Country Affinity: Predicting Negative Reputational Shocks to Global Brands Amid the Israel-Hamas Conflict
Key Takeaways
This memo uses the methodology outlined in our companion “country affinity” white paper to assess the impact of U.S. brands’ countries of origin on their reputations in the Middle East following the Oct. 7, 2023 Hamas attacks.
Our country affinity metric — which measures how tightly consumers associate brands with their country of origin — accurately predicted the magnitude of negative reputational shocks to major brands in Egypt, Saudi Arabia and the United Arab Emirates after the attacks on Israel.
The food and beverage industry — for which our metric predicted a much smaller reputational decline — is an outlier. Instead, companies in that industry saw outsized negative shocks, and have been targets of major consumer boycotts.
The differential impact for this particular sector underscores how brands’ actions and consumers’ reactions to them can still matter greatly when it comes to the severity and duration of a negative reputational shock linked to a geopolitical crisis.
These findings, along with our related research on Russia’s invasion of Ukraine, suggest U.S. multinationals should pay careful attention to America’s reputation among overseas consumers to better hedge against risks arising from future crises.
In Sept. 2023, we published a white paper introducing a new “country affinity” metric which quantifies the closeness of the relationship between global consumers’ views of major multinational brands and their countries of origin. As part of this project, we presented evidence surrounding Russia’s invasion of Ukraine, which demonstrates how companies can use our metric to predict the reputational impact of major geopolitical shocks.
In this follow-up memo, we apply the same methodology from our white paper and companion strategy playbook to assess the impact of another major geopolitical crisis on U.S. brands’ reputations overseas: Hamas’ attacks on Israel on Oct. 7, 2023.
Country affinity: a refresher
As outlined in the white paper, our country affinity metric combines data from Morning Consult Brand and Political Intelligence on 46 companies in 42 countries. To construct the metric, we used correlation coefficients between global views of each company and their country of origin to devise company-specific scores that quantify the closeness of the relationship between them. We then examined the resulting scores across groups of companies to assess which industries saw closer relationships between country and company favorability.
The figure below plots all 46 companies’ country affinity scores by industry from the original white paper, with each dot representing the correlation between public views of a given company and its country of origin across all markets in which we collect data on that company. Higher values mean a closer relationship. Individual company names and correlation coefficients can be found in the appendices of the original white paper.
Country Affinity Correlations by Industry
By doing so, we saw first and foremost that industry is a key differentiator when it comes to country affinity scores for the companies we examined. We furthermore noted that actions taken by particular brands do still matter a lot, and that brand strength can mediate country of origin effects.
Finally, we used Russia’s invasion of Ukraine to model how a geopolitical shock can affect a country’s reputation in a foreign market — in this case, views of the United States among Russian consumers — and subsequently assessed shifts in favorability of U.S. companies as a function of their country affinity scores. The metric was highly predictive of how much reputational damage U.S. brands suffered among Russian consumers in the immediate aftermath of the invasion.
Reinvestigating country affinity amid a new geopolitical shock: the Hamas attacks
In light of Hamas’ attacks on Israel and the subsequent ongoing conflict, this memo revisits our country affinity metric to assess the extent to which it can predict geopolitical fallout for major multinational brands doing business in the Middle East. To do so, we recalculate country affinity scores using data from the six months before Hamas’ Oct. 7, 2023 attacks on Israel, spanning Apr. 1 -Oct. 6, 2023. We then calculate the negative shock to favorability of U.S. brands in two large markets — Egypt and Saudi Arabia — in the aftermath of the attacks.
The findings are striking: On average, the U.S. companies we examine suffered a 10 percentage point negative shock to their reputation in Egypt and a 5 point shock in Saudi Arabia. As one would expect, individual companies experienced different levels of reputational damage.
