Globalization of alcohol markets in Central and South America

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 • Increases economic efficiency • Builds on global division of labor, comparative advantage existing in each country • Increases employment, diffuses technological advances into less-developed countries • Increases global trade

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

6. Global trends in alcohol consumption • Developed country markets have “matured” – consumption is stagnant or falling • Developing regions are where growth is for global alcohol producers • Substantial “unrecorded” consumption exists • 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. • 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. • Globalized alcohol travels primarily through integrated production networks, not through trade.

9. Concentration in the global beer market 1979-2005

10. Concentration in the global distilled spirits market, 1991-2003

11. Summary of globalization trends • Globalized beverages coexist with local beverages • Gradual shift of consumption towards sectors where ownership is more highly concentrated • Dramatic increase in concentration of ownership of beer companies • 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 • Creates larger political and economic actors • Allows for innovations in one market to move to another • E.g. social aspects organizations • Permits shifting of global resources from one market to another • e.g. SABMiller and US market • 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.): • Globalized alcohol is marketed . • 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.

15. Marketing as intentional cultural change • 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. -- (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.” -- Aaker 1996:156

17. Summary of marketing channels • Includes: • Traditional channels (television, radio, print) • Internet • Texting, pixting • Logoed clothing • Beverage type • NPD • Packaging • Point of sale (including media, price promotions, access) • Sponsorships • product placement • Viral marketing

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

21. On-line and downloadable gaming • “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: • Global brands • 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) • Local brands • Take advantage of local brand loyalty • Often actually controlled by global brewers • Recipes not always as local as it appears (e.g. Saku) • Distilled spirits: global brands essential

26. Johnnie Walker’s global image • “We’ve 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.”

28. Advantages of globalization for public health • Supply more predictable • Problems of quality control in informal supply less likely (although not unknown) • Control of markets may become more feasible • Fewer producers • Easier 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 women’s employment in particular. • 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.

30. Disadvantages of globalization of alcohol • Goals of globalized alcohol often at odds with those of public health • Expand availability rather than reduce it • Make 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.

31. Globalization and Public Health

32. The need for global leadership • 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. • National expertise in alcohol control and in drinking-driving counter measures needs to be exchanged and diffused. • Trade agreements need to reflect alcohol’s 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 • Research, demonstration and evaluation projects on alcohol are needed in non-Western settings.