Gap," Mr. Williams said.
The Snapple Beverage Corp. broke its first TV ads outside the U.S. for Snapple natural fruit juice and tea drinks this summer in the U.K., using London agency Banks Hoggins O'Shea. After picking up on and helping to create a U.S. trend toward more natural, New Age beverages faster than either Coke or Pepsi, Snapple is trying to take its U.S. success to Europe, Asia and Latin America.
The list of brands singled out by consumers in the U.S., the biggest source of global brands, as having high differentiation includes, besides Snapple, Sharper Image and Victoria's Secret, retailers of innovative products and lingerie that could have great international potential.
Retailers on the rise
Germany's fast-expanding Aldi does not appear on the global ranking but the heavily-advertised discount supermarket chain was rated the No. 1 brand by Germans surveyed.
"Aldi is the most international of all the retail chains," Mr. Williams said. "It's in 15 or 16 countries. It's much more than a discount retailer. It's seen to stand for something, not just low prices. It gives consumers a fair deal."
Retailers' own brands are posing a growing threat to marketers' brands as they are seen as more innovative and better value.
"A lot of private label brands are stronger," Mr. Williams said. "They have higher esteem and differentiation [in the survey] than [marketers'] brands. They're not just competing on price and unfair shelf space display-they have stronger brand credibility."
Marketers fight back
Marketers know it. Nestle is considering running a corporate ad campaign next year in the belief that consumers want to know what company is behind a brand name and to counter the advance of supermarket brands.
"In certain product categories costs were not well contained while the product inno-
vation has been modest," said Michel Reinarz, Nestle senior VP and director of communications.
"We have made it easy for the big food retailers to push ahead."
Mr. Reinarz said most consumers buying Nestle products with the same brand names don't realize they are from the same marketer.
French food group BSN, realizing that BSN meant nothing to consumers, changed its name earlier this year to that of its biggest brand, Danone.
Perhaps the brands in the biggest trouble are the ones that everyone has heard of-but no one particularly likes.
IBM, for example, scored high on familiarity. However, the giant company "is seen as arrogant, aloof and out of touch with real people," Mr. Williams said.
Large national brands that have lost their way and become tired have a similar problem.
A more enviable dilemma is that of brands that are well-kept secrets.
The Hill's Science Diet for pets, recently introduced in the U.K. from the U.S., scored high in the U.K. on differentiation but low in familiarity.
Mr. Williams, after spending a weekend with friends who faithfully purchase Hill's Science Diet for their pets, concluded, "Very few people know about it, but almost to a man they are passionate about it."
Michael van Os in Amsterdam contributed to this story.