Testing Western Brands' Eastern Impact

By Meller, Paul | Marketing, September 23, 1993 | Go to article overview

Testing Western Brands' Eastern Impact


Meller, Paul, Marketing


Western brands are doing big business in Eastern markets. And as Poles, Russians, Czechs and Hungarians get a taste for branded merchandise, it's British marketers who are heading East to run the brands. Marketing's Paul Meller and photographer Shaun Bloodworth followed them.

It's been easy for the pioneers like McDonald's and Coke to grow their brands with stimulation-starved would-be consumers fighting to get their hands on new products. But now the situation is very different. The second wave of western investment has begun, as Philip Price of Lyons Tetley International puts it. Some of the biggest names in marketing are now out there, doing battle with age old rivals.

Unilever finds itself in head-on competition with Procter & Gamble for share of the Hungarian shampoo market. Nestle and BSN have combined forces to fend off the promotional might of Mars in the nascent Czech and Slovak Republics (right). And Allied Lyons races against Unilever to build a tea franchise in central Europe's biggest market, Poland.

Sunday's general election there "won't change much" for Tetley and Lipton's marketing plans there. It is generally agreed now that the free market is the only option.

And then there's Russia. While living standards have at least held their ground in central Europe, Russians are struggling to make ends meet. To a Moscow mother who parts with over 80% of her family's funds just to cover the basics, a trade up to a western brand is not such an easy decision.

So how would your brand fare in the East? Read Marketing's exclusive five-page report on what it's really like in the wild East, and you'll be half way to knowing ...

Czech Republic:

BSN/Nestle rival

Mars with Czech

Confectionery

The heat is on as two European conglomerates join forces to establish a stranglehold on the Czech and Slovak republics' confectionery market

The taxi driver needs no further instructions. "Ah, Cokoladovny," he says with a sweet-toothed grin as he slams his foot down on the accelerator.

The story unfolds as we draw closer to Prague's largest chocolate factory. A van carrying a Mars branded ice-cream freezer tears by. Three Mars bar posters flash past the cab window as we career along the eastern bank of the Vlatava river heading south out of town. Where is the competition?

The smell of chocolate fills the air, as if in answer to my question as we pull up outside a factory billowing sweet fumes from four tall smokestacks. It is a tale of two strategies and the first chapter is drawning rapidly to a close.

On one side there are two of Europe's biggest food conglomerates, French-owned BSN and Swiss-owned Nestle. Together they bought 51% of what used to be Czechoslovakia's biggest state-owned confectioner Cokoladovny, in 1991, which at the time was generating turnover of 120 [pounds] m with 60% of a 80,000 tonne chocolate market that is forecast to grow in value by 6%-8% a year for the next decade.

And on the other side there is Mars.

A defensive strategy versus a brand-building offensive that this summer overshadowed even the efforts of McDonald's, Marlboro and Coke across the whole central and east European region.

BSN and Nestle bought in in equal measure, and have since invested millions trying to knock what used to be a production-orientated, marketing-illiterate organisation into competitive shape.

They took the cheap option. Their US rival won't divulge the cost of its eastern assault, but educated guesses put it at over 100 [pounds] m. Up to a quarter of that is focused on the Czech and Slovak republics, and is being spent on a TV, radio and poster ad blitz through the Prague branch of DMB&B, as well as on a distribution drive akin to Napoleon's 1812 eastern push.

"Mars' distribution is perfect," acknowledges Max Berger, a tall affable Dutchman who heads the Cokoladovny executive team.

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