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U.S. marketplace is stuck playing ketchup

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WASHINGTON – It’s Saturday night and you want to go see a movie. You fire up your IBM ThinkPad and check the listings. The local AMC theater is showing “Iron Man 3,” the Marvel Comics blockbuster partly filmed in China. You hop in your Volvo, fill it up with gas, and settle down in your seat with your popcorn.

The latest in the “Iron Man” series, to be released on May 3, represents a new Hollywood wave: catering to massive Chinese audiences with scenes shot in the Middle Kingdom. But the movie is not the only Chinese element of your Saturday-night scenario.

The IBM ThinkPad you used to check movie times? That’s owned by a Chinese company, Lenovo. They bought IBM’s PC business in 2005 for $1.75 billion. The theater showing the movie? Also Chinese-owned. The Dalian Wanda Group bought AMC Theatres, America’s second largest cinema chain, for $2.6 billion in 2012. The gas that filled up your Volvo? That could come from anywhere, really, but since Canada is America’s largest supplier of crude oil, and China National Offshore Oil Company (CNOOC) completed the purchase of Nexen, one of Canada’s largest oil and gas producers, in 2013, it may well have been CNOOC gas filling your tank.

OK, so at least you have the Volvo, the very symbol of all things Swedish. Think again. Volvo is owned by Geely, a Chinese state-owned automaker, purchased from Ford Motor Co. for some $1.5 billion in 2010.

Your popcorn, at least, is most likely made from American corn kernels. As for the machine that pops it, well, that could very well be made in China.

Amazingly, a recent poll found that 94 percent of Americans could not name a single Chinese brand. This caused a minor stir in the circles that stir over such things, but it’s not the real story. The real story involves Chinese companies – and others from emerging markets – making a major push to buy American and Western brands and companies.

Take the recent purchase of The H.J. Heinz Company. What could be more American than Heinz ketchup? It sits in refrigerators and restaurants – both humble and high-end – across the land. Its name adorns the stadium of one of the NFL’s most storied football franchises, the Pittsburgh Steelers. It’s a global American icon, standing alongside the likes of GE, McDonald’s, Coca-Cola and Boeing.

It’s no wonder, then, that another American icon, the investor Warren Buffett, would seek a piece of the Heinz story. His firm, Berkshire Hathaway, last month helped finance a $23 billion private equity investment to acquire the company. What could be more American that? The sage of Omaha making a long-term play on a top American brand.

Not so fast. The company leading the purchase of Heinz is a Brazilian private equity firm, 3G. Never heard of it? Well, 3G also happens to own Burger King Corp., which it bought for $3.3 billion in 2010, to considerable success, expanding the franchise’s reach and increasing shareholder value.

The 3G takeover of Heinz – partly financed by Berkshire Hathaway – is not simply an outlier, a talented group of Brazilian investors who like to buy established brands and wring more profit out of them. It signals a larger trend that has been taking place over the last decade and will accelerate over the next: the rise of emerging-market investors and companies acquiring majority stakes in well-known Western brand names and lesser-known Western companies.

Wait a minute, you might be saying: I’ve been reading these headlines for the past two years. But the new story is the rise of emerging market multinationals. As they grow, they are becoming more acquisitive. And they are not just buying well-known Western brands; they are creating some powerful ones of their own.

St. Louis-based Anheuser-Busch knows a thing or two about this trend. In 2008, the Belgian-Brazilian brewer Inbev acquired the American beverage giant. Budweiser, that great American icon, and Bud Light, the best-selling beer in the United States, are now owned by a consortium headquartered in Leuven, Belgium, and run by a Brazil-born CEO. The deal was engineered by Brazilian billionaire financier Jorge Paulo Lemann, head of 3G Capital. Yes, that 3G Capital, the one who partnered with Warren Buffett to buy H.J. Heinz. From the beer you drink to the burgers you eat to the sauces that flavor your meat and fries, Lemann has a hand in it.

Europe-based multi-nationals and investors already own a bevy of American brands. The names may surprise many Americans: Gerber, Holiday Inn Hotels, Vaseline, Hellman’s Mayonnaise, Alka-Seltzer, Ray-Ban, LensCrafters, Lysol, Woolite, Motel 6, Trader Joe’s, and on and on. All are owned by European companies. Even the popular television show American Idol is owned by a Germany-based media conglomerate, Bertelsmann.

Emerging-market investors are now joining the Europeans. China’s Lenovo led the way when it purchased IBM’s PC business in 2005. The Milwaukee-based Miller Brewing Company is owned by SABMiller, a company launched in South Africa in 1895 (née South Africa Breweries), now based in London, and serving thirsty customers across six continents. While Chrysler Motors is owned by Italy’s Fiat, the iconic Chrysler Building in New York City is owned by the Abu Dhabi Investment Council.

Even America’s once-impoverished but now surging neighbor to the south, Mexico, has joined the tide. Grupo Bimbo, a Mexico-based food conglomerate, bought the North America bakery operations of cakes maker Sara Lee in 2011.

Today, Jaguar and Land Rover, the British auto icons, are now owned by India-based Tata Motors. Since 2005, emerging markets companies have acquired more than 3,100 companies in developed economies, according to KPMG’s Emerging Markets International Acquisition Tracker. A full third of the targets have been in the United States – and Chinese companies have had the most voracious appetite.

But cash-rich emerging-market investors are also building their own world-famous companies. Dubai-based Emirates airline has become a global brand icon while reshaping global aviation, inspiring regional competitors such as Doha-based Qatar Airways and Abu Dhabi-based Etihad Airways. Today, the Persian Gulf “Big Three” carriers plus Turkish Airlines have stolen a march on European aviation powerhouses by cutting into their lucrative long-haul routes to Asia, forcing them to cut costs and shelve growth plans. The European carriers are on the ropes.

Meanwhile, Brazil’s Embraer is the third-largest selling aircraft maker in the world and Vale is a global mining giant. Petrobras of Brazil, Petrochina, Sinopec and CNOOC of China are all players in their own right in the oil and gas industry. Infosys of India is a global technology giant.

The emerging markets tide still has a long way to go. It’s not going to end with ketchup.

Afshin Molavi is a Washington, D.C.-based senior advisor at Oxford Analytica, the global analysis and advisory firm.

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