When global brands get caught in middle of geopolitical conflicts An analysis by Foreign Policy

As the world undergoes geopolitical shifts, companies are facing increasingly challenging decisions regarding their stances on international issues, requiring careful navigation to maintain brand integrity and market presence. The Foreign Policy journal highlights the challenges faced by global brands in navigating international conflicts, political tensions, and social issues, including in light of the current Israel-Hamas war. Caliber.Az reprints this article.

"Brooks Brothers presents itself not only as the oldest American apparel company but as a quintessential piece of Americana. Its website touts the firm’s history supplying veterans and the US military from its founding in 1818 through the Second World War. The company’s website also describes how the company has preserved records and fabric samples from an 1861 agreement signed by New York’s governor and the four Brooks brothers themselves to supply the state’s regiments with uniforms at the outbreak of the US Civil War. This isn’t just an established firm, it’s a patriotic one.

That kind of traditional Americana was once an easy sell for companies. In a globalized age, though, flag-waving is a dangerous business. What a brand—or its franchisees—do in one market can affect them all. When an Israeli McDonald’s franchise started offering free meals to Israel soldiers last month, for instance, franchises across the rest of the Middle East distanced themselves—many donating money to Gaza.

For companies that own valuable brands, the threats to their business can emerge precisely because of the strength of those brands. The more global a brand becomes, the more likely it is to be entangled in international disputes, and the more picking a side comes with costs, even for the softest of products like fizzy drinks or ice cream.

In a brand-dominated consumer economy, defining oneself by a relationship to brands is inescapable. Even in normal times, choosing between Starbucks or Peet’s and Athleta or Lululemon expresses not just personality but political and moral overtones. War, and the threat of war, can bring national loyalties into the mix, making customers avoid anyone who is trading with the enemy, possibly for long after the conflict ends. Even brands that want to be bystanders will come under pressure to take a stance.

Once, companies could segment their messages in different countries, or even avoid commenting on conflict at all. In a world of digital media and consumer-activists, that is no longer possible. But it’s not the first time that companies have had to steer through rocky geopolitical shoals with lasting consequences.

Coca-Cola was one of the first brands to go global, and one of the first to find itself on both sides of a war. In his history of the company, Mark Pendergrast details how wartime shortages of Coca-Cola’s formula and sugar led Max Keith, who ran the company’s German unit during the 1930s and 1940s, to develop an alternative soda to maintain sales while it was cut off from the US headquarters. The resulting beverage, Fanta, one of numerous ersatz products of the era, relied on whatever scraps were available for its fruit flavoring, including whey and apple fiber from cider presses. [Pendergrast speculates that Keith was betting that if the Germans won, Keith expected to be rewarded for such inventiveness by being made head of Coca-Cola’s international operations, perhaps the ultimate hostile takeover.]

Because a drink sold under the Fanta name remains popular in Europe and sold in the United States, its origin story is often misleadingly summarized online as 'Fanta was invented for Nazi Germany'. Yet Pendergrast makes clear that the drink sold today has little to do with the Nazi-era recipe. In the 1950s, stiff international competition from Pepsi pushed Coca-Cola executives to search for new ways to boost sales.

Fanta’s wartime formula itself wasn’t attractive. Rather, the key to the brand’s post-Nazi era was that Keith had registered the trademark for the drink throughout Nazi-occupied Europe—trademarks that continued to be valid even after the war. A more severe trial for Coca-Cola came when the company was drawn into the Arab-Israeli conflict during the 1960s.

The Middle East, particularly Egypt, became a major market for Coca-Cola after the Second World War. Historian Maurice Labelle notes that the company established several bottling plants in Egypt to help produce what amounted to hundreds of millions of bottles a year by 1950. King Farouk was such a fan that Egyptian restaurants kept some on hand just in case he dropped in. After the king’s downfall, the new leaders proved to be just as big fans: A mini-crisis erupted when Algerian officials failed to provide Egyptian ruler Gamal Abdel Nasser with the beverage during a 1963 visit since Nasser 'drank no other'.

Coca-Cola portrayed itself as a partner in Egyptian modernization efforts. The company touted how it was raising living standards through its investments and by providing jobs. It sought to do everything it could to present itself as anything but an instrument of American power—of 'Coca-Colonization'.

That goal foundered when Coca-Cola found itself dragged into the Arab-Israeli conflict. The initial impetus had nothing to do with Egypt per se. In 1966, the Anti-Defamation League, a Jewish advocacy group headquartered in the United States, accused the company of obeying the Arab boycott of Israel on the grounds that Coca-Cola had not given an Israeli bottler a franchise even as it sold elsewhere in the Middle East.

