Garçon! Un Coca-Cola, S'il Vous Plaît
13-01-06 Suggested by: Jack of all Trades
Europeans hate America these days. So, why are they still buying our stuff?
By Daniel Gross
It is an article of faith among marketing types, Bush administration critics, and even awkward practitioners of public diplomacy, like Karen Hughes, that the unpopularity of U.S. foreign policy in Europe and the Middle East could hurt American economic interests.
If they hate our invasion of Iraq and our president, the reasoning goes, they'll hate Starbucks lattes, Levi's jeans, and Ford sedans. Media and marketing professionals stoked these fears—the former by highlighting every attempted boycott of American products, the latter by undertaking studies to see which companies were most at risk. Last year, I wrote about marketing consultant GMI, which polled European and Canadian consumers and constructed a matrix that showed which brands were deemed to be most American and which brands customers said they'd be likely to avoid.
It was tough to give too much credence to such surveys, because what people say they'll do in a survey and what they actually do in the checkout line are frequently different. What's more, it's difficult to quantify the value of an image, and hence how much a sullied image in the marketplace of public opinion costs a company. But it is easier to tally results in the real marketplace—sales, revenues, and earnings. If U.S. foreign policy is engendering hostility among consumers in Europe, it would surely show up in annual reports.
Two distinguished political scientists, Peter Katzenstein (from whom I took a class in introductory international relations half a lifetime ago) and Robert Keohane, set out to investigate whether American companies were suffering because of American policies. They're editing a book, Anti-Americanism in World Politics, to be published this fall by Cornell University Press. In one chapter, they trot out anecdotal evidence of European hostility to U.S. products. "It is plausible to believe that people who feel hostile toward the United States would be reluctant to purchase products form American firms, especially those products associated strongly with the United States," they write.
To put the hypothesis to the test, Katzenstein and Keohane examined 2000-2004 European sales figures of three major U.S.-based consumer products firms (Coca-Cola, McDonald's, and Nike) and three major European-based consumer products firms competing in similar fields (Cadbury Schweppes, Nestlé, and adidas-Salomon). In the GMI report I wrote about last year, Coca-Cola and McDonald's were squarely nestled in the problem quadrant—identified in the survey as companies that were seen as highly American and that European and Canadian consumers said they'd be likely to avoid. Nike barely avoided the problem quadrant.
In the time period studied, the European sales of all six firms rose. But the sales of the U.S. firms grew more rapidly. From 2002-2004, Coke's sales in Europe rose 37 percent, McDonald's rose 31 percent, and Nike's rose 40 percent. By contrast, adidas-Salomon's Europeans sales rose about 8 percent, Cadbury Schweppes' rose 28 percent, and Nestlé's rose about 2 percent—albeit off a gigantic base. What's more, "all three American firms increased the share of their [overall] revenues deriving from Europe." In other words, as they were demonstrating against U.S. policy and telling market researchers they'd boycott Coca-Cola and McDonald's, Euros were increasingly lacing up their Nikes to walk down to McDonald's, where they'd wash down the junk food with a supersized Diet Coke. The conclusion: "Reports of consumer anti-Americanism damaging sales of U.S.-based firms in Europe are highly exaggerated."
Is there any reason to doubt Katzenstein and Keohane's conclusion? The fact that the dollar was weakening against the Euro during much of the period may have helped boost the American sales. (The figures for U.S. companies are calculated in dollars while the figures for European companies are reported in Euros.) And it could be that weakness in the European economies where anti-American feeling is concentrated—Germany, France, and Italy—was made up for by strength in more friendly countries like Poland. This seems unlikely, since the continent's consuming power is overwhelmingly concentrated in the countries more hostile to the United States.
Plus, there's other evidence to back up Katzenstein and Keohane. For example, it is generally accepted that the public in the Middle East is more hostile to U.S. foreign policy than the public in Europe. And calls have rung out across the Middle East for boycotts of U.S. products like Coca-Cola. But such boycotts have not occurred. As Vito Racanelli pointed out in Barron's over the weekend, data from the Bureau of Economic Analysis "show in the first nine months of 2005, U.S. corporate profits earned from Middle East affiliates rose 33 percent to $3.4 billion."
What gives? One conclusion is that consumers are hypocrites. Or, to view it more charitably, they don't let geopolitical issues stand in the way of positive consuming experiences. (They won't put their money where their mouth is.) There is also a long European tradition of America-bashing mixed with consumption of American goods. What's more, in Europe, the anti-American combination geopolitical/consumer backlash has a long history of futility. In his magisterial book on Europe, Postwar, Tony Judt notes that even after World War II, when the United States was giving France enormous, essential aid, the French railed against the invasion of American consumer products while snapping them up.
Judt notes that Coca-Cola's rapid expansion in the late 1940s "unleashed a public storm" in France. Le Monde was aghast that Coca-Cola had set a target of selling 240 million bottles in the country in 1950 and editorialized, "Coca-Cola is the Danzig of European Culture." Parisians guzzled the sweet stuff anyway.
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