Accelerating market changes combined with a few basic challenges serve as obstacles for brands aiming to achieve sustainable growth in developing Asia, according to a study by Bain & Company.
According to Bain’s latest research, the steady rise in digital connectivity is fueling a boom in online sales and transforming the way brands talk to consumers to influence purchase decisions.
Consumers in the region are increasingly willing to pay for convenience, and they are more digitally connected than ever, the study showed.
“Each of these shifts has caused an accompanying change in retailing,” Bain & Company stated. “For example, throughout developing Asia, consumers now make fewer trips to larger stores, instead flocking to convenience stores.”
Asia’s developing markets are some of the most promising places on Earth to sell fast-moving consumer goods (FMCG), according to Bain. They can also be a place to fail fast.
“The rules of the game are changing at an ever-increasing pace, and many multinational and local brands are struggling to keep up.”
The study shows despite developing Asia’s massive opportunities, fewer than 20 per cent of brands outgrow their categories in the region—roughly the same proportion as in low-growth developed markets.
“To successfully compete in these markets, brands need to push themselves more than ever to swiftly and continuously adapt to the new realities,” according to Bain.
Several fundamental factors have also made it tough for brands in developing Asia, the study indicated. Because the region’s distribution channels are highly fragmented, it is harder to gain household penetration, the most important contributor to brand growth.
Another new complication for companies trying to plot a winning strategy is bifurcated demand, the study shows. In the last 20 years, most value growth came from the “belly” of the market. Now the middle is shrinking, while a category’s premium and discount ends grow faster.
“Fundamental consumer shifts in developing Asia have accelerated in the past few years, making it tougher for brands to survive and win in a region that remains critical for multinationals,” said Paolo Misurale, partner and head of Bain & Company’s SEA consumer products practice.
“All of this is altering the rules of the game for consumer products companies, requiring them to rethink their strategies from ‘where to play’ to ‘how to win’,” Misurale said. “Then they need to deliver the change, building new capabilities and forging alignment across stakeholders and functions. Those that fail to adapt – even large and established brands – will be left gasping for air.”
Amid these challenges, the research revealed, nimble local players manage to gain traction by revising their playbooks to new market realities.
“Brands can turbocharge their growth through a relentless focus on increasing penetration and consideration,” said Nader Stefano Elkhweet, partner and head of Bain & Company’s Indonesian consumer products and retail practices.
“This requires focusing on what shoppers actually do – as opposed to what they say they do in surveys – planning from the ‘shelf back’ to win the battle in stores, and relying heavily on advanced analytics tools to generate the insights that help brands make the smartest trade-off decisions.”
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