Egypt as a case study
U.S. Companies Across Industries Saw Negative Reputational Shocks in Egypt After Hamas Attacks
While we treat the Hamas attacks as a single geopolitical shock, reality is of course more complicated. Much of the decline in views of both the United States and of U.S. companies in Egypt — where results parallel those for Saudi Arabia and the Emirates, and which we use as an illustrative case study here — came later, after Israel began its aerial bombardment and ground offensive in Gaza. And because the conflict is ongoing, both the evolving geopolitical situation, and the steps that companies are taking to safeguard their brands as it continues to unfold, are dynamically involved in moving our country affinity metrics.
Nevertheless, by using an interrupted time series model — analogous to our analysis of country affinity dynamics in Russia following its invasion of Ukraine (see Appendix 3 of the original white paper), we can measure the net reputational shock faced by each company after the Oct. 7 attacks.
By comparing the magnitude of reputational shocks observed after the attacks with country affinity scores from just before them, we find strong evidence that our scores are indeed predictive of the negative shocks experienced by most U.S. brands when outliers are removed.1 We find specifically that country affinity scores alone were significant predictors of the size of corporate reputational shocks experienced in Egypt, Saudi Arabia and the United Arab Emirates, and explained 18-23% of the variation in the magnitude of negative reputational shocks following the attacks.
Country Affinity Scores Predicted Egyptian Consumers’ Changing Perceptions of U.S. Brands Post-Hamas Attacks
Food and Beverage in the crosshairs
Among the companies we examine, all outliers were concentrated in a single industry: food and beverage. By contrast, in our initial industry breakdown of country affinity scores from last September (see the first figure above), the food and beverage category sat squarely in the middle — neither the most strongly nor the most weakly associated with views of the United States.
In the context of our analysis of the Hamas attacks, our model specifically predicted a 5-10 percentage point negative shock to companies in the food and beverage industry based on their country affinity scores. Instead, the three food and beverage companies we tracked for this project all saw negative shocks of more than 40 points in Egypt. Food and beverages companies also saw much higher than expected negative shocks in Saudi Arabia and the United Arab Emirates.
This serves as a good reminder that not all companies (or industries) are created equal when it comes to reputational risks linked to geopolitical crises. Market-specific relationships between consumers and brands can clearly play a role, as does media coverage during the crisis and consumers’ reactions to corporate messaging, in this case extending to boycott lists circulating in MENA countries.
The fact that some of these boycotts are being led by younger consumers — many of whom primarily come into contact with foreign brands through consumption of foreign food products and beverages due to their accessible price point relative to other foreign products — makes them an attractive choice for boycotts and could explain why the food and beverage sector is such a notable outlier.
How to prepare for next time
Negative reputational shocks for U.S. companies (and for the United States itself) have been less generalized and smaller on average in other countries outside of the MENA region with large Muslim populations, like Indonesia and Malaysia. Amid future geopolitical crises, this suggests that our country affinity metric will be most useful as a predictive tool in markets that are geographically close to the crises, and where shocks to country favorability are most acute and channel through to brand favorability more generally. Paying close attention to global favorability of the United States on a real-time basis, and pairing expert qualitative analysis of global and market-specific events with our country affinity data, are the most immediate ways in which U.S. companies doing business overseas can proactively safeguard their brands.
For brands looking to go deeper in the context of the current crisis, we advise using our metric to assess country affinity among key demographic groups. Young consumers’ outsized role in leading consumer boycotts in the Middle East at present suggests segmenting consumers by age group would yield additional insights into brand risks.
1. We used the common definition of outliers as those with values more than three standard deviations away from the mean.
Sonnet Frisbie is the deputy head of political intelligence and leads Morning Consult’s geopolitical risk offering for Europe, the Middle East and Africa. Prior to joining Morning Consult, Sonnet spent over a decade at the U.S. State Department specializing in issues at the intersection of economics, commerce and political risk in Iraq, Central Europe and sub-Saharan Africa. She holds an MPP from the University of Chicago.
Follow her on Twitter @sonnetfrisbie. Interested in connecting with Sonnet to discuss her analysis or for a media engagement or speaking opportunity? Email [email protected].
