Brand Origin Effects During Economic Declines: Evidence from an Emerging Market

Abstract

Drawing on the signaling theory perspective, this study examines the effect of perceived country of origin on brand performance during economic contractions. The authors specify an econometric model linking brand market share to recession periods and analyze the interaction with brand origin perception. They test the model on four years of longitudinal data on consumer packaged goods brands combined with a self-administrated consumer questionnaire to infer consumers’ perceptions about brands’ origins. The authors find that economic contractions differentially affect brands with different country-of-origin perceptions. The results indicate that the market share of brands that customers most identify as domestic suffers more damage during contractions than brands they perceive as foreign. The main contribution of this article is in generating a better understanding of brands’ resistance to economic contractions based on their perceived country of origin. Moreover, the authors provide strategic recommendations to brands based on their origin perception and the country's economic situation.

Keywords

brand origin economic fluctuation recession country of origin

In a survey conducted by Nielsen (2016) with more than 30,000 consumers in 61 countries, 28% of respondents considered the country of origin (COO) of a brand a more important purchase driver than other factors such as price, quality, and product benefits. Over the past several decades, the international marketing literature has shown that brands’ COO is critical for product manufacturers, given its considerable effects on consumer preference and brand performance (Samiee and Chabowski 2021). The association of a brand with a country can lead to perceptions of identification, credibility, quality, prestige, and so on (Mandler, Bartsch, and Han 2020; Sichtmann, Davvetas, and Diamantopoulos 2019; Xie, Batra, and Peng 2015). However, consumers do not always have precise information about brands’ origin, and they use cues such as the brand name, brand image, and familiarity to infer its origin (Ahmed and D’Astous 2008; Melnyk, Klein, and Völckner 2012).

For example, in 2005, Coca-Cola entered the juice market in Brazil by acquiring an established local juice brand called Sucos Mais. Although Coca-Cola originally planned to use its global juice brand name (i.e., Minute Maid), the company eventually decided to merge the local name of the acquired juice manufacturer with its global brand name to form a new brand, Minute Maid Mais. It later rebranded to Sucos Del Valle Mais after acquiring Sucos Del Valle. Although Coca-Cola did not consolidate its global brand name in the country, it leads the Brazilian juice market (Euromonitor 2020). Such an example reveals that managers can benefit from understanding consumer perceptions of brand origin to develop appropriate marketing strategies in international markets.

Consumers’ perceptions of brand origin can be even more important in times of uncertainty (e.g., economic contractions), when consumers seek more product information and use brand signals to drive their decisions, as suggested by signaling theory (Erdem, Swait, and Valenzuela 2006). Concerns about their finances and the country's economy can affect their consumption patterns and product switching behavior, which can be observed for nondurable consumer goods that are purchased more frequently (Curtin 2020; Dubé, Hitsch, and Rossi 2018; Lamey 2014). Therefore, contractions can motivate a change in consumer preferences and companies’ strategies (Lamey et al. 2012), becoming particularly relevant for companies that compete in a volatile environment such as that observed in emerging markets. The literature has evolved to consider the effectiveness of marketing strategies during rapid economic fluctuations prevalent in these contexts (Dekimpe and Deleersnyder 2018; Guissoni et al. 2021), as well as the importance of these markets for global companies’ performance (Sheth 2011). In addition, brand origin information is often more relevant in emerging markets than in more developed economies (Zeugner-Roth and Bartsch 2020).

Even though previous research does not directly show whether economic contractions affect brand origin outcomes, some studies address aspects of consumers’ personal finances, such as economic hardship (Huang, Phau, and Lin 2010) and perceived financial well-being (Hampson, Ma, and Wang 2018). The findings from these studies suggest that when economic hardship is greater, consumers tend to prefer local products because of the frugality descriptive norm (Hampson, Ma, and Wang 2018) and increased animosity toward foreign countries (Huang, Phau, and Lin 2010). However, consumers view brands with a wide geographic market reach as high quality (Özsomer 2012; Riefler 2020). Thus, in economic contractions, when consumers generally become more risk averse (Bollerslev, Gibson, and Zhou 2011), brands they perceive as foreign may have an advantage. This lack of consensus can be related to the absence of studies in the international marketing field investigating the impact of economic downturns on the perceived-brand-origin effect.

Motivated by this research gap, we aimed to investigate the effects of perceived brand origin on market share during economic contractions. To achieve such a goal, we propose a time-series econometric regression model of market share. We implemented the model using retail data from 2012 to 2015 of consumer packaged goods (CPG) brands operating in the Brazilian market, combined with a survey to assess consumers’ perception of these brands’ origin.

Drawing on signaling theory, our study expands the international marketing literature by arguing that economic dynamics can influence the impact of brand origin on brands’ performance (i.e., market share). First, this study adds to the research field by presenting a more robust market-based understanding of which types of brands (i.e., perceived as domestic vs. perceived as foreign) are more resistant to economic fluctuations. Even though one of the main concerns of international firms is their market share and financial performance, this topic has received insufficient attention in international marketing research. The unit of analysis in COO studies is generally at the individual or experimental level, which makes assessing firm-related impacts difficult (Samiee and Chabowski 2021). Thus, analyzing the effect of economic contraction on brand performance using historical market data could contribute to the field from a brand management perspective.

Second, we complement previous work by investigating the role of perceived brand origin during economic contractions. Previous research focuses on analyzing consumption shifts between product categories or brands during economic declines (Kamakura and Du 2012; Lamey 2014; Millet, Lamey, and Van den Bergh 2012; Rajavi, Kushwaha, and Steenkamp 2023). Other studies investigate the effect of brand origin perception during international conflicts (Pandya and Venkatesan 2016). In addition, studies that investigate the COO effect on personal economic hardship use the real origin of the brand by directly presenting it to respondents (Hampson, Ma, and Wang 2018; Huang, Phau, and Lin 2010). However, to the best of our knowledge, none of these studies were specifically designed to assess consumers’ perception of brand origin and how it can affect brand performance during economic contractions.

Third, we provide managerial insights to companies by presenting evidence that can help them direct international marketing and positioning strategies based on countries’ economic contractions. Our research also contributes by analyzing CPG brands’ performance in international markets. Over the past several decades, international markets have experienced high growth, and developing countries represent a considerable part of the total sales from CPG companies (McKinsey 2020). Thus, understanding market share fluctuations in this industry is important for companies developing marketing strategies to build a competitive advantage in these markets.

Related Literature

By investigating the effects of perceived brand origin on market share during economic declines, our research falls into the intersection of two areas: brand COO and economic fluctuation. This section provides an overview of these areas in the marketing literature to describe how we contribute to the research field.

Brand Origin Effects

Over the past few decades, globalization advancement and increased transport capacity have helped brands expand their horizon by intensifying their exposure in different countries (Rust 2020). As a result, competitiveness between foreign and domestic brands fighting for share and consumer preference across markets has increased (Zhang 2015).

