Emerging markets are the new Holy Grail for the Consumer Goods industry accounting for more than 75% of incremental sales*. All leading CG companies are developing plans and strategies to consolidate their positions in these markets with a hope of capturing a larger portion of the pie; for example, Unilever expects to generate ~ 70% of its revenue from emerging markets by 2020. And these companies are not chasing a pipedream. According to a recent McKinsey report, although the emerging-markets today account for only 35% of the world's GDP, by 2020 the collective GDP of the emerging markets is expected to overtake that of the developed economies for the first time. Consumer spending in emerging markets is also expected to grow three times faster than the consumer spending in developed nations, reaching a total of $6 trillion by 2020. According to GIA's Business Perspectives on Emerging Markets 2012-2017 Report, CG companies expect an average of 28% of their global revenues to come from emerging markets by 2017
The enormous growth potential of the emerging markets presents opportunities as well as challenges for companies operating here. Those that are entering these markets for the first time need to realign their perspective in certain ways. Many FMCG companies still view their home model as the best practice model for procedures, processes and management practices. However, while the mature markets of USA and Europe show remarkable similarities, the same is not true in the case of emerging markets, which are often more dissimilar from each other than same. Without a complete understanding of the business landscape awaiting them in these markets, companies are not as likely to enjoy business success.
One way to succeed is through localization. Companies must localize their business and marketing approaches in different countries, whether it's in the brand message or in the product design. KFC serves porridge for breakfast and Peking Duck burgers for lunch in China, and in India, McDonalds eschews its traditional beef-based products for chicken, lamb and vegetarian options. The key challenge before the brand custodian is to enable speedy localization of the marketing – in a pick and play fashion – and yet ensure adherence to the global brand guidelines and code.
Consumers in Asia have different expectations and preferences about how and where they purchase goods, depending on where they live. For example, in China, the e-commerce market is growing aggressively, especially among the young, so companies targeting a younger demographic should leverage platforms such as e-commerce and social media to reach them. On other hand, in Hong Kong, many people buy products at traditional retails stores located at shopping malls. Shopping behavior in Hong Kong is really about going out; it's part of their lifestyle and entertainment. So, going thee-commerce way might not succeed all that well in Hong Kong.
When it comes to making a successful move into emerging markets, the stakes are high. As opportunities for business growth increase in several sectors of the CG industry in the coming years, it's likely that many more companies will look to enter these markets. Working with a strong partner who understands the emerging markets will give you a huge advantage.