Monday, August 11, 2008

Marketing Memo: Is the Branding of Agriculture Products A Way For Developing Nations to Better Participate in the Global Food Marketing Economy?

Guest Marketing Memo From

Emerging Nations Cultivate Agricultural Brands
by Randall Frost August 11, 2008 issue

“There may be an inherent perceptual bias against developing countries’ products, serving as an entry barrier to industrialized markets," write Professor Eugene D. Jaffe and Israel D. Nebenzahl in National Image & Competitive Advantage (2006). "In general, American consumers are more receptive to products from developed countries and less so from developing countries.”

But not everyone agrees with this statement. Thomas Cromwell, president of East West Communications in Washington, DC, questions the conclusion relative to agricultural imports.
“Because agricultural products are natural, and people associate quality with natural factors, such as climate, soil quality, and organic growing methods, the positive association with agricultural products has little if anything to do with the overall level of development of the country from which they come,” he told brandchannel.

Professor Nicolas Papadopoulos of Carleton University in Ottawa, Canada, disagreed. “All the research to date shows that products from developing countries are viewed with greater ‘suspicion’ and a higher discount is expected, by consumers in developed and developing nations.” An exception occurs, he says, when the developing-to-developing country exchange occurs between nations that are geographically close, culturally similar, or at least not at odds with one another.

Professor Jaffe, co-author of the above-mentioned book and head of the MBA programs at Israel’s Ruppin Academic Center, says that although agricultural commodities are harder to brand than manufactured products, there are nevertheless success stories for developing-country-based agricultural brands. As an example, he cited Brazilian coffee and that country’s advertisements for wine. Jaffe added that there is no doubt these brands have contributed positively to the nation’s image.

Of the developing countries, Brazil has one of the most advanced agricultural branding programs. Alexandre Rocha of the Brazil-Arab News Agency in Sao Paulo told us that in addition to the country’s promotions for Brazilian coffee, there are also branding programs for Brazilian beef, Brazilian fruit, Brazilian chicken, and wines from Brazil.

Brazil exports many of its agricultural products to other developing countries. Says Rocha, “Russia is the main buyer of Brazilian pork meat, Egypt is the main importer of Brazilian fresh beef, the Middle East in general is the biggest market for Brazilian poultry and sugar, Algeria is the main buyer of Brazilian dairy products, China is the biggest importer of Brazilian soy beans, and Iran is the main market for the Brazilian corn.”

According to Rocha, expanded trade with the developed nations has not been an option. “Many developed countries, such as the US, Australia, and nations of the EU, are our competitors, and impose barriers to the imports of Brazilian products. This is one of the more difficult problems for the WTO Doha Round.”

Several years ago, a Hindu Business Line (India) editorial considered the role of regional trade blocs in the global economy. The editorial went on to recommend that developing countries preferentially export branded agricultural produce to regional trade partners, rather than focusing on major importers like the US and EU.

Brazil’s successes notwithstanding, this strategy may not be feasible for all developing countries. Although the greatest potential for growth in food and agricultural trade is among developing countries due to higher population and income growth rates, Professor David Blandford of Pennsylvania State University notes, “Barriers to South-South agricultural and food trade tend to be high, due to high transactions costs and tariff protection.”

Still it can be quite expensive to build a brand in the US and EU. “There may be some cost savings in staying regional. And building brands up slowly from the local to the global is an old strategy for many firms,” says Professor Keith Maskus of the University of Colorado.

Christa Lachenmayr, an agricultural economist with Nathan Associates in Arlington, Virginia, works with clients in developing countries, helping them acquire intellectual property rights for agricultural brands. She says, “One of the limiting factors in developing countries is whether or not they have the appropriate regulatory regime to recognize and for companies to register a national identity.”

In a project designed to create a regional brand for Mongolian cashmere, Nathan Associates began by helping Mongolia draft a law that allows companies to register a geographic indicator. Lachenmayr explains, “Then we assisted them with the testing to document the unique properties of Mongolian cashmere. We registered the mark first in Mongolia—you have to register it worldwide. Then we helped them develop a branding campaign around that mark. It wasn’t cheap but it wasn’t prohibitively expensive.”

East West Communications’ Thomas Cromwell believes country-based agricultural brands can help build affinity between nations. Citing examples like Egyptian cotton, Sri Lankan tea, tilapia from Honduras, and cut flowers from Central and Latin America, he says, “A well-known, well-branded agricultural product can do a great deal to help build a nation's brand.”

“Perhaps the best [example of this] is Colombian coffee and the famous Juan Valdez marketing campaign,” he told us. “If you think about it, Colombian coffee has long been just about the only positive thing most people in the world have been able to associate with Colombia, against a background identity of narco-terrorism and crime.”

Cromwell added, “Sudan is the largest country in Africa, with its vast fertile regions fed by the White and Blue branches of the Nile. It is located near the arid lands of the Arabian Gulf, where oil-fueled economies are strong and most food is imported. Yet the country is only known for its sugar and gum arabic. With good planning and incentives, Sudan could begin to change its image from sponsor of terror to bread basket or market garden, beginning on a regional level.”

But, alas, every silver lining has a cloud. Cromwell notes that if a developing country becomes too closely identified with an agricultural brand, the association might make it difficult later for the country to upgrade its identity from being agrarian to being technologically advanced.

Randall Frost is a freelance writer based in Pleasanton, California. He is the author of The Globalization of Trade. His work has appeared in Worth, The New England Financial Journal, CBSHealthWatch, and a variety of educational publications.

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