According to signaling theory, the availability of more options and the asymmetry of information in the marketplace encourage consumers to use brands as signals to mitigate uncertainties and risk in their purchases (Erdem and Swait 1998). Therefore, brands can manipulate informational signals such as COO perception to position themselves as, for example, high quality, luxury, or low cost. The COO concept is related to the impact of inferential and informational beliefs about a country in regard to consumers’ purchase intentions, evaluations, and risk perceptions of products/brands (Martin and Eroglu 1993). International marketing has studied this topic extensively (Diamantopoulos, Arslanagic-Kalajdzic, and Moschik 2020). The COO effect is based on the fit between product features and the country's image (Maheswaran and Cathy 2009).

However, studies have found that consumers have limited knowledge about brands’ real origin (Samiee, Shimp, and Sharma 2005; Zhang 2015). Even though consumers use cues, such as brand names and symbols, to infer a brand's COO, they regularly make mistakes (Balabanis and Diamantopoulos 2008). Thus, many consumer attitudes toward brands are based more on the perception of origin than on the real origin, influencing the success of brand extensions (Liu et al. 2021; Sichtmann and Diamantopoulos 2013). Therefore, previous studies define concepts on the basis of perceived brand origin. Perceived brand foreignness (PBF) is related to the perception that the brand comes from a foreign country and is marketed locally and in foreign countries. In other words, such brands have a broad geographic market reach (Batra et al. 2000). Conversely, perceived brand localness (PBL) refers to a brand with a perceived domestic origin and a deeper connection to the local culture (Özsomer 2012; Swoboda, Pennemann, and Taube 2012).

The fact that international brands are present in different countries indicates they have good acceptance across markets (Riefler 2020). This broad acceptance may cause consumers to more often associate these brands with quality and prestige (Randrianasolo 2017; Sharma 2011). However, consumers also tend to associate domestic brands with positive affect (Özsomer 2012). These brands enjoy an advantage through their ability to adapt to local preferences and to be identified with a strong national identity (Xie, Batra, and Peng 2015).

In addition, the performance of brands perceived as foreign or domestic may depend on several other conditions and situations, such as consumer ethnocentrism (Akram, Merunka, and Akram 2011), product category characteristics (Davvetas and Diamantopoulos 2016), consumer cultural identity (Bernard et al. 2020), and the country's economic development level (Mandler, Bartsch, and Han 2020). Extrinsic situations can also affect brands’ performance based on their perceived origin. Pandya and Venkatesan (2016) provide evidence that during the 2003 international conflict between the United States and France, U.S. consumers tried to boycott French-sounding brands. Another study argues that firms based in countries with higher corruption levels establish brands that consumers value less and that also decrease firms’ trustworthiness (Lin and Chuang 2016). Gao et al. (2015) suggest that in a domestic industry-wide scandal, foreignness provides an immunizing effect for brands, protecting their performance.

However, studies related to economic crises—extrinsic situations that happen often, especially in more volatile markets—are still rare in the COO literature. Studies such as Hampson, Ma, and Wang (2018), Huang, Phau, and Lin (2010), and Ng, Faraji-Rad, and Batra (2021) address perceptual concepts that are related to economic contractions, such as economic hardship, perceived financial well-being, and uncertainty. They do not, however, capture national economic situations to infer their impact on brand performance. Therefore, in contrast to previous studies, we focus on this literature gap in the COO field by analyzing the perceived-brand-origin phenomenon and the effect of country economic declines on actual marketplace behavior.

Brand Performance in Economic Declines

Firm strategies and consumer purchase decisions vary across economic periods, and these changes are more dramatic in response to recessionary periods than to expansions (Bowman, Minehart, and Rabin 1999). The marketing literature shows that not all companies and brands are affected in the same way—nor do they react similarly—when facing different economic periods. The variation in marketing-mix effectiveness and the changes in consumer behavior following economic expansions and contractions can explain this finding (Dekimpe and Deleersnyder 2018; Guissoni et al. 2021).

Shea (1995) argues that consumers make greater consumption changes when their income decreases than when it increases to the same extent. During contractions, consumer confidence decreases in response to the uncertainties of the economic environment (Hunneman, Verhoef, and Sloot 2015). In general, consumers with a low level of confidence tend to spend less and save more than consumers with a high level of confidence (Dhar and Weinberg 2016). Recession periods also put consumers in a scarcity mindset, causing them to be more risk averse (Bollerslev, Gibson, and Zhou 2011; Shah, Shafir, and Mullainathan 2015). Thus, a dichotomous picture of economic contractions emerges: Although consumers become more willing to buy lower-price brands, they still try to avoid the risk of buying products they view as low quality (Zurawicki and Braidot 2005).

Therefore, a divergent discussion continues related to how consumers change their purchase decisions during times of uncertainty. On the one hand, some studies argue that consumers switch to less expensive brands to save on total spending. This move helps them reduce total spending without reducing the amount purchased (Dubé, Hitsch, and Rossi 2018; Lamey 2014). On the other hand, Hunneman, Verhoef, and Sloot (2015) find that in times of lower consumer confidence, emphasizing customer satisfaction is better than emphasizing a favorable price image, as satisfaction has a stronger effect on share of wallet. This conclusion is in line with Ross, Meloy, and Carlson (2020), who find that consumers tend to refine their preferences in recession periods, prioritizing the items they value most.

Previous studies investigate how the performance of different firms changes during economic contractions (Kamakura and Du 2012; Millet, Lamey, and Van den Bergh 2012). Millet, Lamey, and Van den Bergh (2012) argue that consumers opt for products and services associated with avoiding negative outcomes during economic declines, such as insurance. More precisely, some studies investigate shifting spending within product categories, across companies and brands (Cha, Chintagunta, and Dhar 2015; Dubé, Hitsch, and Rossi 2018; Lamey 2014). Lamey (2014), for example, shows that consumers shift their consumption from national brands to private-label brands to save more. Consumers move their preference to hard discounters during economic declines. Therefore, store brands—which usually have greater ability to reduce their price margins—have a competitive advantage during these periods. Relatedly, Cha, Chintagunta, and Dhar (2015) show that during recessions, households purchase more discounted items.

However, as Dekimpe and Deleersnyder (2018) note, studies aimed at identifying which firms and brands (e.g., smaller/larger, global/local, with more or fewer sub-brands) are more resistant to economic fluctuations are still scant. Rajavi, Kushwaha, and Steenkamp (2023) suggest that low-line-length brands, high-ad-spender brands, extensively distributed brands, and umbrella brands perform better than other brands in economic contractions. Regarding brand origin, some studies focus on international crises and investigate how they create consumer animosity toward brands from foreign countries (Bennett, Kozup, and Taylor 2018; De Nisco et al. 2016; Pandya and Venkatesan 2016). But these crises are more related to political conflicts between countries than to economic decline. Other studies address economic declines through intrinsic aspects, such as personal economic hardship (Huang, Phau, and Lin 2010) and perceived financial well-being (Hampson, Ma, and Wang 2018). Regarding brand origin measurement, previous research that connects this theme with economic contractions uses direct information about the COO by telling the respondents where the product/brand is from (Hampson, Ma, and Wang 2018; Huang, Phau, and Lin 2010). We did not identify a study in this context that addresses the perceived brand origin, which is an important measure, as consumers do not always have precise information about the real origin of a brand (Samiee, Shimp, and Sharma 2005; Zhang 2015). Finally, these studies also present experiment- and survey-based findings. Consequently, exploration of firm-based outcomes in this literature is scant.

