Globalization of alcohol Globalization of alcohol markets in Central and markets in Central and

South AmericaSouth America

David Jernigan PhDDavid Jernigan PhDCenter on Alcohol Marketing and Center on Alcohol Marketing and

YouthYouthGeorgetown UniversityGeorgetown UniversityWashington, DC, USAWashington, DC, USA

What is globalization?What is globalization?

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

General advantages of General advantages of globalizationglobalization

Standardizes products globally, with Standardizes products globally, with possible increases in general quality of possible increases in general quality of products products

Increases economic efficiencyIncreases economic efficiency• Builds on global division of labor, comparative Builds on global division of labor, comparative

advantage existing in each countryadvantage existing in each country Increases employment, diffuses Increases employment, diffuses

technological advances into less-developed technological advances into less-developed countriescountries

Increases global tradeIncreases global trade

Alcohol types in national Alcohol types in national marketsmarkets

““Traditional” beveragesTraditional” 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” beveragesTraditional 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

GlobalizedGlobalized• Recipes globally-controlledRecipes globally-controlled• Marketing based on lifestyle, embedding product into Marketing based on lifestyle, embedding product into

cultural life cultural life

Global trends in alcohol Global trends in alcohol consumptionconsumption

Developed country markets have Developed country markets have “matured” – consumption is stagnant or “matured” – consumption is stagnant or fallingfalling

Developing regions are where growth is Developing regions are where growth is for global alcohol producersfor global alcohol producers

Substantial “unrecorded” consumption Substantial “unrecorded” consumption existsexists

Gradual shift towards consumption of Gradual shift towards consumption of industrially-produced, globally-available industrially-produced, globally-available beveragesbeverages

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

consumption risingconsumption rising

Alcohol in international Alcohol in international tradetrade

By far the greatest amount of trade is By far the greatest amount of trade is between US, Europe and Japan.between US, Europe and Japan.

Mexico is only non-Western country Mexico is only non-Western country among the top ten distilled spirits or beer among the top ten distilled spirits or beer exporters.exporters.

Chile and Argentina are the only non-Chile and Argentina are the only non-Western countries among the top ten Western countries among the top ten wine exporters.wine exporters.

Globalized alcohol travels primarily Globalized alcohol travels primarily through integrated production networks, through integrated production networks, not through trade.not through trade.

Concentration in the global Concentration in the global beer market 1979-2005beer market 1979-2005

Concentration in the global Concentration in the global distilled spirits market, 1991-distilled spirits market, 1991-

20032003

Summary of globalization Summary of globalization trendstrends

Globalized beverages coexist with Globalized beverages coexist with local beverageslocal beverages

Gradual shift of consumption Gradual shift of consumption towards sectors where ownership is towards sectors where ownership is more highly concentratedmore highly concentrated

Dramatic increase in concentration Dramatic increase in concentration of ownership of beer companiesof ownership of beer companies

Increased dominance of Central and Increased dominance of Central and South American beer markets by South American beer markets by global producersglobal producers

Global brewers in Central and Global brewers in Central and South American countriesSouth American countries

So what? Implications of So what? Implications of globalization of alcoholglobalization of alcohol

Globalization brings significant Globalization brings significant economies of scaleeconomies of scale• Creates larger political and economic Creates larger political and economic

actorsactors• Allows for innovations in one market to Allows for innovations in one market to

move to anothermove to another E.g. social aspects organizationsE.g. social aspects organizations

• Permits shifting of global resources from Permits shifting of global resources from one market to another one market to another

e.g. SABMiller and US markete.g. SABMiller and US market Creates conditions for monopoly pricingCreates conditions for monopoly pricing

So what? Implications of So what? Implications of globalization of alcoholglobalization of alcohol

Key difference between globalized Key difference between globalized alcohol and other alcohol types (e.g. alcohol and other alcohol types (e.g. traditional, local industrial, etc.):traditional, local industrial, etc.):• Globalized alcohol is Globalized alcohol is marketed .marketed .• This marketing is the dominant feature This marketing is the dominant feature

of its global production chain.of its global production chain.• Production itself is easily delegated – Production itself is easily delegated –

tightest control is over marketing tightest control is over marketing activities, the image of the product.activities, the image of the product.

Marketing as intentional Marketing as intentional cultural changecultural change

Advertising is Advertising is • ...a tool of social order whose self-espoused ...a tool of social order whose self-espoused

purpose was the “nullification” of the “customs purpose was the “nullification” of the “customs of ages; [to] ... break down the barriers of of ages; [to] ... break down the barriers of individual habits.” It defined itself as “at once individual habits.” It defined itself as “at once the destroyer and creator in the process of the the destroyer and creator in the process of the ever-evolving new. Its constructive effort ever-evolving new. Its constructive effort [was] ... to superimpose new conceptions of [was] ... to superimpose new conceptions of individual attainment and community desire;” to individual attainment and community desire;” to solidify the productive process while at the same solidify the productive process while at the same time parrying anticorporate feeling. time parrying anticorporate feeling.

