Asia-Pacific’s fast growth is set to impact and transform patterns of consumption in the region.
It is largely driven by the consumption growth of Asia’s middle class. Today, about half of the world’s middle-class population live in Asia. This figure is expected to increase to two-thirds by 2030. Middle-class consumption has also followed the same trend – by 2030, Asia will account for 60% whilst North America and Europe combined will come in at just 30%.
It represents a big opportunity for fast-moving consumer goods (FMCG) businesses. However, Asia is also a great challenge as the market is as diverse as it is vast; with different sizes, stages of development, coupled with varied cultural and ethnic backgrounds.
This has prevented FMCG companies from adopting a cookie-cutter approach if they want to succeed. Hence our focus on key developments that can give companies an edge.
Here are 3 Trends in Asia that FMCG Companies Should Keep an Eye on :
Asia Leads in Engaging Consumers in an AI-first World
To remove distance between the brand and end-users, FMCG companies are exploring new ways to engage customers on their own terms.
Businesses have identified voice assistants powered by artificial intelligence (AI) as a big opportunity due to the close relationship that is developed between users and their devices. For example, in Asian markets that are rapidly embracing voice, consumers are excited about a future where their voice assistants are able to anticipate what they need and take actions or make suggestions. This is particularly strong in China and Thailand, with 65% and 61% of consumers respectively, adopting this point of view.
Hence the emergence of partnerships between consumer goods companies and tech companies offering these solutions. For example, Nestle worked with China’s second-largest business-to-consumer ecommerce retailer JD.com to offer Nestle XiaoAI — a device with an inbuilt AI-powered voice assistant that offers healthy living tips, plays music, controls your home and most importantly, enables you to shop online for Nestle products.
Released as a limited edition product, it has enabled Nestle to connect with its biggest fans and embed them further into its ecosystem of products. According to Rashid Aleem Qureshi, Nestle Greater China chairman and CEO, this AI attempt by Nestle is part of a global trend to go beyond traditional products with digital services offering consumers convenience, entertainment and education for healthier living.
Consumer-Driven Insights Drive Product Development
FMCG businesses often have a long development time for products, taking as many as 18 months to bring products to market. With Asian consumers always looking for the “next big thing”, it is both a challenge and an opportunity for brands to create a product which consumers love and will recommend to family and friends.
BitsxBites, China’s first food-centric accelerator, has enabled its startups to overcome this challenge via adopting a test-and-learn approach based on consumer insights.
Bugsolutely, one of the startups accepted to BitsxBites, had specialised in using cricket flour as an alternative animal protein. However in China, silkworms were the only legal insect ingredient. A pivot was thus necessary, which Bugsolutely managed to do within the 120-day acceleration programme with BitsxBites.
Leveraging on BitsxBites’ network of chefs, the startup managed to produce 48 different flavour prototypes for its snacks made from silkworm flour. Through four rounds of testing with consumers, they discovered that flavours like Fine Italian Herbs, Smoky Cumin and Salt & Vinegar emerged as preferred options. These later went into mass production.
Bugsolutely’s prototyping rounds with consumers to identify flavours worth producing.
Bugsolutely was rewarded for its consumer-insights driven approach when it won the Food and Beverage Innovation Forum’s Most Innovative Food award. It was voted number one out of 54 competitors from different categories, including dairy, drink, snack and instant foods, beating out established Chinese brands like Wangwang, Master Kang and Three Squirrels.
Elsewhere in Asia, Indonesian startup Snapcart is enabling FMCG companies to do the same by offering offline consumer data insights.
Snapcart’s app lets users take a picture of their receipt whenever they buy something in order to earn some money back. By scanning the contents of the receipt, Snapcart’s analytics software gathers consumer data from offline purchases, like who bought what, when, and from where. Not only does this give companies access to data which is generally only available to e-commerce platforms, it also removes the need for manual data collection through consumer surveys.
With over 700,000 users on its platform and partnerships with over 75 FMCG brands like Unilever, Nestle, and L’Oreal, Snapcart has enabled companies to see their performance in real-time and leverage on consumer data for improved decision-making.
FMCG Brands Face Local Challengers
It used to be “easy money” for Western FMCG brands as Asia’s growing population chose to buy their products to demonstrate their newfound wealth. However, the focus has since shifted to local brands which are more effective at communicating and connecting with the Asian consumer.
A recent BCG survey has illustrated that 73% of executives at large multinational companies shared that “local companies are more effective competitors than other multinationals” in emerging markets.
A key example of where localised does not mean small is Patanjali — an Indian FMCG company selling ayurvedic products based on India’s ancient medical traditions. Today, it has become India’s fastest-growing FMCG company. Its revenue has grown 20 times from US$69 million in 2012 to US$1.6 billion in 2017. And if it continues on this trajectory of growth, it could possibly come out ahead against the Indian subsidiaries of global FMCG players like Unilever.
One of its biggest successes has been Dant Kanti, Patnanjali’s ayurvedic toothpaste which has reshaped Indian consumption in the oral care market. According to HDCF Securities, ayurvedic or herbal-based products now constitute about 20% of the total oral care market, as compared to zero even 10 years ago! And even though established players like Unilever’s Indian subsidiary Hindustan-Unilever (HUL) and the Indian subsidiary of Colgate-Palmolive have adapted to changing tastes, local brands like Patanjali and Dabur still sell four out of five herbal and Ayurvedic products in the oral care market. And although Colgate is still a market leader in the oral care market by many miles, its market share has dropped to 53% from 57.4% in 2015, due to the popularity of local ayurvedic brands.
Hence with these developments changing the way which FMCG companies can succeed in the world’s biggest market, on-the-ground experience is key to leveraging on these new opportunities.
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