The present study addresses this research gap by providing market-based outcomes and analyzing brands’ performance during economic contractions based on their perceived origin. Table 1 compares our study with previous literature from our review of the research streams on COO and economic contractions.

Table 1.

Comparison of This Study with Previous Related Literature.

Study	Products	Type of Data	Brand Origin	Economic Declines	Key Findings
Lamey (2012)	CPGs	Longitudinal real data set	✕	GDP	The results show that private-label share improves during economic recession and decreases during economic expansions. In other words, it behaves countercyclically.
Millet, Lamey, and Van den Bergh (2012)	Insurance and gambling products	Experiment design and longitudinal real data set	✕	GDP	Economic downturns are related to higher consumption of products associated with avoiding negative outcomes (i.e., health insurance). In contrast, economic expansions are related to higher consumption of products associated with achieving positive outcomes (i.e., gambling).
Ng, Faraji-Rad, and Batra (2021)	Headphones and high-definition televisions	Experiment design	✕	Uncertainty	In states of uncertainty, consumers tend to have divergent thinking styles. Those who have a global identity prefer local brands, whereas those who have a local identity prefer global brands.
Pandya and Venkatesan (2016)	CPGs	Longitudinal real data set	Consumer perception about brand origin	✕	The authors show that during an international conflict between France and the United States, the market share of brands perceived as French declined in U.S. supermarkets.
Huang, Phau, and Lin (2010)	They do not analyze specific product categories	Survey	Directly present product COO	Economic hardship	The findings suggest perceived personal economic hardship has a positive effect on consumer animosity, which is negatively related to consumers’ intention to buy products originating in foreign countries.
Hampson, Ma, and Wang (2018)	They do not analyze specific product categories	Survey	Directly present product COO	Perceived financial well-being scale	The results show a positive relation between reduced perceived financial well-being and domestic product purchase intention. This relation is partially mediated by the frugality descriptive norm and perceived value of global brands.
Our study	CPGs	Longitudinal real data set and survey	Consumer perception about brand origin	GDP	The market share of brands most associated with a domestic origin suffer more damage in recessive periods.

Conceptual Framework

To understand how brand origin works on consumers’ decisions during an economic recession, we adopt a signaling theory perspective derived from information economics, which highlights the importance of information for buyers and sellers to make their daily decisions (Erdem and Swait 1998). Signaling theory considers the asymmetric information in marketplaces, whereby consumers and companies have different and often contradictory information. Such asymmetry generates consumer uncertainty about the product/brand quality. Therefore, consumers look for extrinsic and intrinsic signals to identify product characteristics. Many brand aspects can serve as signals to indicate quality, credibility, and identity, such as price, advertising, and package design (Erdem, Swait, and Valenzuela 2006). Companies can also manipulate these attributes to generate more positive signals to consumers. For example, the brand can have a French name to create a signal of French origin, even if the company is based in the United States (Salciuviene et al. 2010).

Erdem, Swait, and Valenzuela (2006) suggest that uncertainty avoidance is one of the dimensions most clearly related to brand effects as signals. It is defined as “the extent to which people feel threatened by ambiguous situations and create beliefs and institutions that try to avoid these” (Hofstede and Bond 1984, p. 418). An economic crisis, which is characterized as a period of uncertainty, makes people more risk averse and takes them out of their routine (Bollerslev, Gibson, and Zhou 2011). This moment of high perceived risk can motivate consumers to collect and process more information (Erdem and Swait 1998), and they move into a decision process that broadens their pool of knowledge (Ng, Faraji-Rad, and Batra 2021). Consequently, brand signals become even more important for reducing consumer uncertainty about product quality (Chen et al. 2020; Hauff and Nilsson 2017). Given this greater importance of brand signals during economic contractions, the consumption of products associated with avoiding negative outcomes tends to increase because of consumers’ heightened risk aversion (Millet, Lamey, and Van den Bergh 2012). Thus, the ability to evoke high quality through signals can benefit a firm (Fogel, Lovallo, and Caringal 2004).

As a result, brand origin can be an important attribute that generates brand signals, helping consumers mentally designate product qualities to the brand (Davvetas and Diamantopoulos 2016; Mandler, Bartsch, and Han 2020; Nguyen and Alcantara 2022; Sichtmann and Diamantopoulos 2013). In general terms, brands with a foreign origin have a broader market reach than domestic brands because they are available in the domestic country as well as other countries, which is not always the case for domestic brands (Batra et al. 2000). Consequently, consumers perceive brands high in PBF as premium brands of higher quality (Riefler 2020), as a brand’s presence in different countries highlights favorable signals of high acceptance (Özsomer 2012; Steenkamp, Batra, and Alden 2003). Consumers could also perceive brands with more foreign cues as an asset rather than a liability (Gao et al. 2015). Thus, the perceived risk of purchasing foreign brands might be lower.

From a consumer perspective in an emerging-market context, signals associated with brands perceived as foreign can be even stronger (Zeugner-Roth and Bartsch 2020), especially during economic contractions, when these markets suffer more consequences than those in countries with greater stability (Narasimhan, Srinivasan, and Sudhir 2015). Previous studies have shown that, overall, consumers in emerging markets tend to admire international brands because they often associate them with signals such as higher prestige and value (Batra et al. 2000; Randrianasolo 2017; Steenkamp, Batra, and Alden 2003). In addition, foreign brands can promote the idea of global citizenship, which consumers in less-developed countries desire (Strizhakova, Coulter, and Price 2008). Such consumers might perceive the consumption of these brands as a means to reach their aspirations and as evidence of social mobility. In addition, consumers tend to view developed countries’ brands more positively because they recognize a fit between brand and country image (Melnyk, Klein, and Völckner 2012; Sharma 2011; Zeugner-Roth and Bartsch 2020; Zhang 2015). Thus, because economic-level classification is an important attribute for evaluating quality, consumers in emerging markets will tend to perceive domestic products as less valuable than those from developed countries.

The importance of signals associated with the quality and prestige of foreign brands might be more important in periods of economic contraction. At these times, perceptions of personal hardship drive uncertainty levels (Huang, Phau, and Lin 2010), and threats to financial well-being (Hampson, Ma, and Wang 2018) tend to increase consumers’ need for signals to deal with asymmetric information. Buyers facing the uncertainties of economic recessions tend to shift to a scarcity mindset, which fosters their risk aversion (Bollerslev, Gibson, and Zhou 2011; Shah, Shafir, and Mullainathan 2015). In this context of increased risk aversion during economic contractions, consumers try to avoid products they view as low quality to avoid negative outcomes (Millet, Lamey, and Van den Bergh 2012; Zurawicki and Braidot 2005) and make a preference refinement to items they value more (Ross, Meloy, and Carlson 2020).

Therefore, drawing on signaling theory, we suggest that during economic contraction—when the importance of brand origin attributes is higher because consumers want to decrease the risk related to product purchase—consumers might be more likely to choose brands they perceive as foreign, given that the image of such brands is related to high quality and good acceptance across markets (Randrianasolo 2017; Riefler 2020). Thus, these brands will suffer less negative impact in recessions than brands perceived as domestic. Drawing on these arguments, we hypothesize that under economic contractions, the market share of brands perceived as domestic (foreign) is more (less) harmed. To address this hypothesis, we propose a conceptual model that investigates the effects of perceived brand origin on market share during an economic recession. To refine our analysis of the phenomenon, we control for different aspects, such as product characteristics, brand image, marketing-mix strategies, and the country's political stability. Figure 1 graphically depicts the conceptual model.

