Smart young professionals sit in Starbucks cafes in the southern Chinese boomtown of Guangzhou, sipping barista-made drinks. Decked with mood lighting and smooth wooden tables, menus offer everything from Chinese New Year cakes—some shaped like teddy bears—to green-tea lattes.
Starbucks is a foreign brand that has been a resounding success in China: since 1999, when the company made its first foray into the Middle Kingdom, it has reached more than 2,100 stores in over 100 cities.
Not only does the American company have an active digital strategy, crucial in a nation where over half of the 1.3 billion-strong population is now online. But drinking coffee—a habit only recently imported from the West—has become a status symbol for the growing middle classes. Added to this, Starbucks has prioritised cultural adaptation, tapping into Chinese festivals, localising recipes, and tailoring tastes.
Promoting a culture of general care for society is another plus, with the company performing over 446,000 hours of community service and taking an active interest in employees.
“They bring the families in to explain what the career path is—they make it clear they are not just training employees to make coffee. Customers like the fact that Starbucks cares enough to do that,” says Ben Cavender, associate principal at China Market Research Group.
Storm clouds in Asia
Yet, as nationalism rears its head around Asia, not all foreign brands can weather the storm so easily. Threats include organised boycotts and, more subtly, a turning away from foreign brands towards domestic products as national pride grows. Social media is another risk. In the past, companies could largely write the conversation when it came to communication; today, in the face of sites such as Sina Weibo, a large part of media relations is out of a brand’s control—driven, instead, by bloggers.
Further stirring up instability in Asia is Donald Trump, the newly anointed 45th president of the US. Trump has aggressively opposed China’s foreign exchange policy and has threatened a fresh trade war, proposing a 45 percent tariff on imports from China. He has riled Beijing with moves hinting at support for Taiwan’s independence, and has suggested changes to future US support in South Korea (including strong criticism of the US-Korea free trade agreement).
Meanwhile, Filipino president Rodrigo Duterte is proving equally as unpredictable in his foreign policy announcements, both in rebutting the US and in stirring up controversy throughout the South China Sea, a major shipping route. The latter is a particularly sore trigger point for nationalist tensions in Asia. As such, brands associated with certain countries can find themselves facing a backlash.
“Every single Northeast-Asian culture values stability as the platform of progress. When that stability is threatened or dismantled, you really have a lot of things that can go wrong and a lot of things that can spring from uncertainty,” notes commentator Tom Doctoroff, former CEO of
J. Walter Thompson Asia-Pacific. “It’s very possible that there will be a disaster because Trump is Trump.”
Jerry Clode, head of digital and social insight at Resonance China, believes that “there are early signs that Trump’s anti-China rhetoric will cause a backlash on social media”, which he says is China’s version of civil society. “This will give the government pressure, and may in turn lead to more nationalistic posturing,” he adds.
Local vs foreign brands
Boosted national sentiment can lead to local brands gaining more market share. “Local brands have been quick to take advantage of the rise in nationalism,” notes Kunal Sinha, a Shanghai-based strategy consultant. Indian brands, for example, increased their value by 32 percent over the past three years, compared to 19 percent for global brands, according to Millward Brown’s 2016 BrandZ top-50 most valuable Indian brands report.
"There are early signs that [US President Donald] Trump’s anti-China rhetoric will cause a backlash on social media, China’s version of civil society" Jerry Clode, head of digital and social insight, Resonance China
Sinha points to the Indian FMCG brand Patanjali, which has expanded from offering a narrow range of Ayurvedic products to food, skincare, and more. “It draws attention to its healthier, natural ingredients—suggesting that international brands might be harmful and unsuitable, and by doing so has created a brand of unique appeal to Indian consumers,” he says.
One way to vent nationalism on the ground is boycotting brands. Just last month, China’s official tourism body ordered travel agencies to boycott the Japanese hotel chain APA over a book written by its CEO Toshio Motoya which denied casualty counts during the Nanjing massacre in 1937.
Following The Hague’s ruling in favour of Manila in the South China Sea dispute last July, some Chinese called for boycotts of products from the Philippines and the US. There were also protests outside KFC across the country; one sign read: “What you eat is KFC. What is lost is the face of our ancestors.” Photographs spread online of vigilantes smashing Apple iPhones. As one user stated: “Take out your iPhone. If you don’t smash it, you aren’t Chinese!”
