What's hot and what's not in Euro-Asia

Editor’s note: Edward Hodgman is vice president of corporate and media relations, MASMI Research Group, Moscow.

Have you ever heard of Kazbegi? In the former Soviet republic of Georgia, this beverage manufacturer recently showed stronger spontaneous awareness than Coca-Cola. In Croatia, Kras (a confectionery) also came out ahead of Coke, whereas in Azerbaijan, Coke joined another multinational, Samsung, in achieving strong name recognition. In Central Asia, on the other hand, not a single local company made it into the Top 10 in terms of spontaneous awareness.

This is just a small glimpse into the impact of consumer marketing within the emerging markets of Eastern Europe, the Caucasus and Central Asia, as measured in a survey of the region by EMRA, the Euro-Asian Marketing Research Association. EMRA’s members are independent social and marketing research companies operating in countries across the former USSR, Eastern Europe, the Caucasus and Central Asia. All of these countries, representing more than 300 million consumers, have undergone rapid social and economic changes in recent years. In order to understand the inroads made by Western corporations in these emerging markets, as well as the ability of local/regional brands to successfully compete in their newly open economies, EMRA conducts an annual consumer survey of company and brand awareness and communication effectiveness.

The countries included in the survey are either former Soviet republics or countries that operated in the Soviet economic zone. Until a little over 10 years ago, these countries all had centrally-planned economies. Government-run enterprises were the sole source of consumer products. These entities operated without competition, resulting in few branded products and little consumer understanding of the brand concept. Yugoslavia was perhaps the only exception in that, while still having a centralized economy, it imported more European products, thus exposing consumers in this market to brand choices. In the years since perestroika and glasnost entered the world’s vocabulary, the Berlin Wall fell, and relative stability came to the Balkans, multinational firms have entered these markets by establishing local operations, selling their branded products and heavily advertising these products in order to establish recognition and promote brand choice. Over time, local and regional companies have begun to compete with the multinationals by manufacturing better-quality products - and promoting them as actively as their outsized competition.

The results of the EMRA poll of this region show that some multinationals have established a leading presence in these markets. At the same time, the survey shows that local consumers demonstrate real loyalty toward local brands.

Survey methodology

In the first quarter of 2004, 14,429 men and women between the ages of 18 and 64 were interviewed. Participants were from Azerbaijan, Belarus, Bulgaria, Croatia, Georgia, Hungary, Russia, Serbia and Montenegro, the Ukraine, and Uzbekistan. EMRA member companies conducted research among both urban and rural inhabitants, and age and gender quotas were established within each country to appropriately represent the local populations.

The survey probed unaided recall and advertising awareness of companies and brands, and surveyed sources of advertising awareness as well. The survey went on to ask about the positive and negative ramifications of the presence of multinationals. It ended with an exploration of recent and anticipated changes in personal well being, as well as anticipated countrywide social and economic changes.

  • Across the region as a whole, multinationals dominate – led by Coca-Cola.

In aggregate, on every awareness measure, Coca-Cola is mentioned most often, achieving recall levels of at least double that of any other company/brand. This finding is consistent with Coca-Cola’s significant investment in this region over many years.

Other multinationals among the Top 10 company mentions are Samsung, Nestlé, Sony, Procter & Gamble, Oriflame (cosmetics), and LG (consumer electronics). Danone also achieves high awareness when consumers are asked specifically about advertising. The only local/regional companies that are able to break through the dominance of the multinationals, on a region-wide basis, are Kazbegi (a Georgia-based firm), M Tel (a mobile telecommunications provider based in Bulgaria) and Kras (based in Croatia).

Spontaneous Company Awareness Total
 Coca-Cola 18 percent
 Nestlé 9 percent
 Samsung 9 percent
 Sony 7 percent
 Oriflame 5 percent
 Kazbegi 5 percent
 Procter & Gamble 5 percent
 LG 4 percent
 M Tel 4 percent
Kras 3 percent

 

Spontaneous AdvertisingCompany Awareness

Total
 Coca-Cola 23 percent
 Samsung 10 percent
 Nestlé 9 percent
 Procter & Gamble 8 percent
 M Tel 5 percent
 Sony 5 percent
 Danone 4 percent
 LG 4 percent
Oriflame 4 percent
Kras 4 percent

Even more notable, across the region multinational brands overpower the local brands; all Top 10 brand mentions are products of multinational manufacturers. The sole regional brand to achieve advertising recognition at the level of the multinationals is Grand Kafa (a Serbian coffee manufacturer).