Figure 1.

Conceptual Framework.

Research Design and Data

In this study, we analyze CPG brands from the Brazilian market. We employed a two-stage least-squares (2SLS) regression to verify sub-brand performance during economic contractions based on the perceived brand origin. Our analysis encompasses three types of information: monthly retail data from sub-brands, measures of consumer perceptions about brand origin, and Brazilian gross domestic product (GDP) variation to assess recession periods.

Brazil is a good research context for this study for three reasons. First, it is classified as an emerging market (MSCI 2019). Such countries are characterized by more volatile economic environments. In addition, COO is more relevant for consumer decisions in emerging markets than in developed countries (Zeugner-Roth and Bartsch 2020). Second, by comparing Brazil with other emerging markets during the period of analysis (2012–2015), we note that the country experienced disparate economic situations in a short period, from economic growth to political instability and economic crisis. This volatility facilitates the analysis in this study due to the variation in GDP trends over time. Finally, Brazil is ranked as the seventh-largest foreign direct investment receiver in the world (UNCTAD 2019), and thus, Brazilian consumers may be experienced with foreign firms and brands. Their daily contact with local and foreign products as a globalized country makes for a favorable environment in which to analyze brands’ performance based on origin.

Next, we provide a detailed description of the operationalization and source of the variables used in this study. Table 2 summarizes this information.

Table 2.

Variables’ Operationalization and Source.

Variable Name	Description	Source
MarketShare_it	Volume sales of a sub-brand divided by the total volume sales in the category in a month.	Audit retail data
DomesticScore_i	A score varying from 0 to 10 based on consumers perception of brand perceived origin.	Survey with consumers
Recession_t	Dummy variable equal to 1 if the month is considered recessionary based on GDP variation, and 0 otherwise.	Brazilian Institute of Geography and Statistics
RelPrice_it	The sub-brand unit price in a month divided by the average price of the category.	Audit retail data
Promo_it	The weighted distribution of point-of-sales promotional communication materials. That is, the total sales of stores carrying the sub-brand's promotional communication materials divided by the total sales of all stores.	Audit retail data
Sales_it−1	Volume sales of a sub-brand in the previous month.	Audit retail data
Familiarity_i	A seven-point semantic differential scale based on Zhou, Yang, and Hui (2010) that measures consumers’ familiarity with a brand.	Survey with consumers
Essential_i	Dummy variable equal to 1 if the product category is considered essential, and 0 otherwise.	Brazilian basic basket
Political_t	A variable that “reflect[s] the likelihood of a disorderly transfer of government power, armed conflict, violent demonstrations, social unrest, international tensions, terrorism, as well as ethnic, religious or regional conflicts” (The Global Economy 2021).	The Global Economy

Retail Data

We use an extensive set of monthly scanner data from in-store audits by a large market research firm. This database contains information from 448 sub-brands that have local or international manufacturer headquarters. They are divided into seven CPG categories: beer, biscuits/cookies, coffee, juice, laundry detergent, shampoo, and yogurt. We opted to use these seven categories because they are all consumables present in consumers’ daily lives. These sub-brands are available on the Brazilian market via self-service channels (i.e., marketplaces where consumers browse assortments unassisted; e.g., supermarkets), which represent 60% of the total sales in the Brazilian grocery market (Euromonitor 2022b). The data set contains sales, promotion, and price information for a period of 42 months, spanning July 2012 to December 2015. Because we analyze the recession effect, we divide the descriptive statistics into recessionary and nonrecessionary periods for each sub-brand product category in our data (Table 3).

Table 3.

Descriptive Statistics.

		Recessionary Period					Nonrecessionary Period
Variable	Categories	Mean	SD	Mdn	Min	Max	Mean	SD	Mdn	Min	Max
Sales	Beer	5,143.65	13,528.12	234.6	.1	117,845.7	5,999.77	14,024.74	329.1	.1	106,727.7
	Biscuits/Cookies	129.96	260.89	35.4	.1	1,884.2	136.22	257.91	37.9	.1	1,948.5
	Coffee	295.41	560.12	26.6	.5	2,773.9	266.27	517.56	23.6	.9	2,509.5
	Juice	400.04	312.91	322.7	.4	1,210	316.58	385.88	166.2	.1	1,409.3
	Laundry	775.73	1,271.23	234.1	.1	6,034.8	762.96	1,138.63	265.2	1.6	5,556.6
	Shampoo	24.65	31.13	14.4	.1	258.9	25.08	30.45	16	.1	212.6
	Yogurt	872.09	1,289.77	474.6	.1	6,708.9	878.12	1,470.66	493.95	4.9	7,251.6
Market Share	Beer	2.23%	5.12%	.12%	.0001%	30.53%	1.83%	4.77%	.08%	.0001%	29.45%
	Biscuits/Cookies	.25%	.48%	.07%	.0002%	3.59%	.23%	.47%	.06%	.0002%	3.33%
	Coffee	1.17%	2.27%	.10%	.0038%	10.99%	1.18%	2.25%	.11%	.0019%	11.59%
	Juice	.70%	.85%	.40%	.0002%	3.27%	.78%	.61%	.61%	.0009%	2.45%
	Laundry	1.13%	1.69%	.40%	.0023%	8.04%	1.13%	1.84%	.34%	.0001%	8.72%
	Shampoo	.39%	.47%	.25%	.0016%	3.28%	.38%	.48%	.22%	.0014%	3.74%
	Yogurt	1.53%	2.55%	.85%	.0089%	11.92%	1.60%	2.36%	.85%	.0002%	12.03%
Relative Price	Beer	1.36	.66	1.24	.62	4.73	1.38	.69	1.25	.68	4.66
	Biscuits/Cookies	1.49	.80	1.23	.40	5.65	1.49	.81	1.22	.49	4.96
	Coffee	1.47	.50	1.26	.84	2.93	1.45	.45	1.32	.84	2.51
	Juice	1.35	.47	1.43	.59	2.26	1.35	.49	1.23	.76	5.09
	Laundry	1.35	1.04	.96	.60	9.16	1.4	1.14	.99	.53	8.08
	Shampoo	1.43	.59	1.37	.25	4.24	1.42	.59	1.41	.42	4.38
	Yogurt	1.65	.71	1.4	.57	3.27	1.75	.74	1.44	.59	3.23
Promotion	Beer	1.81	3.09	0	0	22	2.11	3.45	1	0	15
	Biscuits/Cookies	3.33	3.83	2	0	19	2.81	3.28	2	0	23
	Coffee	2.81	4.01	1	0	20	2.53	3.68	1	0	18
	Juice	.21	.44	0	0	2	.18	.51	0	0	4
	Laundry	1.18	1.57	1	0	9	1.13	1.66	0	0	10
	Shampoo	1.99	2.16	1	0	18	2.53	2.64	2	0	18
	Yogurt	15.25	11.74	15	0	49	16.63	10.73	18	0	43

We note high standard deviations given the sub-brands’ heterogeneity. Because we are dealing with a diverse market, the data comprise different-sized sub-brands (leaders and low share).

