A brand is one of the most important assets of a company because of the influence it has on consumers. Few business concepts are as important as a brand, because of its ability to attract consumers and gain their loyalty, which are key for product development strategies, positioning, segmentation and updating.
In addition to the distinctive character that must be achieved to gain its registration, a brand also conveys the origin or source of the product that legitimizes to the consumer that all products or services from the same source and carriers of the same brand, have been produced, distributed or provided by the same company, strengthening brand association for customers[i].
But perhaps the quintessential role of brands is to facilitate marketing and advertising through the power of association in the minds of consumers with verbal or graphic elements that comprise them, including colors or color combinations, sounds and styles or fonts for certain letters that are fixed in the human mind through repetition, carried out through the systematic advertising of the brand.
In the case of the Cuban market, it is difficult to promote the values of a brand through the conventional advertising methods. Cuban consumers have lived more than half a century out of the reach and influence of advertising because it has been banned in the mass media, which has lost the possibility of earning tens of millions of dollars annually in a market where consumers are true fans of brands.
How is this possible? It is simple: the strength of a brand transcends the border of the forbidden, and goes beyond the political barriers and taboos imposed by closed societies.
Paradoxically, Cuban companies spend millions of dollars promoting several of the most famous tobacco brands in the world (Montecristo, Cohiba, Partagás, etc.) and one of the most emblematic rums in the world of liquor (Havana Cub). Together with powerful transnational corporations such as Imperial Tobacco and Pernod Ricard, these products, icons of the heritage of Cuban history and culture, travel around the world, capturing the interest of millions of customers.
Publicity outside of national borders, at the same time that there is very limited publicity in the domestic market, is one of the worst strategies that the Cuban business sector has followed since the triumph of the revolution. This dichotomy remains today as one of the anti-commercial features of the Cuban socialist model.
However, the end of this era is coming, based on the need of the Cuban economy to insert itself in the world economy and the opportunity that is presented for the country's development by the new scenario that has that has led to the reestablishment of diplomatic relations between Cuba and the U.S., and that has put the island on the threshold of becoming the most important tourist destination in the Caribbean.
But for this to happen, modernity has to reach the Cuban economy. The use of technology and the media are important components in the new environment that the tourism industry and other sectors of the economy need to reinvent themselves and move the country forward. At this point, advertising is one of the indispensable elements to build that new image that the country needs to promote itself as an attractive investment destination.
Brands and the current Cuban market
Over the last five decades, the Cuban public got used to purchasing items without identification, as in the case of food bought in bulk under the rationing system without packaging that showed product identification.[ii] However, since Cuba began some economic reforms and opened up its economy beginning in 1993 in order to overcome the crisis of the special period, the situation changed drastically. More than a thousand domestic and foreign brands began to affect the lives and consumption pattern of Cubans.
The dollarized retail market that emerged in the mid-90s led to the emergence of various segments of consumers in the Cuban market. Many of these consumers incorporated brand identification within their consumption patterns. Among the brands identified are those for beer, cigarettes, shoes, pre-packaged food and toiletries. National and foreign distinctive brand identification signs began to position themselves in the market and in the minds of consumers.
The same is the case with some brands for services, where the use of distinctive colors has created brand loyalty among consumers. Such is the case of the oil stations of the CIMEX Corporation, with the distinctive CUPET brand identified with green and red stripes in a white background, and ORO NEGRO, identified with red and yellow. Segments of consumers preferred one brand over the other and vice versa. Consumers began to enjoy the freedom of choice according to their preferences.
A survey carried out in 2006 concluded that 41% of Cuban consumers made their purchasing decision based on the brand[iii]. The study showed that even with the absence of advertising in the media and its low purchasing power, Cuban consumers showed a deep understanding of brands.
That is, the 780 people interviewed recalled a total of 711 brands. Of these, 56% were foreign and 44% were national. Figure 1 lists the top 10 Cuban and foreign brands that had the highest brand awareness in Cuban consumers in 2006.
Figure 1. Top 10 Cuban and foreign brands with the highest brand awareness by Cuban consumers, 2006
Source: Brand survey conducted in 2006 by Ángel Hernández Gómez and the author.
Within the Cuban brands, the fop 6 were produced in the country by joint ventures with foreign companies, which indicates the impact of foreign investment on the island at that time.
