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Globalization of alcohol markets in Central and South America David Jernigan PhD Center on Alcohol Marketing and Youth Georgetown University Washington,

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Presentation on theme: "Globalization of alcohol markets in Central and South America David Jernigan PhD Center on Alcohol Marketing and Youth Georgetown University Washington,"— Presentation transcript:

1 Globalization of alcohol markets in Central and South America David Jernigan PhD Center on Alcohol Marketing and Youth Georgetown University Washington, DC, USA

2 What is globalization? Deep integration of economic activities that …extends to the level of the production of goods and services and, in addition, increases visible and invisible trade. Linkages between national economies are therefore increasingly influenced by the cross-border value adding activities within …transnational corporations and within networks established by transnational corporations. (UNCTAD, 1993

3 General advantages of globalization Standardizes products globally, with possible increases in general quality of products Standardizes products globally, with possible increases in general quality of products Increases economic efficiency Increases economic efficiency Builds on global division of labor, comparative advantage existing in each countryBuilds on global division of labor, comparative advantage existing in each country Increases employment, diffuses technological advances into less-developed countries Increases employment, diffuses technological advances into less-developed countries Increases global trade Increases global trade

4 Alcohol types in national markets Traditional beverages Traditional beverages Recipes localRecipes local Low levels of technology required for production and saleLow levels of technology required for production and sale Little marketing/advertising beyond word of mouthLittle marketing/advertising beyond word of mouth Traditional industrial beverages Traditional industrial beverages Recipes localRecipes local Higher levels of technology for production and saleHigher levels of technology for production and sale Marketing based on price and qualityMarketing based on price and quality Peripheral cosmopolitan Peripheral cosmopolitan Recipes local imitations of global productsRecipes local imitations of global products Marketing based on price and qualityMarketing based on price and quality Globalized Globalized Recipes globally-controlledRecipes globally-controlled Marketing based on lifestyle, embedding product into cultural lifeMarketing based on lifestyle, embedding product into cultural life

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6 Global trends in alcohol consumption Developed country markets have matured – consumption is stagnant or falling Developed country markets have matured – consumption is stagnant or falling Developing regions are where growth is for global alcohol producers Developing regions are where growth is for global alcohol producers Substantial unrecorded consumption exists Substantial unrecorded consumption exists Gradual shift towards consumption of industrially-produced, globally-available beverages Gradual shift towards consumption of industrially-produced, globally-available beverages

7 Central and South America: wine consumption falling, spirits and beer consumption rising

8 Alcohol in international trade By far the greatest amount of trade is between US, Europe and Japan. By far the greatest amount of trade is between US, Europe and Japan. Mexico is only non-Western country among the top ten distilled spirits or beer exporters. Mexico is only non-Western country among the top ten distilled spirits or beer exporters. Chile and Argentina are the only non-Western countries among the top ten wine exporters. Chile and Argentina are the only non-Western countries among the top ten wine exporters. Globalized alcohol travels primarily through integrated production networks, not through trade. Globalized alcohol travels primarily through integrated production networks, not through trade.

9 Concentration in the global beer market

10 Concentration in the global distilled spirits market,

11 Summary of globalization trends Globalized beverages coexist with local beverages Globalized beverages coexist with local beverages Gradual shift of consumption towards sectors where ownership is more highly concentrated Gradual shift of consumption towards sectors where ownership is more highly concentrated Dramatic increase in concentration of ownership of beer companies Dramatic increase in concentration of ownership of beer companies Increased dominance of Central and South American beer markets by global producers Increased dominance of Central and South American beer markets by global producers

12 Global brewers in Central and South American countries

13 So what? Implications of globalization of alcohol Globalization brings significant economies of scale Globalization brings significant economies of scale Creates larger political and economic actorsCreates larger political and economic actors Allows for innovations in one market to move to anotherAllows for innovations in one market to move to another E.g. social aspects organizations E.g. social aspects organizations Permits shifting of global resources from one market to anotherPermits shifting of global resources from one market to another e.g. SABMiller and US market e.g. SABMiller and US market Creates conditions for monopoly pricing Creates conditions for monopoly pricing

14 So what? Implications of globalization of alcohol Key difference between globalized alcohol and other alcohol types (e.g. traditional, local industrial, etc.): Key difference between globalized alcohol and other alcohol types (e.g. traditional, local industrial, etc.): Globalized alcohol is marketed.Globalized alcohol is marketed. This marketing is the dominant feature of its global production chain.This marketing is the dominant feature of its global production chain. Production itself is easily delegated – tightest control is over marketing activities, the image of the product.Production itself is easily delegated – tightest control is over marketing activities, the image of the product.