It isn’t only China, however. In 2013 shop owners in South Korea declared nationwide boycotts of Japanese products including Asahi beer and Sony following territorial disputes. Meanwhile, in India last year, boycotts of Chinese goods took place during Diwali, the festival of lights, following China’s open support for Pakistan.
Malaysia, too, is developing its own unique brand of nationalism, notes Chris Robinson, managing partner at research consultancy Anovax.
“Suddenly it went from being a fairly non-religious country to the political parties using Islam as a basis for pushing the party line,” he says. “In Malaysia [we are] going to see a huge Islamic product market quite different from China or Western markets—smart brands there will push the Muslim line very strongly, in other words halal products, and tap into religious brand positions.
“Politically and religiously orientated boycotting is going to be a problem for brands going forward—I could see that happening even in the Philippines.”
What foreign brands can do
So how do brands avoid courting vitriol? Appearing foreign is not always a disadvantage and in some cases it can strengthen a brand’s image. This is particularly the case when the origin is “of a more developed country with strong association with the quality that the brand will like to be associated with”, says Yukino Yamamoto, managing director of Asia for Labbrand, citing examples of Germany for quality, Europe generally for advancement in environmental protection, Switzerland for precision, Italy for workmanship, and Japan for both innovation and quality.
Clode also believes that while appearing foreign can have advantages—mainly based around quality control, with foreign food products and baby formula brands in China particularly sought after—an important crux is “how the brand communicates this as part of their brand stories. Some do this well, others fail to capture it.”
Even if brands are symbolically American, working hard to localise can provide one barrier against boycotts. It’s all about balance, says Robinson. “There’s this complicated understanding that China is still not there yet [in terms of quality] particularly on the food product side. But that doesn’t mean that the brands from [foreign] countries can brag about being special. You can talk about technology and pure ingredients etc but you can’t wave the flag.”
One way to promote foreign brands sensitively is to use local opinion leaders and celebrities as ambassadors. Another tool is to present a brand as “culturally odourless” or pan-Asian—a method that many Japanese brands use to avoid nationalistic sentiment. Sony and Panasonic are careful to promote their quality over their ‘Japaneseness’. Muji also avoids overtly Japanese links, concentrating instead on experiential shopping experiences. Meanwhile, skincare brand Shiseido has even developed a China-specific brand, Aupres.
It's 'brand beware' when using cultural symbols
Brands can also go too far, however—adopting local symbols can be a risk in itself. In 2004, China banned Nike ads showing NBA star LeBron James battling a Chinese dragon, citing it as offensive. Authenticity is key, particularly during the Lunar New Year, a time Resonance’s Clode says can be “dangerous for internationals, where a careful strategy needs to be adopted when using traditional symbols”. “Brands need to ensure localising fits their core DNA—so their localisation relates to an intuitive part of their brand personality and essence,” he adds.
This year, while Victoria’s Secret gained kudos for featuring four models of Chinese origin in its runway show, its dragon-themed outfits were deemed controversial, sparking online criticism in China. It was, notes Clode, seen “as ‘try hard’ and a lame attempt to co-opt Chinese consumers”.
If shallow and superficial symbols are rejected, a deeper contribution to society is the way forward. “International brands can do more and communicate more on a regular basis on how their business has localised and contributed back to the local community to mitigate this political risk,” says Yamamoto. “It could be sourcing local produces for F&B brands, encouraging research, studies or education for engineering students, or taking part in local events or fundraising activities.”
Cavender agrees. “The key thing is to make it clear to the consumer on the ground that [the brand is] responsive to and really plugged into their needs … so that Chinese think of them as international brands but also as a local brand too,” he says. “By having a WeChat that is very active, and being in tune with Chinese holidays, it’s reminding people more than anything that the brand cares about the consumer, not treating them as a second-class customer. Design first, product first for those markets.”
The same applies in India. Samsung recently launched its successful ‘Make for India’ campaign, highlighting its commitment to Indian consumers, and borrowing heavily from Prime Minister Narendra Modi’s 2014 slogan ‘Make in India’.
In China, the brand has fared less well, largely due to its poorly handled product recall of the Note 7 last year, which led state broadcaster CCTV to accuse the company of acting with “arrogance” and “double standards”.
Samsung “sent a really bad message to people: ‘Those Koreans are above things and we don’t really care about you as customers’”, Cavender says. “That really damaged the brand: if they had been fast at the recall and been open and didn’t try and shift blame people would have looked right past it.”
The brand could have learned from Starbucks. Back in Guangzhou, the coffee chain continues to court queues around the block. Its success? An American brand looking out for Chinese people.