Soviet-Era Brands Rise
On Socialist Nostalgia Traubi, Tisza Re-Emerge
As Firms Look to Cash In
On Eastern Europe Success
By MARTA KARENOVA SPECIAL TO THE WALL STREET JOURNAL
BUDAPEST -- In one of this city's busy kerts -- courtyards surrounded by drab buildings that have been transformed into trendy open-air pubs -- Kati Manu, 26 years old, finishes off her second bottle of Traubisoda, a grape drink popular during communist times.
"Drinking Traubi ," she says, "is like recognizing positive things about our country's past."
A few blocks away in a shoe store in downtown Budapest, Adam Baranyi, 29, eyes a 20,000-forint (¤80) pair of Tisza sport shoes, an upscale revival of a staple footwear behind the Iron Curtain. He prefers Tiszas to Western brands because they are a "groovy retro thing" that "take me back to my childhood." Just because he likes them, he adds, "does not mean I want communism back."
Traubisoda and Tisza shoes are two of dozens of former Soviet-era brands in Hungary and other Central and Eastern European countries that are being resurrected by their old owners or Western multinationals eager to cash in on a wave of socialist nostalgia. The Czechs and Slovaks have their own favorite '60s-era soft drink, Kofola, an old take on Coca-Cola. In Germany, socialist brands like Spreewald Gurken pickles and Perlodont toothpaste have gained iconic status.
Hungary's traditional candy bar Sport Szelet is enjoying a sales surge under the ownership of a unit of Kraft Foods Inc., using a 50-year-old package design. Unilever restored the traditional Baba personal-care brand with little change to its polka-dot packaging. "Hungarian consumers have a very strong and even emotional connection to it," says Attila Borodi, corporate affairs director of Unilever Hungary.
The resurgence has been triggered partly by "a backlash against globalization," says Robert Parnica, curator of a recent exhibit at the Centralis Gallery in Budapest that showcased the mass-produced everyday items in the former East Germany. "There were many good things made during communism, so why should we not try again?" he asks. "Our past should not be colored solely by politics."
After a honeymoon period with previously unobtainable Western goods, consumers in former Soviet satellite countries became disenchanted with their often higher cost and monopolization of the local market, says Frank Odzuck, chief executive of Zwack Unicum, which produces Hungary's bitter herbal liquor Unicum. "At the beginning people bought more imported goods but after some time they returned back to their old familiar products," says Mr. Odzuck, whose company produces dominant local brands and distributes international brands including Johnnie Walker and Smirnoff.
Even though some products were nearly extinct, new owners have been able to revive their past popularity. Soviet-era brands often "had been the only or the dominant players in their category at a much less cluttered market," says Zoltan Havasi, strategic planner at advertising agency Young & Rubicam in Budapest. "Thus they had decades to build awareness, uniqueness and relevance without much effort."
Market research by one of Traubisoda's producers, Traubi Hungaria, found a strong nostalgia for the drink among Hungarians who were teenagers in the '80s -- an age group that was more sheltered from the communist regime and remembers products of the period with fondness. After a decade of layoffs, cutbacks in state subsidies for medical care and social services and other sometimes-painful economic restructuring, Eastern Europeans also are receptive to appeals for products of more predictable, albeit authoritarian, times.
Increased advertising also has helped. In a survey of 35 revived retro products ranging from laundry detergents and mineral waters to cosmetics, Hungarian media research firm Mediagnozis found an advertising spending surge in the last four years, to 5.9 billion forints in 2003 from 1.9 billion forints in 1999.
Nostalgia for Soviet-era products isn't limited to Hungary. In the former East Germany, ostalgie (a term derived from the German words for east and nostalgia) is a widely used nickname for the sentimental yearning for life under communism. The internationally acclaimed 2003 movie "Good Bye Lenin" portrays an East German who collects objects of communist material culture to keep up appearances for his mother who awakes from a coma in post-1989 Germany.
But the trend has gained particular traction in Hungary because it evokes memories of the regime of Janos Kadar, whose leadership from 1956 to 1988 blended consumerism and socialist paternalism and led to higher living standards.
Of course, no one is suggesting that these revived brands will stop the widening influence of products from the West. Among the hurdles facing retro products: undercapitalization, a domestic market with limited personal incomes and foreign competition intensified by this year's expansion of the European Union to encompass Hungary and other Central and Eastern European countries.
A recent survey of the Hungarian food industry found many smaller businesses and even some large ones lacked the resources for an EU-wide brand-building strategy. "Nostalgia is a unique way of tapping into consumers' emotions but it does not ensure long-term prosperity," says Peter Sebok, a Budapest-based branding specialist. "Current business infrastructure is still not up to par to make Hungarian products competitive in the global market."