-- (Ewen 1976:19) -- (Ewen 1976:19)

The importance of brandingThe importance of branding

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

-- Aaker 1996:156-- Aaker 1996:156

Summary of marketing Summary of marketing channelschannels

Includes:Includes: Traditional channels (television, radio, Traditional channels (television, radio,

print)print) InternetInternet Texting, pixtingTexting, pixting Logoed clothingLogoed clothing

• Beverage typeBeverage type• NPDNPD• PackagingPackaging• Point of sale (including media, price Point of sale (including media, price

promotions, access)promotions, access)• SponsorshipsSponsorships• product placementproduct placement• Viral marketingViral marketing

Product PlacementProduct Placement

Many examples:Many examples:• Kahlua in Kahlua in

CatwomanCatwoman• Coors in Scary Coors in Scary

Movie 3Movie 3• Carlsberg in Carlsberg in

SpidermanSpiderman• Heineken ($10 Heineken ($10

million) in Matrix million) in Matrix ReloadedReloaded

On-line and downloadable On-line and downloadable gaminggaming

““Miller Beer Run”Miller Beer Run”

““A beer is a beer is a A beer is a beer is a beer…So therefore it beer…So therefore it is all about brands… is all about brands… We are not selling We are not selling beer, we are selling beer, we are selling image.”image.”

- Koh Poh Tiong, CEO, Asia Pacific - Koh Poh Tiong, CEO, Asia Pacific BreweriesBreweries

““It's a beer industry It's a beer industry truism that people truism that people drink the marketing, drink the marketing, not the beer.”not the beer.”

- Ann Kingston, - Ann Kingston, Saturday PostSaturday Post (Canada), April 20, 2002(Canada), April 20, 2002

Globalization: two pathsGlobalization: two paths

Beer – bifurcated markets:Beer – bifurcated markets:• Global brandsGlobal brands

Often not super-premiums at home, but marketed that Often not super-premiums at home, but marketed that way abroadway abroad

Often contract-brewed by local breweries, in partnership Often contract-brewed by local breweries, in partnership with or owned by global brewing companies (which are with or owned by global brewing companies (which are sometimes in the hands of competing global brewers)sometimes in the hands of competing global brewers)

• Local brandsLocal brands Take advantage of local brand loyaltyTake advantage of local brand loyalty Often actually controlled by global brewersOften 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 essentialDistilled spirits: global brands essential

Johnnie Walker’s global Johnnie Walker’s global imageimage

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

Advantages of globalization for Advantages of globalization for public healthpublic health

Supply more predictableSupply more predictable• Problems of quality control in informal Problems of quality control in informal

supply less likely (although not supply less likely (although not unknown)unknown)

Control of markets may become Control of markets may become more feasiblemore feasible• Fewer producersFewer producers• Easier to implement health-oriented Easier to implement health-oriented

taxation taxation

Alcohol production and Alcohol production and economic and social economic and social

development development Industrially-produced beverages are Industrially-produced beverages are

gaining ground, to the detriment of gaining ground, to the detriment of employment generally and women’s employment generally and women’s employment in particular.employment in particular.

Industrialization of alcohol production Industrialization of alcohol production may help transport, but contributes little may help transport, but contributes little to industrial development.to industrial development.

Most alcohol-related employment is at Most alcohol-related employment is at retail level – if this rises, consumption and retail level – if this rises, consumption and problems are also likely to be rising.problems are also likely to be rising.

Disadvantages of Disadvantages of globalization of alcoholglobalization of alcohol

Goals of globalized alcohol often at Goals of globalized alcohol often at odds with those of public healthodds with those of public health• Expand availability rather than reduce itExpand availability rather than reduce it• Make product an essential part of every Make product an essential part of every

activity rather than optional and activity rather than optional and occasional, in safe settingsoccasional, in safe settings

• Consciously change culture to include Consciously change culture to include alcohol – expansion of consumption into alcohol – expansion of consumption into all groups e.g.all groups e.g.

Globalization and Public Globalization and Public HealthHealth

GlobalizationGlobalization Public HealthPublic HealthIncreased integration Increased integration of production and of production and marketingmarketing

Little integration of Little integration of prevention effortsprevention efforts

Diffusion of Diffusion of sophisticated sophisticated technologies for technologies for marketing the marketing the productproduct

Little international Little international exchange of exchange of prevention prevention technologies, technologies, services often services often unavailableunavailable

Increased ability to Increased ability to promote point of promote point of view at global levels view at global levels (e.g. trade (e.g. trade agreements)agreements)

Little ability to Little ability to organize or mobilize organize or mobilize at national or at national or international levelsinternational levels

The need for global The need for global leadershipleadership

Globalization is leading to worsening drinking Globalization is leading to worsening drinking patterns and problems, often in settings with patterns and problems, often in settings with fewest resources to counter them.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 National expertise in alcohol control and in

drinking-driving counter measures needs to be drinking-driving counter measures needs to be exchanged and diffused.exchanged and diffused.

Trade agreements need to reflect alcohol’s special Trade agreements need to reflect alcohol’s special nature as a commodity, and to protect national nature as a commodity, and to protect national and local ability to control alcohol markets.and local ability to control alcohol markets.

There is a continued lack of basic information for There is a continued lack of basic information for alcohol policy making in developing countriesalcohol policy making in developing countries

Research, demonstration and evaluation projects Research, demonstration and evaluation projects on alcohol are needed in non-Western settings.on alcohol are needed in non-Western settings.