Political Fallout Hits US Brands' European Sales

26 October 2004

A cluster of all-American brand icons - among them Altria, Coca-Cola, Disney, Gap, General Motors, McDonald's, Starbucks and Wal-Mart - are facing a significant sag in European sales, especially in France and Germany (nations categorized last year as 'Old Europe' in a jibe by US defence secretary Donald Rumsfeld).

Rumsfeld's jeer was triggered by the opposition of those countries to the Bush administration's invasion of Iraq - a hostility that some now fear has been redirected toward US brands.

Last week McDonald's admitted that that a sudden and seemingly inexplicable distaste in Germany for its fast food fare had virtually stalled the company's sales growth in Europe. Likewise Coca-Cola reported a 16% year-on-year fall in German sales, resulting in a $392 million (€310.15m; £214.48m) write-down in the value of its business assets in that country.

In France Altria's iconic cigarette brand Marlboro was hardest hit by a 24.5% falloff in its parent's sales, while in Germany volumes fell by 18.7% . And although tax rises and health campaigns undoubtedly played a part in these decreases, some see more significant forces at play.

Coffee-house colonist Starbucks has also cited a degree of antipathy to US brands in Europe, although it claims this is concentrated among specific groups such as older French coffee drinkers.

Initial hostility to the invasion of Iraq has spread in the wake of the anarchy that followed the US/British occupation - and especially damaging have been the revelations of the Abu-Ghraib prison scandal.

Says DDB Worldwide chairman Keith Reinhard: "My sense is we are seeing a transfer of anger and resentment from foreign policies to things American." US opinion pollster John Zogby agrees: "I would not be surprised if we were seeing growing hostility towards American products."

But the marketers concerned prefer to play down political isues, attributing the sales slides to such factors as new recycling laws and an abysmal northern European summer. Opines Coke's chairman/ceo E Neville Isdell: "I'm sure you will find some consumers who say they have made a political vote, but in terms of impact overall, no [it's not a political issue]."

His optimism seems ill founded in the wake of last week's decision by General Motors to fire staff at Germany's Adam Opel auto plant. The cover of leading news magazine Stern featured a GM-branded cowboy boot, embellished with the US flag, stomping on a throng of German workers.

Data sourced from Financial Times Online; additional content by WARC staff