Why Oligoplies Become Multinationals
Oligopolies are always seeking to grow in three ways:
- by increasing market share through sales growth or new product development,
- by buying up domestic competitors, and
- by expanding internationally.
In mature markets, the first is difficult just because it's a hit-and-miss proposition. The second gets harder once the industry has been rolled up into very few dominant players. For that reason, international expansion is usually the easiest move, especially for oligopolies with deep pockets. As a result, it's an increasingly common phenomenon.
International expansion can happen in two ways: by introducing brands to new markets where they've never been available; or by buying local brands and using sophisticated marketing, manufacturing, and supply techniques to improve sales. In many cases, both things happen, where the local brand is sold in combination with the multinational brand, giving consumers a pseudo-choice.
Let's look at the recent history of international expansion by Kraft Foods (a division of Altria, formerly Philip Morris). First it pushes Kraft-branded products in markets in Europe, Asia, and Latin America. For example, you can buy Philadelphia Cream Cheese in Singapore, Kraft Singles in Spain, Chees Whiz in Venezuela, Tang in Bangladesh, and Miracle Whip in Germany.
In addition, the company has been busy acquiring other brands, namely:
- 1990 Acquires Jacobs Suchard, a leading European coffee and chocolate company. Acquired brands include Jacobs coffee and Suchard, Milka, Toblerone and Cote d'Or chocolates. (Yes, Kraft now makes Suchard and Toblerone chocolate!)
- 1992 Acquires Splendid, the second largest Italian coffee manufacturer, and El Caserio, Spanish leader in processed cheese.
- 1992-1993 Acquires five local confectionery companies in Eastern Europe: Olza in Poland, Csemege in Hungary, Kaunas in Lithuania, Figaro in Slovakia, and Republika in Bulgaria.
- 1993 Acquires both Freia Marabou, Scandinavia's leading confectioner, and Terry's of York, a major United Kingdom confectioner (Callard & Bowser, Altoids)
- 1994 Acquires Lyons instant coffee business from Lyons Tetley (UK). Acquires Poiana, Romania's leading confectioner.
- 1996 Acquires confectioner Lacta in Brazil.
- 1999 Acquires snack-maker Mova from Ukraine.
- 2001 Acquires coffee brands: Nova Brasilia in Bulgaria; Nova Brasilia, ClassicBrasilier and Prestige in Romania; and Samar and Gaouar in Morocco.
And that's just a sampling. Nabisco, a division of Kraft since 2000, has its own history of international acquistions. This pattern of snapping up undercapitalized companies in smaller markets is typical of hundreds of other oligopolies. And few people know it is happening or its extent.
When the Eastern European economies started recovering in the post-Soviet period, the local businesses (and brands) were ripe for the taking for anyone with a small pile of dollars. So there was a gold rush as all the big players snapped up local firms. Similar moves are afoot in India and in China (though the latter country still has obstacles for the multinationals).
Of course, the margins are generally low in less-developed countries, but some money can be made, and the hope is that these markets will continue to expand, and that the early stakeholders will reap the benefits.
6:46:11 PM 
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