French label creation

A contribution by courtesy of Mr. Paul Cleenewerck, Financial Advisor, KPMG Luxembourg

Looking back to the numbers related to the French trade balance would obviously scare any investors nowadays. Indeed the 47 billion of trade deficit that had been reached in 2009 is not likely to be reduced, given the crisis invading the whole Europe once again. 

A sharp contrast is nevertheless present : How such a deficit could be reached in a country whose brand are very often perceived as a reference and a proof of quality standards.

Luxury goods always had the reputation of being perceived as safe values, especially in a downturn context. Yet the most popular French luxury brands always seem to be competing to have the same impacts on both locals and international customers. Nevertheless, all of them clearly depend on their internal ability to establish a relevant and neat marketing campaign. Surveys often show customer’s interest for French brands. Meanwhile Marketing textbooks often explain that the country of origin of a product, typically communicated by the phrase «made in country» has a considerable effect on the quality perception.

Multinational companies very often create umbrellas corporations to host and gather their brand range. This reference to the brand ownership, is sometimes very helpful to position the product in the consumer’s mind, enhancing this pride for excellence, creating mutual benefits of long lasting products. Could the state help represent those brands on behalf of the general willingness for competitiveness?

Non tariff barriers become much more prevalent in times of recession. As a result, strategies should not  really be the implementation of  restrictions for international brands coming on the French territory. Otherwise, shall we establish penalties for companies pretending to be French but not employing enough French labor? This sounds hard to do given that customer’s benefits are often reached thanks to cost savings…

Provided the economical context remains similar in the coming years, economists would traditionally define restrictive measures as barren ones in a time when growth has to be promoted. Instead of preventing foreign direct investment, which is essential to maintain competition alive, another opportunity could be for our nation to create its own label. «Made in France». Very few brands boast themselves with this argument, forgetting though, the huge reinforcement on value proposition this added positioning can have.

Although the consumer’s perception would be increased, many brands now employ French subcontractors, most of the time for cost purposes and direct cost improvement in manufacturing, improving then, the budget allowed for marketing and value added operations.

Nevertheless, design and engineering is seldom done in the manufacturing country, and those are even more essential to bolster prospect’s minds. Any person who owns an Apple product, can clearly read on the device: «Manufactured in Asia, Designed in California», which means the brand is still very careful of who has been in charge of the most important attributes attached to the product.

Nowadays products could be divided in two types: 

1. Products of which manufacturing is perceived as essential:This category is represented by products like wine, food and catering, any type of beverages and products where human’s hands and/or earth soils  are predominant. 
2. Product of which design and intangible assets is more important: Typically products like cloth or electronic device are well known for how they are thought, in terms of package and how they look like. Few customers really think of the necessity of human intervention in order to produce them, since those products don’t really have any natural connotations.

It is rather obvious that changing business plans for companies producing items abroad would be complicated in spite of being a new possibility to create labor employment at home, the loss of cost effectiveness reached by those brands, would harm their sustainability.

What would be the way for the state to help them compete their international challengers.

Relating to the product division mentioned previously, the state could create Three groups of label according to the type of products:  

• DESIGNED IN FRANCE: this label would represent products like fancy cloth, or any type of famous fragrance packages. 
• MANUFACTURED IN FRANCE: Knifes, or any type of upscale furniture and home design products or even luxury pens would fit those requirements. 
• PRODUCED IN FRANCE: Wine and finest food products like typical biscuits or pastry would be added in this label.

Those three different label could be owned under one same trade mark, coming from one same organization.  Every brand would be carefully selected according to some well defined standards since those products are supposed to give a reflection of excellence. A commission of experts could be consulted when required. High standards expectations is also a cluster of motivation for companies. An acknowledgement of efforts provided to increase and keep quality standards, and this measure would be likely to stimulate competition, which would also enhance the reactive motives companies need to develop their business model.

The label would help international customers to get more and more familiar with the French products, emphasizing also what is the nation’s key know how and devotion. Indeed, many newly rich prospects are rising in emerging countries, where the representation of social status is highly considered, albeit they are not always aware of the origins of luxury products thy buy.

Intrinsic qualities of a nation can hide many attributes implied into a product perception. Thus the support from the state in essential and all the research being performed by this new organization could be shared with brands managers in order to give them a further global overview on their targets.

Switzerland has already done it for its watches, It is now time for France to do it and to make it move one step forward. A stratification of brands in many categories would ensure them a positive growth against new oversees brands competing on both our local and international demands. Since crisis is hitting and state workers reshuffle become the matters, how about creating new links between them and corporate, with a view to produce new outputs.