Within the foreign brands, it was noticeable that 5 of the 10 highest brands in terms of awareness by Cuban consumers were clothing and sports footwear, four appliances and one food.
Ten years later, research conducted by THCG's Intelligence Unit obtained the following results: only 3 brands repeated in the top ten with respect to highest brand awareness by Cuban consumers in 2010: Adidas, Nike and Coca-Cola. The Adidas brand was displaced by Nestlé as the top foreign brand recognized by Cuban consumers, followed by Heineken and Coca-Cola. In 2016. the top three marks, unlike in 2006, were for food products and beverages. See Figure 2.
Figure 2. Top 10 Cuban and foreign brands with the highest brand awareness by Cuban consumers, 2016
Source: Fieldwork conducted by the THCH Business Intelligence Unit in 2016.
In the case of national brands, seven of them repeated with respect to the study carried out in 2006. Havana Club maintained its leadership as the most recognized brand by Cuban consumers, followed by beer brands Cristal and Bucanero. The latter maintained its third place in the ranking.
This phenomenon of Cuban consumers having a wide branding culture has strengthened over the years. In fact, there has been a very large external influence from Cubans living abroad and tourists visiting the island. In recent years between 3 and 4 million tourists have been visiting the island annually. This includes more than half a million Cuban-Americans and Cubans (who travel back to the island from visits to the United States), carrying suitcases full of branded goods, such as shoes, clothing, perfumes, cell phones and appliances of all kinds.
The cell phone sector is a good example of how the demand by Cuban consumers has been growing exponentially and their brands preferences have changed too.
Cellular telephony, despite its late arrival to the Cuban market, has had an accelerated growth since it began to be offered legally as a service to the population in 2008. Eight years later, it was reaching 4 million customers[i]. See Figure 3.
Figure 3. Number of customers of cellular telephony in Cuba, 2004-2016
Source: THCG and Tech from statistical series published by the National Office of Statistics and Information (ONEI), Cuban phone company ETECSA and own sources.
From 2006 to 2016, the number of cell phone customers grew more than 19 times, with the fastest growth occurring in the last three years. In 2014 there were 2.2 million costumers and at the end of 2016, the number had risen to 4 million, for a growth of 81.8%[i].
In 2006, just when cellular telephony was being introduced on the island, consumers preferred Nokia units, with 27% of respondents preferring this brand, followed by Motorola (26%), Sony Ericsson (15%), Blackberry (12.5%) and Samsung (6.1%). See Figure 4.
Figure 4. Top 10 list of cell phone brands preferred by Cubans, 2006-2016
Source: Brand survey conducted in 2006 by Ángel Hernández Gómez and the author and fieldwork conducted by the THCH Business Intelligence Unit in 2006.
However, ten years later, only 4 of the 10 brands preferred in 2006 were still among the favorites. The first five brands were different from the ranking 10 years ago. In 2016, Nokia was no longer on the list and Samsung had moved to the top of the ranking. Samsung was followed, in order, by HTC (15.6%), LG (14.4%), BLU (9.6%) and Sony (5.2%).
Another factor influencing the brand awareness of Cuban consumers is the thousands of entrepreneurs (cuentapropistas) who travel abroad and who have created a long-distance wholesale market, becoming suppliers of various products in informal trading networks on the island. Most purchases are based on orders for specific brands of products. It is a market that moves between 1,500 and 2,000 million dollars annually in merchandise, which originates principally from Miami, Panama Ecuador and Mexico[i]. The most popular products are: clothing, footwear, sports shoes, underwear, and appliances.
In recent years the Cuban consumer has become a voracious consumer of branded products. The growth in the purchasing power of Cubans, fueled by the growth of remittances, coupled with the growth of the private sector, has increased the purchasing power of a considerable part of the population by more than 10 times.
This has resulted in a situation where a large number of people, particularly young people, spend their income on travel, tourism, quality clothes, restaurants, entertainment, etc.
Recently, Cuban authorities revealed that from January 2013 to December 2016, some 671,000 Cubans traveled outside the island. The number of trips abroad made by Cubans during that period was 1,745,000 trips[ii]. The most popular destinations were: Ecuador, Panama, United States, Mexico and Spain. If we consider an average cost of $600 per air ticket, the volume of money that Cubans have disbursed for air travel in just three years is $ 1,047 million.