The firm denied the charge. It argued that Israel [a far poorer, smaller country than today] was ill-fitted to their business. Yet, Pendergrast writes, many American Jews were outraged. A boycott quickly emerged. Institutions like Mount Sinai Hospital and Nathan’s Famous hot dog emporium ditched Coke. Coca-Cola quickly found an Israeli partner, in an effort to protect its American market.

This may have settled one set of problems, but it quickly raised another. Coca-Cola’s formal entry into Israel’s market clearly violated the Arab boycott. Established in 1945, the boycott originally prohibited the purchase of products made in the Jewish sector of Palestine throughout the Arab world. It grew to encompass not only Arab states and companies but any economic actors around the world who did business with Israel and Israeli interests. Suddenly, Coca-Cola found itself in the economic crossfire of the region’s tensions. As a global brand, Coca-Cola had been welcomed in Egypt and elsewhere in the region before 1966. Doing business in Israel wore out that welcome.

The corporation pulled every string it had, doubling down especially on the argument that its involvement in the Arab world would help modernization and economic development. Yet the Arab League, a group of Arab countries including Egypt, was not swayed. It voted to enforce the boycott on Coca-Cola. A ban was officially imposed in 1967 and by 1968 the firm was forced out of the Arab world.

It was left to watch as its brand in the Arab world became tied to imperialism and Zionism. A reintroduction to Arab markets in the 1980s required a gradual lessening of tensions with Israel. In the meantime, the Arab bottling plants Coca-Cola had worked with switched to competing soft drinks instead, delivering a coup to Pepsi-Cola and other rivals.

The Arab boycott imbroglio affected a single company. A few decades before, international and domestic conflicts combined to help bring down the entire alcoholic beverage industry in the United States.

In the early 20th century, American brewers and distilleries knew they faced a powerful political threat from growing prohibitionist forces that sought to ban alcohol consumption. Community by community and state by state, the prohibitionist wave threatened to enact their goal of national prohibition. Historian W.J. Rorabaugh writes that alcohol producers, despite being a significant industry with substantial resources, faced a problem in resisting: Few politicians wanted overt ties to the industry.

Brewers turned to an alternative. Opposition to prohibition was strongest among immigrants from countries like Ireland and Germany, and many brewers themselves were German or of German descent. The brewers consequently used a seemingly neutral organization with deep ties to that bloc: the German-American Alliance.

The German-American Alliance had been founded by Kaiser Wilhelm II, the ruler of the German Empire, in 1900. Its aim was to promote ties between the peoples of the United States and of the German Empire. Millions of Americans joined the cause. Brewers used the alliance to launder their campaign contributions to anti-prohibition candidates and causes, helping to elect 'wet' [pro-alcohol] candidates and defeat state and local prohibition measures. It seemed like they had found a vehicle to defeat their most powerful enemy.

The charade began to unravel when a lawsuit led to the disclosure that Adolphus Busch, the patriarch of the Anheuser-Busch brewers of St. Louis, had personally offered a $100,000 [nearly $3 million in today’s dollars] contribution to defeat a Texas statewide prohibition referendum in 1911. Not only would that donation have been illegal, its revelation, along with subsequent investigations, tied the brewers ever closer to the German-American Alliance.

But the real killer for German branding was the First World War. Unrestricted submarine warfare made it difficult to publicly support Germany’s war effort. A string of sabotage and terror attacks backed by the imperial German government struck at the United States. Saloons catering to German and German-American clientele were portrayed as dens of espionage, and the German-American Alliance was painted as the Kaiser’s hand in the United States. Although replacing the term 'sauerkraut' with 'liberty cabbage' was mostly a myth, it is true that German names were scrubbed from street names and the German-language press in America was clobbered. Curriculums were lastingly changed: Before the war, 25 percent of American high school students took German. By 1922, only 0.6 percent did.

By the 1916 elections, anti-German feeling generally and opposition to the German-American Alliance in particular had disarmed the US liquor industry. Electoral defeat for anti-prohibition candidates was compounded by the US entering the war on the side of the Allies against Germany in 1917, which further weakened opposition to Prohibition. Later that year, Congress passed the 18th Amendment banning alcohol sales, which led to national Prohibition in 1920. [Almost as an afterthought, it revoked the German-American Alliance’s charter in 1918.] Tying the fate of the US alcohol lobby to German fortunes may have not single-handedly brought Prohibition about, but it made Prohibition much easier.