Marketing experts believe that the future success of old Soviet-era brands will depend on whether they can strike a balance between delivering the original attributes of the product while also meeting the quality requirements of a maturing consumer market.
The promoters of Tisza shoes and Traubisoda have used different strategies to steer their relaunch: Tisza owners relied on their status as a '70s track-shoe icon while giving the shoes a makeover to appeal to the brand-savvy younger generation of European consumers. Traubisoda, the subject of a trademark dispute between two producers, returned to variations of its original packaging to appeal to a wider consumer base.
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The Tisza brand traces its roots to a factory in the Tisza region of eastern Hungary that supplied Soviet bloc countries with military boots in the 1950s and '60s. In the early '70s, it became widely known throughout the former Soviet bloc as a rubber-soled athletic shoe with a "T" logo on the back. The brand disappeared after the fall of communism and wasn't revived until 2003, when a 33-year-old entrepreneur, László Vidak, bought the trademark and exclusive production licenses for an undisclosed amount and reintroduced the brand as a more upscale athletic shoe.
A key target market: Hungarians like Mr. Vidak in their 20s and 30s who grew up wearing Tisza sneakers and now feel allegiance to a national brand. The shoes typically sell for between 17,000 forints and 20,000 forints -- in a country where the average monthly income is around 85,000 forints.
Mr. Vidak's closely held company, Clash Kft., says sales have doubled in its first Budapest store since its May 2003 opening, though it declines to disclose numbers. Clash plans to open second Tisza store here next year, is negotiating to start stores in three other Hungarian cities and in September began a wholesale business.
The Tisza brand also is moving outside Hungary. An upscale boutique in Stockholm, Nitty Gritty, introduced a sample collection of Tisza shoes earlier this year, with prices ranging from ¤95 to ¤110. "We loved the shoe not only for the look but also for the history it held," says Nitty Gritty manager Peter Asbrink, noting the store sold out of the shoe in early summer and is waiting for a new supply.
That underscores a problem facing Clash and other fledgling companies seeking to revive old brands: finding production plants that match the quality expectations of a broader market. After encountering problems with some of its Hungarian subcontractors, Clash started importing soles and leather from Italy and Spain.
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Hungary was the first country in the former Soviet bloc where Coca-Cola Co.'s cola, once demonized as an "opiate of imperialism," became available under Mr. Kadar's more consumer-oriented regime in the late 1950s. It was followed by PepsiCo Inc. in 1970 as the two global giants competed with local labels such as Traubisoda, Marka and Tropikola.
Following the fall of communism, Coca-Cola and PepsiCo took over the production of many local brands, which both increased their dominance and drove up demand for soft drinks. "They are the big ones paving the road in the soft-drink industry and our car has been traveling on it," says Salamon Berkowitz, a U.S. investor with Hungarian roots who bought the former state-owned Traubisoda plant and rights to produce the drink in 1992 from state-owned Badacsonyi Allami Gazdasag, or BAG, the first producer of Traubisoda in Hungary.
Mr. Berkowitz says his company, Traubi Hungaria, has "really bought the trademark back," partly by reviving the colorful, upbeat ads used during the communist era. "Traubisoda brought people a good feeling when they drank it while they were being oppressed by the system," says Mr. Berkowitz. "Paradoxically, the situation is similar today. People are under pressure with all the free market and EU reforms."
But Mr. Berkowitz's bid to revive the Traubisoda brand has entangled him in a legal battle with another company. Because the Traubisoda trademark wasn't registered by the state-owned BAG, Rathonyi Rt. claims it acquired the sole right to produce the soft drink in 1995 when it reached an exclusive license agreement with a third company that owns the intellectual-property rights to the drink invented in 1959 by Austrian Lenz Moser. The battle remains unresolved. Hungary's trademark authority registered Rathonyi's trademark in 1995. In 2002 Hungary's highest court overturned a lower court ruling that Traubi Hungaria infringed on the trademark. Another Rathonyi lawsuit suit seeking to bar Traubi Hungaria from using the trademark is pending.
Meanwhile, Rathonyi Kft., with a retail distribution network including Tesco and other retail chains, has invested 300 million forints to double its bottling capacity. Both companies decline to disclose current sales figures.
However the dispute is resolved, it underscores the increasing popularity of Traubisoda. Laurenczy Arpad, manager of Menza, a retro-style restaurant in Budapest that serves old Hungarian soft-drink brands, estimates that Rathonyi-produced Traubisoda accounts for about 40% of soft-drinks sold to local consumers. "There is a definite demand," he says, "for products from the '70s and '80s, which inspired the opening of this restaurant."