That file uses ISO 8859 encoding (presumably Latin-1 or Latin-9), so you
need to grep it in a locale compatible with that encoding. It appears
that you ran grep in a UTF-8 or other incompatible locale, which meant
the ISO 8859 encoding wasn't valid and was treated as binary gibberish.
You could try working around it with this:
grep -a PKG_NAME Makefile
or this:
LC_ALL=de_DE.iso885915 grep PKG_NAME Makefile
but in either case 'grep' might output the binary gibberish, which could
cause other problems. So it might be better to change that non-ASCII
character in the file's string "Raphaël" to use an encoding compatible
with the encoding of your locale.