Spontaneous Brand Awareness Total
 Coca-Cola 12 percent
 Ariel 6 percent
 Addidas 6 percent
 Mercedes 6 percent
 Nike 5 percent
 Samsung 5 percent
 Nivea 4 percent
 Sony 4 percent
 Tide 3 percent
Fanta 3 percent

 

Spontaneous Brand Advertising Awareness

Total
 Coca-Cola 17 percent
 Ariel 7 percent
 Samsung 5 percent
 Nivea 5 percent
 Tide 4 percent
 Fanta 4 percent
 Nescafe 3 percent
 Nike 3 percent
Orbit 3 percent
Grand Kafa 3 percent

Interestingly, the powerful inroads made by multinationals in the Euro-Asian region are far from uniform. Here culture makes all the difference, in investment policies as well as local tastes. While in many countries, local brands are emerging because they better meet long-term consumer usage preferences, it is also true that multinational companies have not been able to invest as freely in all countries of the region, giving some local companies more leverage. For example, consumers in Bulgaria, Croatia, Georgia, Russia, and Serbia and Montenegro are more likely to identify local/regional companies as top-of-mind rather than multinationals. The most notable local entities include M Tel and Globul (mobile communications) in Bulgaria, Kras and Podravka (a food producer) in Croatia, Kazbegi in Georgia, and Grand Prom (coffee) in Serbia and Montenegro. In some cases, as with Russia’s Rossiya chocolate brand, local tastes are being satisfied with multinational investments - Rossiya being a Nestlé-owned brand located in Samara, Russia.

However, even in these countries, multinational brands dominate the markets. The only local/regional brands with strong recognition are Final, a tea popular in Azerbaijan, M-Tel in Bulgaria, Dorina (chocolate) in Croatia, Kazbegi (beer, cold tea) in Georgia, and Grand Kafa and Don Kafa in Serbia and Montenegro.

  • Television is the primary driver of brand awareness across this region.

For every brand probed, television is cited as the primary source of advertising awareness by a wide margin (mentioned by an average of 87 percent across brands). This result reflects a marked change from the initial years of the market economy, when billboards were the primary advertising communication tool; today billboards are only cited by 19 percent.

Also interesting is the growing impact of in-store/POS promotion, at 29 percent. In the past several years, stores in this region have devoted resources to in-store displays, store design and ongoing in-store promotion, with “shopping” becoming a common word in many Eastern European languages and an activity engaged in for pleasure. Historically, stores had simply been places to go to buy what was available, though this was not always what the consumer wanted. So the welcoming storefronts and bright interiors are a significant change in the retail landscape.

  • Attitudes about the market penetration of multinationals are mostly positive, with the most favorable attitudes found among those in the more economically depressed countries.

Consumers in these emerging markets appreciate the wider range of products available to them due to the presence of the multinationals (Figure 5); more than half of those surveyed expressed this opinion. Consumers in the region still recall a time when the selection of products was much narrower, and this is clearly not a fond memory.

Other benefits include the availability of better-quality products and services, expanded employment opportunities (particularly significant to those in the economically depressed countries of Azerbaijan and Georgia), and the benefits of competition (in moderating prices, providing more choices, etc.). Younger consumers (under age 35) are particularly positive about the multinationals’ presence.

While there were fewer negative than positive comments about multinationals, the role of the international companies is not unblemished (Figure 6). Some consumers expressed concerns about their impact on the viability of domestic companies and the loss of national identity (especially among older consumers, i.e., age 35+). Other negative comments, which were less commonly expressed, included concerns about quality due to mass production and the exploitation of workers by international firms. This exploitation concern likely refers to smaller foreign companies (rather than the multinationals) which operate in rural areas, where they can work away from the scrutiny of the government ministries responsible for labor standards and human rights.

  • The general feeling among those in the Euro-Asian countries is that there has been little change in their own socioeconomic status over the past few years. However, consumers in these countries are more positive about prospects in the future, for themselves as well as for their countries.

The most common feeling is that there has been no change in the last two to three years in personal well being, with a sizeable number indicating that whatever improvement has occurred has been slight. Since the most dramatic changes happened in the early years of the open economies, it is likely that more recent changes are simply not viewed as significant. On the other hand, many do expect improvements in the next two to three years.

Younger consumers are more positive about their personal situations than older citizens in the region, both with regard to the recent past as well as their prospects for the future (Figures 7, 8 and 9). The EMRA survey also showed some differences by country, with consumers in Uzbekistan particularly likely to have experienced an improvement in their family’s well being (44 percent). Uzbekistan’s economic improvements have come a bit later than other countries in the region. In Eastern and Central Europe, conversely, many of those surveyed feel that they have most recently experienced a personal decline (36 percent). This is likely a reflection of the year-to-year instability in economic growth in these more mature market economies.

However, in every country, expectations about the future are more positive than feelings about the recent past, with those in the Caucasus countries of Azerbaijan and Georgia being particularly positive (72 percent expect their lives to improve in the future).

There is a clear link between individual positive personal expectations for the future and positive expectations for each country’s future socio-economic situation. Once again younger consumers are more upbeat than their older counterparts. And, mirroring personal expectations, consumers in the Caucasus countries of Azerbaijan and Georgia are again the most positive about their country’s future, with 75 percent expecting improvement.

Face turbulence

It is clear from these findings that the economies of the Euro-Asian region continue to face turbulence. The emergence of competition, spurred by the investment by multinational as well as local companies, is redefining the choices and expectations of consumers in these countries. While the majority embrace the changes, the greatest enthusiasm is found among younger consumers who are less acculturated to the government-controlled restrictive economies of the past.

While Western products have made significant inroads, there still remains a strong sense of nationalism that can potentially drive success for those regional and local brands that are able to adapt to the market’s more competitive environment. At the same time, the products of multinationals are highly desired for their quality and variety. One can only conclude that the potential for brand-building is strong in the region - making it an area worthy of consideration for business expansion opportunities.