Consumer Psychologist Facebook Forum

Lars Perner, Ph.D.
Assistant Professor of Clinical Marketing
Department of Marketing
Marshall School of Business
University of Southern California
Los Angeles, CA 90089-1424, USA
(213) 740-7127


International Food Markets

Background.  The United States exports much of its food supply and in turn imports certain goods that are (1) more economical to grow in other countries, (2) serve niche markets, or (3) perceived to be better if made in certain countries (e.g., Irish whiskey or Belgian chocolate).

 Exchange rates come in two forms:

Measuring country wealth.  There are two ways to measure the wealth of a country.  The nominal per capita gross domestic product (GDP) refers to the value of goods and services produced per person in a country if this value in local currency were to be exchanged into dollars.  Suppose, for example, that the per capita GDP of Japan is 3,500,000 yen and the dollar exchanges for 100 yen, so that the per capita GDP is (3,500,000/100)=$35,000.  However, that $35,000 will not buy as much in Japan—food and housing are much more expensive there.  Therefore, we introduce the idea of purchase parity adjusted  per capita GDP, which reflects what this money can buy in the country.  This is typically based on the relative costs of a weighted “basket” of goods in a country (e.g., 35% of the cost of housing, 40% the cost of food, 10% the cost of clothing, and 15% cost of other items).  If it turns out that this measure of cost of living is 30% higher in Japan, the purchase parity adjusted GPD in Japan would then be ($35,000/(130%) = $26,923. (The Gross Domestic Product (GPD) and Gross National Product (GNP) are almost identical figures.  The GNP, for example, includes income made by citizens working abroad, and does not include the income of foreigners working in the country.  Traditionally, the GNP was more prevalent; today the GPD is more commonly used—in practice, the two measures fall within a few percent of each other.)

In general, the nominal per capita GPD is more useful for determining local consumers’ ability to buy imported goods, the cost of which are determined in large measure by the costs in the home market, while the purchase parity adjusted measure is more useful when products are produced, at local costs, in the country of purchase.  For example, the ability of Argentinians to purchase micro computer chips, which are produced mostly in the U.S. and Japan, is better predicted by nominal income, while the ability to purchase toothpaste made by a U.S. firm in a factory in Argentina is better predicted by purchase parity adjusted income.

It should be noted that, in some countries, income is quite unevenly distributed so that these average measures may not be very meaningful.  In Brazil, for example, there is a very large underclass making significantly less than the national average, and thus, the national figure is not a good indicator of the purchase power of the mass market.  Similarly, great regional differences exist within some countries—income is much higher in northern Germany than it is in the former East Germany, and income in southern Italy is much lower than in northern Italy.

Protectionism:  Although trade generally benefits a country as a whole, powerful interests within countries frequently put obstacles—i.e., they seek to inhibit free trade.   There are several ways this can be done:

Justifications for protectionism:  Several justifications have been made for the practice of protectionism.  Some appear to hold more merit than others:

Variations in Food Taste Preferences.  Our food preferences tend to be “learned” early in life.  It is likely that we will continue to prefer the kind of food we ate growing up.  U.S. agricultural interests lobbied successfully to have wheat included in food aid to Japan after World War II.  The intent was to develop a taste for this product among the next generation—a very forward looking strategy!  Chinese people today do not generally like the taste of U.S. fast food.  The younger generation can “endure” this while the taste is very unpleasant for older Chinese.  Children now growing up and being exposed to this food may appreciate the taste more.

Religion has some impact on food preferences since certain religions do not allow the consumption of certain foods.  There may be significant cultural context to food consumption.  Banquets, for example, are a very important part of the Chinese culture.

Food Diffusion.  Food products often spread to other countries.  Often, this a process that takes considerable time.  Chinese food is believed to have become popular in the U.S. because of Chinese immigrants who started restaurants here.  Mexican food has spread to households of other ethnic groups.  Some products are significantly modified in adopting countries—e.g., U.S. pizza is much more elaborate than the traditional Italian dish.

Food Positioning.  A country of origin may affect the image of a food product either favorably or unfavorably.  When an association is favorable (e.g., French cheese or wine), the country of origin may be emphasized.  Sometimes an origin may be implied when it actually does not exist.  In this practice, which raises serious ethical questions, packaging text may be written in French, for example, even though the product is made in the U.S. and is intended for sale here.  A product name may also imply foreign origin—e.g., Häagen-Dazs ice-cream.  An alternative strategy, when the association is not believed to be seen positively, is to obscure national origin.  A wine made in Germany and a beer made in France use this approach.

Food may also need a different type of positioning based on usage occasion.   Tang, for example, is positioned as a cheap and convenient drink in the U.S.  In Brazil, real orange juice is cheaper and readily available on the streets.  Thus, such a positioning would not work.  Instead, a pineapple flavored drink was promoted as a special treat.  In China, prepared food is available from street vendors much cheaper than McDonald’s food.  Thus, the American position of convenience and low cost are not viable.  Instead, McDonald’s is positioned on its Western mystique.

Food Adaptation.  Food often needs to be adapted to be successful in a new country.  The Japanese tend to like food less sweet than do Americans, so KFC uses less sugar in its potato salad there.  Some McDonald’s sandwiches are much spicier in China.  Serving size may also have to be adjusted.  Americans often eat larger portions than people in many countries.  Packaging is often more important in some countries.  Products exported from the U.S. to Japan often need a significant upgrade to packaging materials where the container is seen a s a reflection of the quality of the product. 

Promotional Decisions.  A large part of most U.S. food products’ marketing is accomplished through television.  However, in many countries, ownership of TVs is much less common than in the U.S.  In most of the World, people watch less TV than Americans do, and some countries either do not allow or limit TV advertising.  Other media, then, may have to be used in certain countries.  Billboards are often more common in India, for example.  Certain other promotional tools may also be unsuitable.  There may not exist an adequate infrastructure for coupon redemption.  Free samples may not be cost effective in countries with low incomes.  Low income individuals who cannot afford to buy the products might endure long lines for a free sample.

Government Export Assistance.  Both the U.S. government and several states have programs to promote agricultural products abroad.  Some programs involve financial assistance, such as low interest loans.  Others assist in making connections with foreign buyers or paperwork.