We operationalized the sales variable as the sub-brand volume of sales during a specific month. On average, the monthly sales volume tends to decrease in recessionary periods for beer, biscuits/cookies, shampoo, and yogurt but increases for coffee, juice, and laundry categories. We operationalized the market share as the sub-brand sales in volume divided by the total sales of the product category. The beer sub-brands have higher market share values on average (2.23%), with a decrease in periods of recession (1.83%).

We operationalized the relative price as the sub-brand unit price divided by the average price of the category. As a result, sub-brands whose relative price is higher than 1 have a higher price than the average for their category. In general, the sub-brands have a higher relative price in nonrecessionary periods. This finding is in line with the literature, which argues that in economic contractions, brands tend to reduce their prices to remain competitive (Lamey et al. 2012).

Finally, promotion is calculated as the weighted distribution of point-of-sales promotional communication materials (i.e., in-store advertising), that is, the total sales of stores carrying the sub-brand's promotional communication materials divided by the total sales of all stores. Therefore, this variable acts as a proxy for point-of-sales promotion investments. On average, the weighted distribution of promotional material is similar during recession and nonrecession periods. For biscuits/cookies, coffee, juice, and laundry categories, however, it is higher during economic contractions. In general, these descriptive analyses show a heterogeneous trend based on different categories. This finding highlights the need to control for product categories in the model.

Perceived Brand Nationality

Previous COO studies use different methods to define brands’ origins. Some research applies fictitious brand names based on the country's language and pronunciation to elicit a domestic or foreign COO perception (Melnyk, Klein, and Völckner 2012; Salciuviene et al. 2010). This approach eliminates the effects of consumers’ previous knowledge and experience with the brand. However, this method is useful for studies that use only primary data, such as in experiments and surveys. Because we use retail data from existing brands, this method is not applicable in our context. We have also discarded a classification based on a match between brand names and dictionary language. Because many brands have names that are not present in any dictionary (e.g., Bauducco), this classification method has a major limitation. Therefore, we decided to classify brands as domestic or foreign by using a survey to capture consumers’ perception about the origin of each brand, as in Zhou, Yang, and Hui (2010) and Pandya and Venkatesan (2016).

We recruited 940 Brazilian consumers from an online panel tool used for repetitive human coding tasks. The respondents were adults (female = 52%, male = 48%), most of whom were between age 25 and 44 (61%) and held at least a graduate degree (65%). A total of 26% had an income of up to the equivalent of the sum of two minimum wages, 31% had an income of between two and four minimum wages, and 30% had an income of between four and ten minimum wages. Our survey presented respondents with the brand name (from the sub-brand database) and its product category, and respondents selected the brand nationality. Each respondent classified 5 brands, randomly chosen from the 188 brands in our secondary 448 sub-brands database (in Web Appendix A, we present the number of brands and sub-brands per product category). We opted to codify perceived origin on the brand level because it is usually related to product image. At the end of the survey application, we had 25 codifications for each brand. This sample size was adequate for our research purpose, considering that previous studies employed fewer codifications per brand (Becker, Wiegand, and Reinartz 2019; Pandya and Venkatesan 2016).

Taking these results into account, we created a variable, DomesticScore_i, which reports values between 0 and 10 according to the number of respondents who classified each brand as Brazilian in origin. For example, if 20 out of 25 people classified a brand as being of Brazilian origin, this brand would receive a DomesticScore_i of 8, because 80% of the coders classified it as domestic. Thus, brands with high scores present a strong Brazilian-nationality perception. Conversely, brands with a low level of DomesticScore_i present a strong foreign-country perception. In other words, brands with high levels of DomesticScore_i are more related to PBL, and brands with low levels are more related to PBF. Table 4 presents examples from our data of brands’ DomesticScore_i.

Table 4.

Brand Examples Across DomesticScore_i Values.

DomesticScore_i Values	Brand (Product Category)
10	Devassa (Beer)
7.39	Molico (Yogurt)
6.5	Ariel (Laundry)
4.29	Chocooky (Biscuits/Cookies)
2.5	Greenday (Juice)
1.15	Head & Shoulders (Shampoo)

To describe our data by checking how the core variables of our study vary across DomesticScore_i, we ran a t-test dividing the sample into two groups—high foreign (DomesticScore_i equal to or lower than 4) and high domestic (DomesticScore_i equal to or higher than 6)—accounting for category differences. Our results show significant group differences (p-value < .01) between the mean of market share (high domestic: .82%, high foreign: .30%), the mean of sales (high domestic: 1,211.05, high foreign: 219.73), the mean of relative price (high domestic: 1.34, high foreign: 1.76), and the mean of promotion (high domestic: 3.06, high foreign: 1.71). These descriptive statistics suggest that the brands that consumers more often perceive as domestic have higher share, sales, and promotion, on average. We expected this finding because we are dealing with CPG categories in which domestic brands are generally the market leaders (Euromonitor 2021). However, brands that consumers more often perceive as foreign have a higher relative price. This finding suggests that these brands are more associated with premium products on the market.

Brazilian GDP

To classify economic periods, we used the market's real GDP variation. It represents the sum of all final goods and services produced in a country or region over a given period, adjusted for inflation. GDP variation is one of the most used measures for classifying the general economic situation in a country (Dekimpe and Deleersnyder 2018).

We collected the Brazilian GDP variation from the Brazilian Institute of Geography and Statistics, transforming it into a binary variable representing the recessionary periods. To do so, we used Shiskin's (1974) definition of a recession as two or more consecutive quarters of negative GDP variation, as per previous marketing studies (Kamakura and Du 2012; Sethuraman, Tellis, and Briesch 2011). Thus, as we show in Figure 2, our data contain 21 months of recession, from the second quarter of 2014 to the last quarter of 2015 (April 2014 to December 2015).

Figure 2.

GDP Variation.

Model Development

We specify a sub-brand-level model to calculate the effect of perceived brand origin on market share in economic declines. We use a 2SLS regression sub-brand-level model to account for the potential endogeneity of the marketing-mix strategies on market share in the first stage and, in the second stage, to accommodate brand familiarity, heterogeneity across categories, and seasonality.

Econometric Concerns

Several issues arose when we created an econometric model to investigate the relationships in this study. The first challenge was related to endogeneity in the marketing-mix variables. Managers can decide to change prices and promotion spending, influenced by previous sales and share performance. Thus, because unobserved demand shocks may influence relative price and promotion, these variables may be subject to endogeneity (Van Heerde et al. 2013; Rossi 2014). Not accounting for the endogeneity problem may cause an elasticity-estimate bias (Rutz and Watson 2019).

