Today’s growing middle classes in Asia desire indulgent products and have the money to buy them. Their habits, tastes and needs are evolving rapidly, as evidenced by the increasing importance of convenience.
The opportunities for beverage brands to increase their global footprint and profitability by reaching shoppers in emerging countries is huge. According to Brand Footprint research by Kantar Worldpanel, 100% of the growth in the number of times Coca-Cola, Tang and Sprite were chosen by consumers in the last year came from emerging regions, leading to 86% of Pepsi’s growth and 76% of Fanta’s.
Coca-Cola – the world’s most chosen brand – now reaches 44% of households in emerging territories, with average frequency of purchase 15 times a year, rising to a phenomenal 84 times a year in Mexico. This comes at a time when volume sales of the brand in Europe are falling.
There’s still room for increasing sales. For example, 68% of households across the globe buy carbonated soft drinks, meaning that more than a third of households can be won by brands that get their strategies right.
In India, where most people drink unbranded products such as mango lassi, or beverages made with local spices bought from street vendors or prepared at home, the penetration of carbonated soft drinks is just 25%. Even Coca-Cola only reaches 3% of Indian households, where people often don’t drink them in the home, and ownership of fridges in rural areas is low.
Global brands need a strong value proposition to counter marketing from local rivals, such as …
There are three areas to focus on in order to compete:
Global brands that grow sales in emerging markets tend to excel at responding to local tastes, flavours and ingredients. Green-tea-flavoured milk is popular in China, for instance, while shoppers in Vietnam love sugar cane juice, and passion fruit is to Brazilians what orange juice is to households in the UK and US.
An awareness of traditions is important, including the culture of gifting in Asia, where giving FMCG goods is common. Producing gift packs and limited editions at key dates such as Lunar New Year and occasions helps increase sales.
Fruit-flavoured powdered drinks brand Tang, which grew its footprint 4% in the last year and is the fourth most-chosen beverage brand in the world, is strong here. Exceptionally popular in Brazil, the Philippines, Venezuela, Mexico and Argentina, Tang grows by developing a variety of flavours to suit local preferences, and appeals to mothers with children.
For low income consumers, making premium products affordable is more successful than a focus on value for money, and packaging is an important part of the proposition.
Consumers may spend $3 on a smaller pack size of a premium product than a large mainstream pack. This smart-sizing strategy makes the brand accessible without making it ‘cheap’ and can encourage trial. Offering small packs and sachets has helped Nescafé achieve success in Asia. Of this, the world’s second most chosen beverage brand, 60% of the products sold in the past year were bought in Asia.
The middle classes like to feel ‘rich’, so adding prestige works well. By adding vitamins, water can be transformed into a premium product – a growth category across emerging markets. Tang, again, has increased its frequency and penetration by adding vitamins and calcium to its powdered fruit drinks, while Nestlé’s chocolate and malt powder drink Milo, which is strong in the Philippines, emphasises the ingredients provide energy and nutrition.
Distribution involves reaching consumers in rural areas. Coca-Cola’s efficient distribution network makes it available in even the smallest towns and villages.
Old-fashioned channels still exist. Consumers still buy products, even premium brands, door-to-door. Markets and corner shops are popular. In Latin America, just 45% of grocery shopping is in supermarkets, hypermarkets and hard discounters. This figure is 44% in China, 43% in Thailand, 28% in the Philippines and 20% in Vietnam.
Three quarters of supermarkets and hypermarkets are in the hands of local rather than international retailers, so working with local retailers is essential.
Brands that are chosen by shoppers in emerging regions stand to reap rewards. In China, for example, the average price of new products launched in the past year was 8% higher in 2011, demonstrating that people are able to pay for premium products.
Those that succeed will be brands that keep up with fast-evolving needs, tastes and attitudes, and understand the shopping habits and trade structures in individual countries.
Virginia Garavaglia is marketing director for Asia at Kantar Worldpanel.
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