The 2022 invasion of Ukraine by Russia put the tensions between corporate interests and pressures to take a side into stark relief. Companies that had spent decades cultivating a presence in Russia either voluntarily suspended their operations in that country or left [or faced substantial pressures to leave] as international sanctions kicked in. Western brands like Coca-Cola, Pepsi, and McDonald’s, whose entry into the Soviet Union had been heralded as a sign of thawing Cold War tensions, departed, sometimes replaced by homebrewed versions. [McDonald’s replacement in Russia, Vkusno i tochka—'Tasty and that’s it'—has seen reportedly high sales, but has met with mixed reviews.]

For some firms, though, the crises were of their own making. Ben & Jerry’s, a Vermont-based ice cream manufacturer, was fresh from its own controversy regarding sales to Israel when it took sides in the Russian-Ukrainian conflict. In February of this year, a few days before the war, the company’s social media team tweeted, 'You cannot simultaneously prevent and prepare for war. We call on President Biden to de-escalate tensions and work for peace rather than prepare for war. Sending thousands more US troops to Europe in response to Russia’s threats against Ukraine only fans the flame of war'.

The team behind the tweet presumably meant to solidify the brand’s identity as a counter-cultural icon. [Ben & Jerry’s is a wholly owned subsidiary of international mega-corporation Unilever, but the terms of its acquisition grants it substantial independence.] And yet the tweet managed to get everything wrong. It centered the United States in a dispute to which it was peripheral. It implicitly called for disarming Ukraine in the face of Russian intimidation. And it left a hostage to fortune: When the Russian military invaded and the [Western] world’s public opinion swung toward ardent support for Ukraine’s resistance, the tweet was bound to age poorly.

Maybe the Ben & Jerry’s team knew the risks but still decided to go for it. Maybe the spirit of co-founder Ben Cohen, who blames US provocations for Russia’s invasions, still lingers in the company. Or maybe they calculated that maintaining opposition to war would be a costly signal that their brand really is counter-cultural. Even performatively counter-cultural corporate utterances can be aimed at maximizing brand value, after all. Ordinary brand managers might want to shy away from conflict, but strategic ones might see the possibility for a form of activist capitalism.

Since then, the brand has expressed support for the Voice to Parliament [a permanent representation for First Nations in Australia’s parliament], issued a Fourth of July statement that the United States was founded on stolen Indigenous land, and sued its parent Unilever over sales in Israel and the West Bank. These actions have led to boycotts and criticism from conservatives like Sen. Mike Lee [R-Utah] and pundit Ben Shapiro—but, of course, it’s doubtful that such criticism hurts the brand among its faithful.

International relations are fiendishly complicated. Today’s masterstroke can be tomorrow’s blunder. Events can transform a seemingly well-crafted message or an innocuous business deal into a sudden public relations disaster.

Even companies’ histories become time bombs, with embarrassing facts discovered [or brought back to life] unpredictably. For all that Brooks Brothers glories in its Civil War association, for example, the company’s version of events reflects a selective presentation of facts. As historian Mark Wilson writes, Brooks Brothers promised to make 12,000 uniforms for New York out of expensive wool broadcloth but ended up substituting lesser materials. The state legislature found the resulting uniforms to be 'badly cut, badly sewed and made up,' a phrase that doesn’t appear on the company’s Web site. [It could be worse. Hugo Boss has to atone for its founder’s Nazi connections.]

The coming years could see more such problems emerge. The rise of China, in particular, could pose problems for businesses that face choices between Beijing’s firm line on issues like Tibet and Taiwan and values like free speech, or markets elsewhere. Just ask the NBA. When then Houston Rockets general manager Daryl Morey tweeted in support of Hong Kong protesters in 2019, China Central Television stopped showing NBA games, a massive blow to a league that depends on China for significant international revenues and whose club owners have substantial investments in the PRC. Even league star LeBron James criticized Morey for not being 'educated on the situation at hand'. Other companies have been drawn into disputes between India and Pakistan. Car maker Toyota and the pizza chain Domino’s had to apologize for tweets about Kashmir.

As the world rebalances between the West and the rest, companies that benefitted from the expansion of global markets will have to navigate far more challenging seas. Brands and their parent corporations will be faced with a constant face between making stands and avoiding conflict. And as the intensity of conflicts around the globe accelerates, the social and political pressures involved in those choices will only grow hotter".