Chile Amidst the Perfect Storm

CLAUDIO APABLAZA
Business Development Director
Millward Brown, Chile
Claudio.Apablaza@millwardbrown.com


In terms of Chile’s sporting performance, 2015 has been the opposite of 2014. In 2015, the America Football Cup took place in our country and Chile was the star – unlike the 2014 World Cup in which we were knocked out by Brazil. The country’s economic situation however looks worse than before. Consumers’ and entrepreneurs’ expectations are pessimistic, and there is an additional element: a massive unveiling of cases of corruption, something new in Chile. This has destroyed people’s trust in politics, precisely at a time of structural reforms that require a high degree of trust in institutions so that these processes can be legitimized.

The picture could not be more different: we were proud and happy about our sporting victory, but once the event was over our feelings were quite the opposite.

  1. Economic predictions announced a low growth rate – 3.0% in August, 2014 – but in fact this growth is even lower than expected: 2.4% in the first quarter of 2015, according to Banco Central de Chile. The future does not look any better: current expectations anticipate a 2.2% growth. All of this is taking place in the context of a significant decrease – 25% according to COCHILCO – in the price of copper, our main export. Due to the slowdown of China’s economy, this price is expected to continue decreasing. There is one more element: private investment has already gone into the red.
  2. This situation has had an impact on consumers: sales growth is about 1%, due exclusively to clothing and shoes, but sales of durable goods and even food have decreased (source: Chile’s National Chamber of Commerce). Households have restricted consumption although their income has not been reduced, and expectations for them are as low as those prevailing during the sub-prime crisis.
  3. Concerning institutions, just as Chile has been undergoing the most important process of structural transformations in the past 50 years, a political scandal has emerged as a result of cases of illegal funding of political campaigns by companies. For the first time in Chile’s history, there are serving legislators, mayors, members of Congress, heads of political parties, officials and businessmen facing judicial proceedings, making us Chileans question our reputation as a country without major corruption.

What have brands done in this scenario? Many of them have substantially reduced their marketing budgets, merely communicating promotions and low prices. But there are also brands that have somehow taken charge of the situation, for instance communicating values of transparency and reliability. Here is a seeming contradiction: a number of sources present a sustained premiumisation of consumption. However, amidst this ‘perfect storm’, this is not actually a new phenomenon. Other critical periods have shown that in times like these, consumers tend to take refuge in the most solid brands. In this case, consumers seem to prefer safe investments, choosing therefore higher quality products.

In this context of disappointment, mistrust, and pessimism, those brands that adapt by making something different – different even to the strategies employed during the subprime crisis – will be the ones riding out the bad weather.

BrandZ LatAm Top 50 2015

BrandZ LATAM 2015 Report Top 50 Report

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Methodology and valuation by Kantar Millward Brown


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