We decided to account for price and promotion endogeneity by employing instrumental variables (IVs). Extant literature widely uses past-performance metrics, such as sales growth, to account for marketing-mix endogeneity (Kumar, Sunder, and Sharma 2015; Sharma, Kumar, and Cosguner 2019). The fact that retailers and manufacturers modify marketing-mix investments and decisions after analyzing the sales growth of previous periods explains the use of past-performance variables. Therefore, past-period sales growth can be a good instrument for the marketing-mix variables. Like Kumar, Sunder, and Sharma (2015), we include the growth of marketing-mix variables as an additional instrument to capture trends in increases and decreases. This IV option is common in the marketing field (Rossi 2014). As a result, our IVs are composed of the sales growth of the last period and the marketing-mix-variable (i.e., relative price and promotion) growth of the last period:

{\hat{RelPrice}}_{it} = φ_{1} Δ Sale s_{i (t - 2 \to t - 1)} + φ_{2} Δ RelPric e_{i (t - 2 \to t - 1)} + η_{it},

(1.1)

\hat{Prom o_{it}} = ψ_{1} Δ Sale s_{i (t - 2 \to t - 1)} + ψ_{2} Δ Prom o_{i (t - 2 \to t - 1)} + η_{it},

(1.2)

where

Δ Sale s_{i (t - 2 \to t - 1)}

is the first difference in the sales volume for sub-brand i between months t−1 and t−2, and

Δ RelPric e_{i (t - 2 \to t - 1)}

is the first difference in the relative price for sub-brand i between months t–1 and t–2. η_it is the error term. We applied statistical tests to confirm price and promotion endogeneity and the instruments’ relevance and validity (for details, see Web Appendix C).

We also conducted other tests. For example, results from the augmented Dickey–Fuller test suggest that the data are stationary and no unit roots are present, and the variance inflation factors show that the model does not have multicollinearity problems. Finally, we used the Breusch–Pagan test to check the presence of heteroskedasticity. Drawing on the results, we estimated our model using robust standard errors (sandwich estimator), which are heteroskedasticity consistent (White 1980). See Web Appendix D for more details.

Control Variables

We included control variables in the model to account for exogenous factors that can impact the analyzed phenomenon.

Brand familiarity

We included this variable to control for aggregated customer-level variability (Bernard et al. 2020; Halkias, Davvetas, and Diamantopoulos 2016). As stated in previous studies, knowledge of the brand characteristics may reduce the impact of brand origin on product evaluation and buying intention (Ahmed et al. 2004; Steenkamp, Batra, and Alden 2003). If consumers have had a previous experience with or already know the brand, the COO perception effect could be lower (Ahmed et al. 2004; Koschate-Fischer, Diamantopoulos, and Oldenkotte 2012). In addition, familiarity with a brand helps consumers classify its origin using previous brand cues, unlike consumers who are not familiar with it. Thus, in the same survey in which we collected perceived brand nationality, we also measured brand familiarity using a seven-point semantic differential scale based on an available instrument from prior literature (Zhou, Yang, and Hui 2010). This variable also controls for the coders’ prior-knowledge bias about the brands they encoded. To insert this variable in the model, we checked the reliability of the scale (Cronbach's alpha = .97, composite reliability index = .98).

Essential products

Even though we already controlled for product-category fixed effects in our model, we also accounted for different characteristics of the products related to their importance to consumers (i.e., essential and nonessential). Consumers in difficult situations, such as economic crises, tend to exhibit different behaviors and decisions for different product categories. Therefore, we created a dummy variable classifying the seven product categories as essential or nonessential. We considered essential goods to be basic hygiene products (e.g., shampoo, laundry detergent) and food products present in Brazilians’ basic food basket (i.e., biscuits/cookies). We classified the others as nonessentials (i.e., juice, beer, yogurt, and coffee), which other products can more easily replace.

Political stability

Previous research has investigated political variables such as the effect of corruption, showing that firms from countries with lower corruption levels tend to establish more valuable brands, even when GDP is controlled (Lin and Chuang 2016). International conflicts also influence consumer preference toward local and foreign brands (Pandya and Venkatesan 2016). Therefore, a country's political environment can influence consumer sentiment about brands originating in the country, which in turn may affect purchase decisions and brand performance (Fong, Lee, and Du 2014; Gurhan-Canli, Sarial-Abi, and Hayran 2018). As a result, we used the political stability index measured by The Global Economy. This yearly index captures “the perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means” (The Global Economy 2021).

Modeling the Perceived-Brand-Origin Effect

In the second stage, we incorporate Sales_it−1 in the model to control for unobserved factors that affect product sales beyond the ones we included in the model. In addition, using the IV approach, ${\hat{RelPrice}}_{it}$ controls for exogenous price changes and brands’ premium prices in relation to those of their competitors, which firms can manipulate to respond to demand shocks (Ataman, Van Heerde, and Mela 2010). Similarly, we also use ${\hat{Promo}}_{it}$ because it is an in-store retail strategy that can influence brand share (Hwang and Thomadsen 2016):

\begin{aligned} MarketShar e_{it} = β_{0} + β_{1} \times DomesticScor e_{i} + β_{2} \times Recessio n_{t} \\ + β_{3} \times DomesticScor e_{i} \times Recessio n_{t} + β_{4} \times {\hat{RelPrice}}_{it} \\ + β_{5} \times {\hat{Promo}}_{it} + β_{6} \times Familiarit y_{i} + β_{7} \times Sale s_{it - 1} \\ + β_{8} \times Essentia l_{i} + β_{9} \times Politica l_{i} + ϵ_{it}, \end{aligned}

(2)

where

MarketShare_it = market share of sub-brand i in month t;

Recession_t = dummy variable equal to 1 if period t is recessionary, and 0 otherwise;

DomesticScore_i = score based on the perception of sub-brand i;

${\hat{RelPrice}}_{it}$ = the relative price instrument of sub-brand i in month t;

${\hat{Promo}}_{it}$ = the promotion instrument of sub-brand i in month t;

Familiarity_i = the perceived familiarity of sub-brand i;

Sales_{it − 1} = total month sales of sub-brand i in month t − 1;

Essential_i = dummy variable equal to 1 if sub-brand i is essential, and 0 otherwise;

Political_t = Brazilian political stability index in month t; and

ε_it = the error term.

Given our research objective, we estimated an unbalanced time-series model with market share as the dependent variable. The interaction between DomesticScore_i and Recession_t represents the effect of brand origin perception on the brands’ market share in downturn periods.

Results

Model Results

Table 5 summarizes our model results. For each DomesticScore_i point, the brand increases its market share by .043% (β = .00043, p < .01). However, in downturn periods, brands’ market share decreases by .019% (β = −.00019, p < .01), on average. The coefficient of the interaction term DomesticScore_i × Recession_t is the estimated effect of domestic origin perception on market share when economic contractions occur. Our results show that brands’ market share decreases by .008% (β = .00008, p < .001) for every one-point increase in their DomesticScore_i. Thus, recession is worse for brands that consumers more often perceive as domestic.

Table 5.

Regression Results.

Variables	Estimates
DomesticScore_i	.00043***
	(.00014)
Recession_t	−.00019***
	(.00007)
DomesticScore_i × Recession_t	−.00008***
	(.00002)
RelPrice_it	−.00225***
	(.00027)
Promo_it	.00156***
	(.00017)
Familiarity_i	.00067**
	(.00033)
Sales_it−1	.000001***
	(.00000)
Essential_i	−.00444***
	(.00111)
Political_t	−.00018
	(.00019)
Constant	.00591***
	(.0011)
Observations	11,597
R²	.27712
Adjusted R²	.27655
f²	.38227
F-statistic (d.f.)	4,449.44*** (9)

*p < .1. **p < .05. ***p < .01.

