Brand owners pin hopes on global expansion

09 September 2010

NEW YORK: Most major brand owners are planning to heighten their investment in foreign markets during the next two years, a move encouraged by the recession and a resultant "shift in priorities."

The United Nations Conference on Trade and Development surveyed 236 multinational companies, as well as a number of investment promotion agencies, to gain an understanding of the current climate.

In all, 13% of corporations displayed optimism about the global business environment in 2010, rising to 47% for 2011 and 62% for 2012.

Just over 30% were in positive mood regarding the their own enterprise's prospects this year, a total surpassing 60% for next year and nearing 70% for two years time.

Some 46% of organisations had reduced resources for overseas expansion in 2009, but only 18% closed or divested units abroad.

A further 38% agreed the recession had "shifted the geographical priorities of my company towards developing and transition countries."

While just 39% of respondents directed a majority of expenditure outside their home country in 2009, 47% intend to do so by 2012.

Another consequence of the downturn has been driving an integrated approach, with 41% of UNCTAD's sample hoping to describe themselves as truly global in 2012, measured against 33% at present.

Concerning budgets, 43% of participants should boost the funds allocated to this kind of activity in 2010, reaching 58% for 2011 and 2012.

The primary sector – such as mining and energy – continued to spend most heavily last year, when categories like automotive cut back given a "significant overcapacity."

"By contrast, industries such as pharmaceuticals and food, beverages and tobacco have been comparatively less affected by the crisis," UNCTAD's report said.

Similarly, telecoms, utilities and services proved stronger than the norm, and these segments are likely to lead investment over the medium term.

"I'd love to buy more global brands," Bob McDonald, ceo of Procter & Gamble, said in an interview in September.

"The climate for acquisitions is good, the climate for mergers is good. Companies are starved for growth, they're looking for opportunities to grow."

China was mentioned as a target by over 100 contributors, with India and Brazil on around 70, slightly ahead of the US.

"The near-term economic outlook for the US and Europe remains pretty dreary, marked by high unemployment and low consumer confidence," said William Johnson, Heinz ceo, earlier this month.

"We are not spending much time looking for M&A opportunities in the United States and Western Europe. Our focus is almost entirely on the emerging world."

Russia came in third on UNCTAD's list, with Mexico, the UK, Vietnam and Germany also attracting attention.

Coca-Cola, the soft drinks giant, recently acquired Nidan Soki, one of Russia's biggest juice manufacturers, to enhance its status in the country.

"We will grow as Russia grows through ongoing investments and building a sustainable business model," said Ahmet Bozer, president of its Eurasia and Africa arm.

PepsiCo, the food and beverage group, has also outlined plans to spend $250m (€197m; £162m) in Vietnam, covering a three year period.

"Vietnam represents one of PepsiCo's most exciting growth opportunities," said Saad Abdul-Latif, chief executive officer of PepsiCo Asia.

Data sourced from UNCTAD/Bloomberg/Seeking Alpha/Moscow Times; additional content by Warc staff