15 Marketing as intentional cultural change Advertising is Advertising is...a tool of social order whose self-espoused purpose was the nullification of the customs of ages; [to]... break down the barriers of individual habits. It defined itself as at once the destroyer and creator in the process of the ever-evolving new. Its constructive effort [was]... to superimpose new conceptions of individual attainment and community desire; to solidify the productive process while at the same time parrying anticorporate feeling....a tool of social order whose self-espoused purpose was the nullification of the customs of ages; [to]... break down the barriers of individual habits. It defined itself as at once the destroyer and creator in the process of the ever-evolving new. Its constructive effort [was]... to superimpose new conceptions of individual attainment and community desire; to solidify the productive process while at the same time parrying anticorporate feeling. -- (Ewen 1976:19)

16 The importance of branding The presence of a brand (or even the attitudes held toward it) can serve to define a person with respect to others, and when social identity is involved, what is expressed can be very important to the individual…. [The] brand becomes an extension or an integral part of the self. The presence of a brand (or even the attitudes held toward it) can serve to define a person with respect to others, and when social identity is involved, what is expressed can be very important to the individual…. [The] brand becomes an extension or an integral part of the self. -- Aaker 1996:156

17 Summary of marketing channels Includes: Includes: Traditional channels (television, radio, print) Traditional channels (television, radio, print) Internet Internet Texting, pixting Texting, pixting Logoed clothing Logoed clothing Beverage typeBeverage type NPDNPD PackagingPackaging Point of sale (including media, price promotions, access)Point of sale (including media, price promotions, access) SponsorshipsSponsorships product placementproduct placement Viral marketingViral marketing

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19 Product Placement Many examples: Many examples: Kahlua in CatwomanKahlua in Catwoman Coors in Scary Movie 3Coors in Scary Movie 3 Carlsberg in SpidermanCarlsberg in Spiderman Heineken ($10 million) in Matrix ReloadedHeineken ($10 million) in Matrix Reloaded

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21 On-line and downloadable gaming Miller Beer Run Miller Beer Run

22 A beer is a beer is a beer…So therefore it is all about brands… We are not selling beer, we are selling image. - Koh Poh Tiong, CEO, Asia Pacific Breweries

23 It's a beer industry truism that people drink the marketing, not the beer. - Ann Kingston, Saturday Post (Canada), April 20, 2002

24 Globalization: two paths Beer – bifurcated markets: Beer – bifurcated markets: Global brandsGlobal brands Often not super-premiums at home, but marketed that way abroad Often not super-premiums at home, but marketed that way abroad Often contract-brewed by local breweries, in partnership with or owned by global brewing companies (which are sometimes in the hands of competing global brewers) Often contract-brewed by local breweries, in partnership with or owned by global brewing companies (which are sometimes in the hands of competing global brewers) Local brandsLocal brands Take advantage of local brand loyalty Take advantage of local brand loyalty Often actually controlled by global brewers Often actually controlled by global brewers Recipes not always as local as it appears (e.g. Saku) Recipes not always as local as it appears (e.g. Saku) Distilled spirits: global brands essential Distilled spirits: global brands essential

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26 Johnnie Walkers global image Weve got to own the emotional heartland of the category and connect with the consumer in a way that goes beyond the rational aspects of the brand….The emotional high ground we believe Johnnie Walker can hold surrounds the area of inspiring personal progress. That whole area carries a set of values that works extremely well across borders. Weve got to own the emotional heartland of the category and connect with the consumer in a way that goes beyond the rational aspects of the brand….The emotional high ground we believe Johnnie Walker can hold surrounds the area of inspiring personal progress. That whole area carries a set of values that works extremely well across borders.

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28 Advantages of globalization for public health Supply more predictable Supply more predictable Problems of quality control in informal supply less likely (although not unknown)Problems of quality control in informal supply less likely (although not unknown) Control of markets may become more feasible Control of markets may become more feasible Fewer producersFewer producers Easier to implement health-oriented taxationEasier to implement health-oriented taxation

29 Alcohol production and economic and social development Industrially-produced beverages are gaining ground, to the detriment of employment generally and womens employment in particular. Industrially-produced beverages are gaining ground, to the detriment of employment generally and womens employment in particular. Industrialization of alcohol production may help transport, but contributes little to industrial development. Industrialization of alcohol production may help transport, but contributes little to industrial development. Most alcohol-related employment is at retail level – if this rises, consumption and problems are also likely to be rising. Most alcohol-related employment is at retail level – if this rises, consumption and problems are also likely to be rising.

30 Disadvantages of globalization of alcohol Goals of globalized alcohol often at odds with those of public health Goals of globalized alcohol often at odds with those of public health Expand availability rather than reduce itExpand availability rather than reduce it Make product an essential part of every activity rather than optional and occasional, in safe settingsMake product an essential part of every activity rather than optional and occasional, in safe settings Consciously change culture to include alcohol – expansion of consumption into all groups e.g.Consciously change culture to include alcohol – expansion of consumption into all groups e.g.

31 Globalization and Public Health Globalization Public Health Increased integration of production and marketing Little integration of prevention efforts Diffusion of sophisticated technologies for marketing the product Little international exchange of prevention technologies, services often unavailable Increased ability to promote point of view at global levels (e.g. trade agreements) Little ability to organize or mobilize at national or international levels

32 The need for global leadership Globalization is leading to worsening drinking patterns and problems, often in settings with fewest resources to counter them. Globalization is leading to worsening drinking patterns and problems, often in settings with fewest resources to counter them. Global leadership is needed for a global problem. Global leadership is needed for a global problem. National expertise in alcohol control and in drinking-driving counter measures needs to be exchanged and diffused. National expertise in alcohol control and in drinking-driving counter measures needs to be exchanged and diffused. Trade agreements need to reflect alcohols special nature as a commodity, and to protect national and local ability to control alcohol markets. Trade agreements need to reflect alcohols special nature as a commodity, and to protect national and local ability to control alcohol markets. There is a continued lack of basic information for alcohol policy making in developing countries There is a continued lack of basic information for alcohol policy making in developing countries Research, demonstration and evaluation projects on alcohol are needed in non-Western settings. Research, demonstration and evaluation projects on alcohol are needed in non-Western settings.


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