Notes: Values in parentheses are standard deviations. The dependent variable of the regression is MarketShare_it.

The control variable coefficients perform as expected. Promotion and brand familiarity are positively correlated with brand market share, and relative price is negatively correlated with market share. We find no significant relationship between political stability and market share.

To make our results clearer, we take as an example three hypothetical sub-brands. The first is called “full domestic,” with a DomesticScore_i equal to 10. In other words, it is a sub-brand widely perceived as domestic. The second hypothetical sub-brand is called “full foreign,” with a DomesticScore_i equal to 0. Thus, it is more often perceived as foreign. Finally, the third sub-brand is called “mixed,” with a DomesticScore_i equal to 5. This sub-brand is not perceived as having a strong domestic or foreign origin.

Using the coefficients of our regression results, we found that the market share of a full-domestic sub-brand is higher than that of a full-foreign or mixed sub-brand in an economically stable or growth condition. However, in downturns, a full-domestic sub-brand experiences the largest loss: on average, its market share will drop from 1.02% to .91%. In the second place, we observed the mixed sub-brand, which loses, on average, .07% of its market share during recession periods. Finally, the full-foreign sub-brand experiences the smallest loss in times of economic contractions, losing .02% compared with nonrecession periods (see Figure 3). We can also illustrate these results with situations observed in real-life contexts. For example, the leading brand from the Brazilian beer market totaled a volume sales of 4 billion liters in 2021 (Euromonitor 2022a). Therefore, the .11% average reduction in market share for a full-domestic sub-brand represents a volume-sales reduction of 4.2 million liters in recessionary periods. In contrast, the .02% average reduction in market share for a full-foreign brand loses, on average, .77 million liters of volume sales in recessionary periods. Our results provide support for our hypothesis because the market shares of brands perceived as more domestic suffer more damage during economic contractions.

Figure 3.

Results Simulation with Three Hypothetical Brands.

Robustness Tests

We conducted three main robustness tests to provide additional evidence for our main model findings.

Brand name

First, we examined whether the relations we identified still make sense when we change DomesticScore_i to a dummy variable that considers the language of the brand name. When consumers do not have precise information about the brand origin, the brand name is one of the most important cues they use to define their COO perception (Samiee, Shimp, and Sharma 2005). We call this variable DomesticBrandName_i, and it indicates whether the brand-name language is Portuguese, the official language in Brazil. The results of this model show that the interaction between recession and the domestic brand name also causes a negative impact, which is a similar pattern to the DomesticScore_i main model. This evidence supports our hypothesis.

Developed market score

We also considered another nationality score with which to compare our findings. In emerging markets—our research context—consumers tend to view developed countries’ brands more positively (Sharma 2011). As a result, we created USScore_i using the same methodology of DomesticScore_i. We opted for the United States because it is the biggest economy in the world in terms of GDP, and some previous studies comparing brand preference in emerging markets use U.S. products to represent items with a developed-country origin (Chen et al. 2020). The score considered the number of respondents who suggest that a brand originates from the United States. These relations between USScore_i and Recession_t are in the reverse direction as the main model results and thus are in line with our hypothesis. This evidence is also consistent with the logic presented by previous studies, which have argued that consumers in emerging markets see brands associated with developed countries as high quality and high prestige (Randrianasolo 2017; Zarantonello et al. 2020). Thus, these brands can be good options, especially in times of risk aversion, when consumers seek greater protection in their purchases.

Essential products

Finally, our third robustness test accounts for the effect of different product-category characteristics. Extant literature suggests the preference for PBL or PBF can vary according to product-category characteristics (Davvetas and Diamantopoulos 2016). As a result, we interacted the Essential_i variable with DomesticScore_i and Recession_t to assess how the market share of different product categories can be affected by brand origin perception and the recession period. The results of this regression suggest that our model holds better for nonessential product categories, providing initial evidence that consumers change their brand origin preference during contractions depending on product characteristics (i.e., essential or nonessential).

To improve the validity and assess the sensitivity of our findings, we conducted three more additional robustness tests by (1) splitting the data into four groups based on sub-brand market share, (2) developing a dynamic model with both Sales_it and MarketShare_it as dependent variables, and (3) controlling brand and sub-brand fixed effects. The results of these six robustness models are reported in Web Appendix E and suggest that our findings are robust across these analyses.

Discussion and Implications

This study investigates the effects of perceived brand origin on market share during economic contractions. Drawing on the study's results, we show that in nonrecession times, brands perceived as domestic have an advantage in terms of market share gains. The idea that local products can benefit by their functionality, whereas foreign products are more related to conspicuous consumption (Ghose, Heiman, and Lowengart 2017; Han 2020), can explain this advantage. Furthermore, the fact that CPGs are led by domestic brands may cause consumers to associate the entire category with domestic brands and then direct their purchase to PBL in economically stable or growth periods (Davvetas and Diamantopoulos 2016). However, we find that this pattern changes in economic declines. Our results show that although the recession harms the market share of all brands, those perceived as more domestic are the most affected during downturns. Recession periods are thus a boundary condition for the effect of brand origin perception on market share.

Drawing on signaling theory, we argue that in times of uncertainty, such as country economic declines, consumers could use more information and signals to make their purchasing decisions. Therefore, the COO becomes an important aspect to consider. As a result, brands perceived as foreign, which have broader market reach and are related to high-quality and premium products (Riefler 2020), will be more resistant to economic fluctuations in terms of market share performance. Our findings are in line with previous studies that suggest global and international brands have an advantage in risky purchases, given the quality and prestige associated with those brands (Davvetas and Diamantopoulos 2016; Özsomer 2012).

However, our findings diverge somewhat from Hampson, Ma, and Wang (2018) in an emerging-market context. The authors suggest that reduced perceived financial well-being is positively related to domestic product purchases. One of the underlying explanations for this is consumer ethnocentrism. However, they do not consider specific product categories in their survey application, which could have affected their results. By contrast, our study employs data from seven CPG categories, and, according to previous literature (Balabanis and Siamagka 2017), consumer ethnocentrism does not exert an important influence on purchase behavior for any of them.

Our study's findings complement the international marketing literature by providing evidence that economic contractions can influence brand performance on the basis of brands’ perceived origin. Previous studies have analyzed the effect of political and economic aspects, such as international conflicts (Pandya and Venkatesan 2016) and industry-wide scandals (Gao et al. 2015). Other studies also analyze intrinsic personal finance aspects, such as perceived financial well-being (Hampson, Ma, and Wang 2018) and personal economic hardship (Huang, Phau, and Lin 2010). However, researchers and practitioners seem puzzled about how such economic situations can impact COO effects. Therefore, our work extends the findings of previous studies by investigating the perceived-brand-origin effect during economic contractions. In other words, we contribute to the discussion about what brands can be more resistant to market economic fluctuations on the basis of their perceived brand origin.

