Choosing or Settling for Local?
The BDS Movement has seen consumer spending on local brands surge, but will they be able to sustain it for the long term?
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To Boycott or Not to Boycott?
In 2017, Apple moved the majority of their R&D to their second-largest tech lab in the world, which was located in Israel. In their official press release, the company said: “Apple, like most top-tier tech multinationals, looks to Israel for leading innovative products. The company has made several strategic acquisitions in Israel over the past decade and much of the technology built into Apple products was developed in Israel.” Given the current trend of supporting the BDS Movement, are we going to throw our iPhones in the bin and pledge never to buy an iPhone again? I guess not. Let’s face it, we can do without a biscuit or a facewash, but an iPhone?
Let’s first try to understand the reality behind the impact of Pakistanis supporting the boycott. Take the example of one of the largest consumer goods companies in Pakistan that is currently facing a boycott of their products. The company, despite being one of the biggest in the country, contributes 0.2% to the total global revenue of the parent company and 0.3% of the total global net profit. This is based on the current USD to PKR conversion rate. Therefore, if we look at the P&L impact of the boycott at the global level, the parent company will suffer a loss of less than 0.1% of the value of their total sales, even if the Pakistani affiliate company loses half their sales. Even more interesting is that the cash flow of the global parent company will not be affected because profits generated in Pakistan have not been transferred to the global parent company for over a decade.
The reality is that the boycott will not have any financial impact on the global company. Conversely, the current boycott can very well create unemployment across a lot of sectors in Pakistan that are dependent on the sales of multinational companies.
Or take Fiverr, which is headquartered in Israel and through which Pakistan’s freelance community has already generated half a billion dollars a year. A boycott of Fiverr would potentially result in a loss of revenue and employment opportunities. Half a billion dollars in Pakistan’s current economic situation is no joke.
But Pakistanis are emotional people and it is too much to expect that we would rationally look at the financial implications of a boycott.
Nevertheless, some brands have been affected more than others, including McDonald’s, KFC, Pepsi and Coke. However, as I pointed out at the beginning of this article, no one is talking about boycotting Apple, nor have people emptied accounts held in multinational banks.
No doubt, the boycott has seen several local brands gain popularity in the last couple of months as substitutes for boycotted brands and that is no bad thing, no matter the reasons behind it. The emergence and growth of local brands are good for the economy, assuming those brands can provide a good-quality product or service and use local materials in their manufacturing process. If they are importing their raw materials, then they are doing the same thing as the multinational brands under boycott are doing.
Several local brands have been strongly emphasising their local credentials in their communications. Cola Next’s current TVC proudly proclaims ‘Kyun Ke Cola Next Hai Pakistani.’ This is quite ironic given that their previous four TVCs were shot outside Pakistan, but then times change and opportunity knocks. The fried chicken/burger war has become intense. KFC, once a major key account for Foodpanda, is off the app now, while Kababjees is expanding at a rate we never knew existed. You never know; Kababjees may even launch their own social media platform.
As local brands ride the favourable tide, how should the multinational companies weather this storm, which frankly does not seem to be abating any time soon? Season 15 of Coke Studio has arrived. Strategically, it makes sense to leverage a platform that Pakistanis not only love but proudly own in order to regain positivity towards the brand. However, on the day the first song was released, Coke Studio’s YouTube channel was bombarded with negative comments and calls for a boycott. Anticipating the reaction, Coke’s social media team moderated the comments and today one cannot find any negative comments anymore. Granted, the popularity of the new season was partly affected by the quality of the music, as expectations were sky-high but the music was underwhelming. Pepsi’s passion point in Pakistan is cricket, and with the World Cup around the corner, they should probably stick to the basics and stick to commercial advertising while ensuring on-ground availability.
A tried and tested formula to handle this phase for these multinational brands under fire would be to donate towards humanitarian causes for Gaza, although I doubt if their global headquarters would endorse such a move.
Alternatively, they should just go about business as usual and wait until the tide subsides. From a purely business point of view, this might be the only option they have.
To conclude, it really doesn’t matter if the boycott is affecting Israel financially or not, as long as it positively affects Pakistan’s current account balance. The tricky part is how the boycott will affect our economy and its impact on local employment. If we can find answers to these questions, I am willing to boycott even the iPhone.
PS: I am an Android user.
Note: At the time of this article’s writing, KFC had been temporarily removed from the Foodpanda app. It has since been reinstated. Sincerest apologies for any confusion caused.
Sami Qahar is CEO, Stimulus Productions.
sami.qahar@gmail.com
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Nevertheless, some brands have been affected more than others, including McDonald’s, KFC, Pepsi and Coke. However, as I pointed out at the beginning of this article, no one is talking about boycotting Apple, nor have people emptied accounts held in multinational banks.
No doubt, the boycott has seen several local brands gain popularity in the last couple of months as substitutes for boycotted brands and that is no bad thing, no matter the reasons behind it. The emergence and growth of local brands are good for the economy, assuming those brands can provide a good-quality product or service and use local materials in their manufacturing process. If they are importing their raw materials, then they are doing the same thing as the multinational brands under boycott are doing.
Several local brands have been strongly emphasising their local credentials in their communications. Cola Next’s current TVC proudly proclaims ‘Kyun Ke Cola Next Hai Pakistani.’ This is quite ironic given that their previous four TVCs were shot outside Pakistan, but then times change and opportunity knocks. The fried chicken/burger war has become intense. KFC, once a major key account for Foodpanda, is off the app now, while Kababjees is expanding at a rate we never knew existed. You never know; Kababjees may even launch their own social media platform.
As local brands ride the favourable tide, how should the multinational companies weather this storm, which frankly does not seem to be abating any time soon? Season 15 of Coke Studio has arrived. Strategically, it makes sense to leverage a platform that Pakistanis not only love but proudly own in order to regain positivity towards the brand. However, on the day the first song was released, Coke Studio’s YouTube channel was bombarded with negative comments and calls for a boycott. Anticipating the reaction, Coke’s social media team moderated the comments and today one cannot find any negative comments anymore. Granted, the popularity of the new season was partly affected by the quality of the music, as expectations were sky-high but the music was underwhelming. Pepsi’s passion point in Pakistan is cricket, and with the World Cup around the corner, they should probably stick to the basics and stick to commercial advertising while ensuring on-ground availability.
A tried and tested formula to handle this phase for these multinational brands under fire would be to donate towards humanitarian causes for Gaza, although I doubt if their global headquarters would endorse such a move.
Alternatively, they should just go about business as usual and wait until the tide subsides. From a purely business point of view, this might be the only option they have.
To conclude, it really doesn’t matter if the boycott is affecting Israel financially or not, as long as it positively affects Pakistan’s current account balance. The tricky part is how the boycott will affect our economy and its impact on local employment. If we can find answers to these questions, I am willing to boycott even the iPhone.
PS: I am an Android user.
Note: At the time of this article’s writing, KFC had been temporarily removed from the Foodpanda app. It has since been reinstated. Sincerest apologies for any confusion caused.
Sami Qahar is CEO, Stimulus Productions.
sami.qahar@gmail.com
Read Comments
Related Stories
To conclude, it really doesn’t matter if the boycott is affecting Israel financially or not, as long as it positively affects Pakistan’s current account balance. The tricky part is how the boycott will affect our economy and its impact on local employment. If we can find answers to these questions, I am willing to boycott even the iPhone.
PS: I am an Android user.
Note: At the time of this article’s writing, KFC had been temporarily removed from the Foodpanda app. It has since been reinstated. Sincerest apologies for any confusion caused.
Sami Qahar is CEO, Stimulus Productions.
sami.qahar@gmail.com