Another element that corroborates the increase of the purchasing power of the Cuban population is the growth of internal tourism, with Cuban nationals paying lodging in hotels that are commercialized in freely convertible currency.
In this sense, the statistics issued by the ONEI show that in 2016, 991,122 Cubans were accommodated in the island's hotels[iii]. This number of national tourists is slightly lower than the number of tourists from the largest international tourist emitter to the island, Canada, which closed 2016 with 1,198,917 tourists. In eight years, the number of national tourists has grown by 1,511.37%, really a meteoric growth. See Figure 5.
Figure 5. National tourists accommodated in the island's hotels, 2010-2016
Source: THCG and Tech from statistical series published by the National Office of Statistics and Information (ONEI).
For many years, the shortage of products in the local market, low wages, the custom of living with a few subsidized services (such as electricity, water, health, transportation and education), not being able to buy a car or a house in the open market, not being able to stay in hotels destined only for international tourists, not being able to travel freely outside of the country, among other factors, created a culture of low consumption. This social phenomenon explains in part why, when remittances and the private sector grew in the last 7 years to levels never before seen, a fever of very strong consumption by the Cuban population was unleashed. The influence of the wave of emigres of the last decade also had a strong impact on this behavior.
The great challenge for the Cuban media
In Cuba, the media are controlled by the Cuban Communist Party (PCC). For more than half a century the media have been used to promote the ideology and values of the system, not consumption, which was eclipsed for many years as a capitalist malpractice.
However, the gradual development of the market for cellular technology and the Internet, plus the reforms undertaken seven years ago by the Raúl Castro government to transform the economic mode and to insert Cuba into the international economy -- suchas the new foreign investment law and the creation of the Mariel Special Development Zone (ZEDM) -- are beginning to change the business environment in the country. These measures are giving rise to a new paradigm, where the conditions exist for the return of advertising to the mass media, undoubtedly, a challenge in this new stage of transformations.
The changes in the behavior of Cuban consumers are a sign that the market is maturing fast, so that the entry of advertising in the media can occur at any time. In fact, in recent years the Cuban government has implemented a series of measures that have paved the way for this to happen, preparing this long awaited moment by Cubans. Today, you can see advertising in hundreds of restaurants, hostels, hair salons, small businesses that provide services to cellular telephony customers and other occupations allowed to perform private work. Entrepreneur are allowed to place ads in the phone book, and more recently a website called "www.ofertas.cu" dedicated to classified ads and advertising was created [i]. See Figure 6.
Figure 6. Government website where Cuban entrepreneurs can advertise their products and services
Source: www.ofertas.cu
The inclusion in the new portfolio of projects for which Cuba is seeking foreign investment recently published by the Ministry of Foreign Trade and Foreign Investment of a project to establish a paid cable television channel could be the springboard to reintroduce commercial advertising in Cuban television[i]. To be sure, such a move would be a positive one in Cuba's reform process.
The national television system requires financial resources to create new programming that would appeal to national audiences and compete with the informal, innovative and popular "package" of content that is transmitted person-to-person weekly through USB memory drives and reaches millions of Cubans. The national system also needs to modernize its technological base and improve working conditions for the professionals who work in this field.
The mentioned investment project to establish a paid cable television channel can be seen as a step forward in Cuba's reinsertion into international markets, meeting the challenges associated with the process of transformation of the economy. It recognizes that attracting foreign investment and stimulating the growth of the tourism sector and national industries who own their brands require the use of advertising.
Should the proposal to create a paid television channel materialize, it would be very beneficial for the private sector and state enterprises in providing them with a medium to promote their products and services, in a competitive environment driven by foreign brands already marketed in the island and new ones that are expected to enter the Cuban market in the near future.
While the investment project included in the investment portfolio does not explicitly mention advertising, it is obvious that one of the main ways for financing a paid cable television channel would be commercial advertising.
The registration of national brands and North American brands has exploded
Meanwhile, the growth of the private sector has revolutionized the registration of national (local) brands, with thousands of private businesses registering their brands planning about the future. For many entrepreneurs, their dream is to turn their brand into a franchise. The private businesses that have registered the largest number of brands are bars, restaurants, recreation, lodging, computers, beauty salons, cell phones repair and craftsmen.
Figure 7. Collage of some brands created by Cuban entrepreneurs, in various sectors of the economy
Source: THCG and TECH, from an internet search.