In addition, this study contributes by providing evidence from audit retail data and exploring brands’ market share as a dependent variable. Unlike most COO studies, which use experimental and survey data, we access firm-based outcomes and incorporate a macroeconomic situation in the analysis (Samiee and Chabowski 2021). In addition, in contrast to previous studies that analyze secondary data using the real brand origin, we utilized consumer perceptions of origin. This distinction is important because consumers have limited knowledge about brands’ origin. Thus, they often use the brand's image and name as cues from which to infer COO (Samiee, Shimp, and Sharma 2005).

Our research also provides managerial implications regarding brand positioning and marketing investments. Our findings suggest that the perception of brand origin is indeed an important factor that influences brand performance, and it can change as the economy contracts. We are living in a time of constant global instability. Therefore, within the usual economic vicissitudes, companies can develop strategies to become more resilient to economic fluctuations or even take advantage of them. Rajavi, Kushwaha, and Steenkamp (2023) argue that low-line-length brands, high-ad-spending brands, extensively distributed brands, and umbrella brands perform better than other brands in economic contractions. We add to these findings by providing evidence that perceived brand origin is another important factor that brand managers need to consider, especially in unstable times.

In Figure 4, we provide insights into how marketers should position their brands while considering the country's economic situation. During economic declines, when the market share of brands perceived as foreign suffer less damage, the companies may highlight international image cues. They can include symbols on their packages or even launch new special editions highlighting international COO cues. For example, 3 Corações, a domestic Brazilian coffee brand, launched an edition called “regions of the world.” For each product, it introduced a new flavor related to one region abroad, such as Sumatra and Colombia, associating the brand with an international image. This strategy might help domestic brands disassociate from their PBL. However, some strategies can require a substantial investment that can be risky for domestic brands from emerging markets that do not enjoy the economies of scale, resources, and global knowledge of international companies. Therefore, these brands may opt for less radical adaptations, such as a change to their communication strategies (Mandler, Bartsch, and Han 2020). Brands may also use verbal and visual advertising strategies to relate their image in other countries (De Meulenaer, Dens, and De Pelsmacker 2015; Zeugner-Roth and Bartsch 2020). A chocolate cookie brand called Ferrero launched a TV ad in Germany featuring characters with Italian names. During the commercial, the characters spoke in Italian with German subtitles. As a result, they reinforced the origin perception to consumers in German.

Figure 4.

Managerial Recommendations.

In contrast, during nonrecession periods, brands can benefit more if they highlight their PBL. They can use similar strategies but focus on domestic-origin cues to increase their perceived domestic origin. In addition, during these periods, foreign brands can adopt local elements. L’Oréal, for example, uses local celebrities as brand ambassadors in different country markets (Mandler, Bartsch, and Han 2020).

Many multinational companies have expanded internationally by acquiring local firms (Chabowski, Samiee, and Hult 2013). Therefore, international companies can create a portfolio of brands in which some are perceived more as domestic and others as foreign to protect the firm from economic fluctuations. AB Inbev is one example of such a firm in our data set. This well-known global beer manufacturer has brands that consumers perceive as more domestic in Brazil (e.g., Brahma, with a DomesticScore_i of 7.89) and others they perceive as more foreign (e.g., Budweiser, with a DomesticScore_i of 2.19). As a result, the company could make marketing investments in its brands that are more suited to consumer preferences during the specific period. In line with this suggestion, Schmidt-Devlin, Özsomer, and Newmeyer (2022) argue that managers are implementing an omnibrand orientation. In other words, managers are adding both global and local components. Such a hybrid approach enables companies to use economic fluctuations as an opportunity to increase their market share gains and financial results.

Finally, note that our findings provide important implications for firms’ strategies in developing countries, because we use evidence from an emerging market. Such markets are focal points for international brands that aim to gain market share around the globe. Consumers from emerging countries represent a good portion of the sales volume of global brands. In addition, prior studies in the COO research stream have supported the notion that brand origin information is especially important in these markets and that international brands—especially those from developed countries—have a superior image in emerging-market consumers’ minds (Batra et al. 2000; Randrianasolo 2017; Steenkamp, Batra, and Alden 2003). Therefore, understanding how economic changes influence brands’ performance on the basis of their perceived origin is important for fostering strategies to gain a competitive advantage in these markets.

Limitations and Further Research

Although we contribute to the existing international marketing literature in several ways, our study has some limitations that provide opportunities for future research. First, our data are from a single country. Our results can benefit from new evidence using retail data from other nations. Such data would serve to illuminate whether the effect of economic recession remains similar in countries that have an analogous economic situation but different cultures, for example. Furthermore, new studies can also explore the effect of economic declines in developed countries. Brand image related to perceived brand origin may be different for consumers in these countries (Sharma 2011). Therefore, we would expect that results in developed countries might differ from the present study's results. We also suggest that future studies carry out cross-country analysis using developed and emerging countries’ data to compare results.

Second, our study explored seven CPG categories. Nondurable goods are generally associated with low-price decisions. In contrast, durable goods are usually higher-priced and more complex products, prompting consumers to search for more information with which to make their purchase decision. Therefore, future studies could explore the effect of economic recession on PBL and PBF market share in the context of durable goods. In addition, the results of our robustness tests also provide initial evidence about the effect of essential and nonessential products. The fact that the model holds for nonessential categories may be because buying decisions made under economic uncertainty tend to favor attributes such as quality and prestige—usually associated with brands perceived as foreign—when consumers make more conspicuous and less functional purchases. However, because we are dealing only with fast-moving consumer goods, which share similar market dynamics, the results provide limited implications. Therefore, the effect of essential versus nonessential products as a boundary condition may be addressed by further research with more comprehensive product categories.

Third, in this research, we analyzed the effects of domestic economic recession on brands’ market share changes. Future research may benefit from differentiating between domestic recessions and contractions happening abroad. Economic crises in a foreign country can lead to aversion to brands that consumers perceive as being from that country. In addition, future studies may also investigate not only the influence of economic contractions but also the political environment. Political crises such as polarized presidential elections, regime changes, and corruption scandals can alter a country's image and cause consumers in that country to perceive themselves as being in a time of uncertainty, increasing their risk aversion. Therefore, further multicountry studies could analyze the influence of political stability on brands’ performance as it relates to their perceived origin.

Supplemental Material

sj-pdf-1-jig-10.1177_1069031X231154483 - Supplemental material for Brand Origin Effects During Economic Declines: Evidence from an Emerging Market

Supplemental material, sj-pdf-1-jig-10.1177_1069031X231154483 for Brand Origin Effects During Economic Declines: Evidence from an Emerging Market by Vitor Azzari, Felipe Zambaldi, Leandro Angotti Guissoni, Jonny Mateus Rodrigues and Eusebio Scornavacca in Journal of International Marketing

Footnotes

Acknowledgments

Authors thank the JIM review team and participants at Theory and Practice in Global Marketing (TPGM) postconference event for their valuable feedback on the previous version of the manuscript. Authors thank Rajkumar Venkatesan, Professor at the Darden School of Business, for his previous research on perceived brand origin effects and for his valuable insights on the draft research proposal. His pioneering study and discussions provided a solid foundation for this investigation.

Special Issue Editors

Kelly Hewett, Cheryl Nakata, and Kay Peters

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This study was supported by Fundação de Amparo à Pesquisa do Estado de São Paulo (grant number #2020/10584-3, #2021/09959-5) and Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (Finance Code 001).

ORCID iD

Vitor Azzari

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