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Want a premium brand? Go global.

Excerpted from BusinessWeek, “Brands: Moving Overseas to Move Upmarket” by Jack Ewing, September 18, 2008

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You could call them David Hasselhoff brands. The onetime star of the TV series Knight Rider resuscitated his showbiz career in the late 1980s with a hit single in Germany, becoming a symbol of unlikely overseas reinvention. Long before Hasselhoff, smart marketers knew that brands could acquire new personalities when they crossed borders.

The brand pros call it “country of origin effect.” For decades products have made a step up in status when they traveled. Heineken, a mainstream brew in the Netherlands, became a premium beer after the Dutch company began exporting it to the U.S. in the 1950s. To Germans, Mercedes is not only a maker of upscale autos but also delivery vans and heavy trucks. But Americans perceive Mercedes as a pure luxury brand—one reason why strategists at parent company Daimler are thinking hard about whether to export the mid-market A-Class and B-Class models to the U.S. They fret the fuel-efficient compact models could dilute the Mercedes image.

Products have to move upscale when they travel in order to justify the higher costs of exporting. But thanks to the Internet and cheap air travel, word gets around if a company overdoes the upgrade. Gap, known for cheap chic in the U.S., failed as a premium brand in Germany. AmBev’s Stella Artois, a distinctly working class brew in Britain, has struggled to achieve the same premium image in the U.S. as Heineken. “If the differences in positioning are too big, you risk destroying the brand,” says Andreas Bauer, a partner at Roland Berger Strategy Consultants who specializes in consumer goods.

The master of overseas reinvention may be Yum! Brands.  The company owns Pizza Hut, KFC, Taco Bell, and several other venerable brands, all of which are surging overseas. KFC is closing stores in the U.S. but has been building them in China at the rate of almost one a day—148 through June, for a total of more than 2,700.

In China and other overseas markets, Pizza Hut is fashionable and booming.  When Cui Tao, a 24-year-old resident, was looking for that special place to take his girlfriend on Valentine’s Day, the choice was obvious: Pizza Hut. They had to wait an hour for a table, and the meal cost more than a quarter of his monthly income, but it was worth it.

Part of the secret, company execs say, is to offer a mix of standards with local favorites. So KFC in China sells not only its trademark fried chicken but also breakfast rice porridge. Pizza Hut in India offers a tandoori topping. “The fast-food and casual dining markets in the U.S. are crowded,” says Graham Allan, president of Yum! international operations. But in places like Brazil or even France, he says, “we still have massive room to grow.” 

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Full article:
http://www.businessweek.com/magazine/content/08_39/b4101060110428.htm 

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