Branding America

By Peter Gumber

If a fine antenna for the political mood were all you needed to create a successful consumer brand, Tawfik Mathlouti would be a happy man by now. Mathlouti is a French Muslim lawyer who vigorously opposes U.S. foreign policy in the Middle East and believes the world should protest it by boycotting American products. In the fall of 2002, he began marketing Mecca-Cola, a distinctly non-American imitation of Coca-Cola, in France, Britain and elsewhere in Europe.

The timing, a few months before the invasion of Iraq, seemed perfect. Polls showed that many Europeans were upset with the U.S. and less inclined to buy its brands. Mathlouti reaped acres of free publicity, especially in France, where the Iraq war was deeply unpopular and Muslims account for about 10% of the population. Yet after a promising start, Mecca-Cola has fizzled. In France, its biggest market, sales dropped about 10% in 2004; its market share there is negligible--1% or less.

The natural question: What kind of risks, really, do U.S. brands face abroad? People outside the U.S., and especially in Europe, are increasingly telling pollsters that they no longer like or feel good about familiar U.S. brands, including Coca-Cola, McDonald's, Marlboro and Heinz. A poll of 8,000 consumers in eight nations taken last December by GMI Inc., based in Seattle, shows that 61% of French consumers and 58% of Germans feel negatively toward U.S. firms. Another poll by the Edelman public relations firm, based in New York City, found that the image of brands including Merck, Procter & Gamble and Kraft has taken a substantial hit in the past year.

Beyond scattered anecdotal evidence, though, this so-called trust deficit hasn't been reflected in sales. "American brands continue to sell very well in all continents," says Maurice Levy, chief executive of the big French advertising agency Publicis. "The danger [is] that one day behavior could follow attitudes, and then the reaction can be brutal."

Some of America's most iconic brands, including McDonald's and Pepsi, have banded together in an attempt to counter that possibility. The initiative, called Business for Diplomatic Action, was founded a year ago by Keith Reinhard, the chairman of DDB Worldwide, and Thomas Miller, an ex-pollster at NOP World. Its mission statement: "To sensitize American companies and individuals to the rise of anti-Americanism in the world and to enlist the U.S. business community in specific actions aimed at addressing the issue and reducing the problem." It has already published a quarter of a million copies of a World Citizens Guide underwritten by Pepsi and UPS for U.S. students overseas. "It's not good news for American businesses that people don't like America," Miller says. While there's no massive boycott, "the question is, what is the time lag between attitudinal shifts and behavior?"

It's a question firms don't like to talk about in public. One Washington consultant who works with a host of U.S. multinationals says companies are reluctant to discuss the issue because they don't want to appear disloyal. But he adds, "Corporate America is looking at this issue intensely. The possible ripple effect of this is enormous." The war in Iraq has fueled the brands' image problems, but some say the causes run deeper. "There's a love-hate thing going on [with the U.S.]," says Richard Edelman, chief executive of the eponymous New York City firm. Simon Silvester, executive planning director for Young & Rubicam, based in London, frames the issue broadly: "Back in the 1960s, the U.S. was 10 years ahead of everywhere else in terms of affluence. It was a very aspirational place," he says. The U.S. "is still well positioned, but it has come down to earth as a destination."

Certainly, the days when U.S. brands touted their national heritage in a boastful way are gone. Most companies work hard to give their products local appeal. Take Nike. In Europe and Latin America, rather than pushing Michael Jordan, Nike features soccer stars and other local athletes. Pepsi used to sell itself worldwide with the help of Michael Jackson and Madonna, but in current British commercials David Beckham is the star. "For most new U.S. brands in the past 10 to 15 years, it's remarkable how low-key they are about their country of origin. I can't remember a brand being launched that was proud to be American," says Simon Anholt, a British consultant and author of the recently published Brand America.

The GMI poll shows that credit-card company Visa is barely identified as American. Even among those consumers who said they were inclined to boycott U.S. brands, only a few included Visa on the list. (American Express, by contrast, was strongly identified as being American.) Still, even companies that believe and practice a localized strategy aren't immune to political backlash. McDonald's, for example, adapts its menus to local taste; its restaurants serve Kiwi burgers in New Zealand and wine in France. But that hasn't prevented the fast-food chain from being a favorite target of French protesters. And General Motors has for decades made cars in Germany under the German brand Opel. But when GM last fall moved to stem years of heavy losses at its European operations by cutting 12,000 jobs, about 20% of the work force, the newsweekly Stern ran a cover depicting an American cowboy boot decorated with the Stars and Stripes stomping on German workers.

Such flare-ups have fueled speculation that U.S. firms are already being squeezed. Yet companies that appear to be at risk insist anti-Americanism isn't a factor (at least not yet). Spending on American Express cards, for instance, grew 16.3% in the U.S. and 23.6% overseas last year. While the company doesn't break out regions, officials say Europe is strong--and that the firm hasn't made any defensive changes. Sales of Marlboro cigarettes fell in France and Germany last year, and both the GMI and Edelman polls suggest that Marlboro is vulnerable to anti-American sentiment. But Philip Morris International senior vice president David Davies blames higher cigarette taxes in both countries and points out that Marlboro's market share actually increased in France. "Clearly the data are not a reflection of what Marlboro smokers are thinking," says Davies. "We've thought about it. But anti-Americanism has had very, very little impact on us."

Harvard Business School professor John Quelch has found that a small minority of overseas customers, between 10% and 15%, won't buy global brands. But he attributes that behavior to the antiglobal movement that arose in the late 1990s, not to more recent anti-American sentiment. "I'm skeptical that the average consumer in the world is going to let their views of American foreign policy affect their brand-choice behavior," he says.

Indeed, for every brand that has run into trouble, there are others that are flourishing. Starbucks opened its first coffee shop in Paris two years ago, for instance, and now has 10 in the city and its outskirts. It will certainly take more than the current political mood to faze Jean-Noel Castanet. A Frenchman who says he loves the U.S., Castanet runs a small grocery store near the Eiffel Tower called the Real McCoy that stocks U.S. products hard to find in France, such as Aunt Jemima Waffle Mix, French's mustard, Oreo O's and Ocean Spray cranberry juice. Last year he opened a small cafe nearby that sells American favorites such as buffalo burgers and bagels with cream cheese. It has been a great success so far, he says--and about half the customers are French. Beaming at a crowd of French schoolkids who have dropped by for a sandwich, he notes, "Young people still love America. That hasn't changed." Big multinational brands are fervently hoping that he's right. --With reporting by Sean Gregory/New York

With reporting by Sean Gregory/New York