Marketing: PRODUCT DEVELOPMENT
BRINGING HIT PRODUCTS ABROAD BACK HOME
U.S. companies are picking up winning product tips from consumers in faraway places
In June of 1997, Haagen-Dazs began serving a new flavor called dulce de leche at its sole ice cream shop in Buenos Aires. Named after the caramelized milk that is one of the most popular flavors in Argentina, the locally developed line was an immediate hit. Within weeks, the supersweet, butterscotch-like confection was the store's best-seller.
Just one year later, consumers from Boston to Los Angeles to Paris can find dulce de leche at the supermarket or in one of Haagen-Dazs's 700 retail stores. In U.S. stores that carry it, only vanilla sells better. In Miami, dulce sells twice as fast as any other flavor. In the U.S., it does $1 million a month in revenue. And in Europe, it will soon move up from a seasonal flavor to year-round status.FERTILE FEEDBACK. The dessert is just the latest example of an emerging two-way trend among American marketers. No longer does the shrinking of the globe mean simply that U.S. companies pump out hamburgers, sneakers, and movies for the world to consume--or that Asian and European companies readily sell their goods in the U.S.
In globalization's latest twist, American companies from Levi Strauss & Co. to Nike Inc. are lifting products and ideas from their international operations and bringing them home. Although U.S. companies have long exported their products, a few have now begun using their international operations as incubators for the next big hit. "As the world becomes smaller--relentlessly, if slowly--the interchange and exchange of ideas is becoming much more commonplace," says Simon Williams, chairman of the Sterling Group, a New York-based brand consulting firm.
It's not just happenstance, either. Companies are reorganizing so that hot products from one region of the world can be more readily spotted and shipped elsewhere--either to the U.S. or other international markets. Reliance on the home office for product research, development, and ideas is shrinking. Within companies, says Jane Fraser, a consultant in McKinsey & Co.'s global practice, "the importance of the product is rising, and the importance of the country is beginning to decline."
Take Pillsbury Co., which owns Haagen-Dazs. After consolidating its international division last year, it now invites U.S. executives to training seminars to swap ideas. North American executives who had tried dulce de leche at a brand conference in January, 1997, realized it might fit with the company's recent move to target Latinos in the U.S. But the product did more than that. Today, U.S. sales of the flavor are growing by about 27% monthly--compared with 6% for another specialty flavor, coffee mocha chip. "It's remarkable and unusual to have a new flavor do so well," says Vivian P. Godfrey, Haagen-Dazs vice-president for North America.BUYING NON-AMERICAN. Quaker Oats Co., too, made strategic changes in its management to encourage the exchange of ideas across international borders. In March, the company cut a layer of management and merged some of the operations of its Latin American and Asian divisions. One goal of the changes: to build better communications between regions.
There are good reasons for the shift. An increasingly diverse U.S. customer base has companies searching for ways to connect with fast-growing ethnic groups. Rising levels of immigration also have brought salsa, soccer, and Thai food into the mainstream. At the same time, Americans of all backgrounds have become increasingly willing to choose more adventurous products. Altoids, a 200-year-old British product originally used to calm upset stomachs, now holds 17% of the $281 million U.S. breath-mint category, having edged aside tamer candies such as Certs. "The popularity of stronger, more intense flavors has soared," says Liz Smith, general manager of Callard & Bowser-Suchard, a Kraft subsidiary that owns the Altoids mint. "What used to be daring and experimental is now broad-based and mainstream."
Moreover, the vast increase in imported products in the U.S. over the last two decades has made consumers and marketers far more comfortable with the idea of products with international roots than they once were. With U.S. households increasingly buying Japanese electronics and German cars, the "Not Invented Here" impulse no longer applies. "Most Americans who buy a Mercedes or Toyota don't think they're buying a value system along with a product," says Richard Pelles, a history professor at the University of Bonn who has written about the cultural effects of international trade.
To be fair, the trend is in its early stages. A good number of giant marketers, such as Coca-Cola Co. and RJR Nabisco Inc., say they have never taken a product or ad campaign from abroad and brought it into the U.S.
But others are happy to take the plunge. Nike has found success with shoes that don't appear to jibe with U.S. tastes. A soccer boot, designed with and worn by Brazilian national team member Ronaldo, was a hit at stores, especially during this summer's playing of the World Cup. Two running shoes have also been imported to the U.S. A long-distance running shoe called the Air Rift, which fits like a mitten with the big toe separate to better simulate running barefoot, was designed with the help of Kenyan runners. And the Air Streak was introduced first in Japan and a year later in the U.S.
The reason for the moves? Nike based them in part on an internal consumer study, which shows a decline in nativistic consumer sentiment in the U.S., especially among young buyers. That has inspired Nike to look abroad more often for new ideas. "All of our products used to be driven almost 100% by consumers in the U.S.," says Juliet Moran, Nike's director of international marketing. "But we're now finding we're getting insights from around the world."
Other companies are hoping for similar outcomes. Levi Strauss, famous for exporting the all-American look of blue jeans to the world, is hoping to bring an offshore trend to U.S. consumers. For three years, a dark version of Levi's denim has been the hot seller in Japan. This year, Levi's is launching an offshoot called "hard jeans" that will be darker and stiffer than typical denim. Levi's has told its U.S. managers that looking abroad for ideas is part of their job. "Three or four years ago, that would have been inconceivable in this company," says Robert Holloway, Levi Strauss's vice-president for business development. "People had a much narrower view."
The tactic does not always work, however. Sometimes, companies discover a product was successful abroad thanks to a dearth of competition. While Keebler Co. was owned by British-based United Biscuits PLC, it tried to import favorites from Rose's marmalade to Panda licorice to Kame cooking oils into the U.S. in the early '90s. But Keebler was not able to make the pricey products distinct from established rivals, and the imports languished.
That hasn't discouraged a host of new candidates already waiting at the border. Cereal partners General Mills Inc. and Nestle have successfully invaded Canadian stores with a popular European chocolate breakfast. General Mills CEO Stephen W. Sanger says he thinks some products from the joint venture will eventually find their way to the U.S. And as new McDonald's Corp. CEO Jack M. Greenberg figures out how to perk up his struggling U.S. division, he says he'll look for help in the company's international outlets. Already, he has reorganized McDonald's American management structure to resemble the decentralized setup overseas, and the company says ad campaigns and tie-ins may cross borders in the future.
Meanwhile, Haagen-Dazs isn't finished. If it can figure out how to import the ingredients, Godfrey says, it will soon sell its most popular Japanese flavor--green tea--in the U.S. Just imagine the possibilities for cross-cultural sundaes.By David Leonhardt in ChicagoReturn to top