But the trademark revolution also has its roots in the US, as a result of the thaw in diplomatic relations. In 2015 the Cuban Office of Industrial Property (OCPI) received more than 1,000 applications to register trademarks and distinctive signs belonging to US companies, in contrast to 2014, when only 78 trademarks were registered[i]. By the end of 2016, according to data published by the Ministry of Foreign Affairs (MINREX), there were more than 6,000 North American trademarks registered on the island.
Figure 8. Collage of some US brands registered in Cuba in the last two years
Source: THCG and TECH, based pm an internet search.
The registration has been carried out by companies in all economic sectors, from chain stores, fast food restaurants, airlines, insurance companies, automobile brands, telephone companies, to technology companies and the mass media, among others.
Conclusions
The future irruption of all these brands on the Cuban market represents an opportunity of incalculable value for Cuba. If the market were opened for advertising businesses, Cuban entrepreneurs and especially the media, they will have in their hands multi-million dollar opportunities.
For this reason, large advertising companies, such as the English multinational WPP, already have offices in Havana. Undoubtedly, they want to be the first when the gates open to advertising.
Meanwhile, Cuban cities are gradually filling up with picturesque and vibrant colors. Hundreds of light posters announcing brands created by Cuban entrepreneurs, are born each day, reviving an economy that was dying, giving a sign of progress and dynamism that spreads everywhere and encourages other Cubans to join the path of success and progress.
Undoubtedly, the private sector could mature at a faster pace than has been allowed by the government so far. Meanwhile, the market is rapidly changing with the same intensity as the avalanche of tourists to the island grows, while hundreds of international brands are pushing to enter the forbidden fruit market, knocking heads with the wall of intolerance.
Cuban entrepreneurs, with their novel and authentic national products, are preparing for the future battle when major international brands enter.
Close by, like a haunting ghost, the advertising industry calmly observes the evolution of the snowball that has been created and is becoming bigger, stronger and faster moving, approaching closer to the moment of the perfect storm that will bring about its return. It's just a matter of time.
References
[i] Fernandez, Abel. “Se duplica registro de marcas de Estados Unidos en Cuba”. El Nuevo Herald. Noviembre 2016. http://www.elnuevoherald.com/noticias/mundo/america-latina/cuba-es/article114740568.html
[i] Morales, Emilio. “Cuba could reintroduce commercial advertising in its mass media”. November 2015. http://www.thehavanaconsultinggroup.com/en-US/Articles/Article/6
References
[i] Granma. “Disponible en Internet web cubana dedicada a clasificados y publicidad”. Agosto, 2015. http://www.granma.cu/cuba/2015-08-11/disponible-en-internet-web-cubana-dedicada-a-clasificados-y-publicidad
[i]THCG Business Intelligence Unit. “Cuban entrepreneurs create long-distance wholesale market”. THCG BUSINESS REPORT DECEMBER 2017 No.1. The Havana Consulting Group and TECH.
[ii] EFE. “Más de 600.000 cubanos viajaron al exterior tras eliminarse el permiso de salida”. Enero 2017. http://www.efe.com/efe/america/portada/mas-de-600-000-cubanos-viajaron-al-exterior-tras-eliminarse-el-permiso-salida/20000064-3148884
[iii] Perrelló Cabrera, José Luis. “Indicadores básicos del Turismo nacional pagado en CUC”. Marzo 2017.
[i]THCG Business Intelligence Unit. “High demand boosts cell phone development in Cuba”. THCG BUSINESS REPORT FEBRUARY No.1. The Havana Consulting Group and TECH.
[i]THCG Business Intelligence Unit. “The mobile telephone market in Cuba: captive and very lucrative”. THCG BUSINESS REPORT DECEMBER 2016 No.6. The Havana Consulting Group and TECH.
[i]THCG Legal Insider. “Trademarks: How do you protect them in Cuba?”. THCG BUSINESS REPORT APRIL 2016 No.2. The Havana Consulting Group and Tech.
[ii] Morales, Emilio. “Cuba: ¿Tránsito silencioso al capitalismo? Capítulo II, Los consumidores cubanos y las marcas”. Pág. 58.
[iii] Hernández Gómez, Ángel; Morales, Emilio. “Estudio sobre notoriedad y conocimiento de marca en la población cubana”. 2006.
