Challenges for the FMCG marketer in the Asia Pacific

There is an ancient African adage "Smooth seas do not make skilful sailors." And nowhere is this truer than the FMCG category. From the late nineties where life was relatively easy focusing on benefits and branding, the last decade has been testing the mettle of FMCG marketers.

To know more about the kind of choppy waters that the FMCG marketer faces today, read on …

1.Increased consolidation of trade

In many key APAC markets like India, Malaysia and Thailand, trade is fast consolidating into “modern trade formats” from mom-and-pop stores. The rule of three has already happened in the retail trade in some other markets like Australia and Philippines.

This consolidation translates into increased trade and channel power to control / dictate brand shares while also resulting in a continuous downward spiral on brand margins. Compound this with the fact that house brands sit alongside established brands with a much higher value proposition.

Implication of this increased trade power – The marketer is on a treadmill of (quantifiably) generating consumer pull through tangible brand differentiation.

2. Heightened competition

There is a proliferation of brands at four levels of competition – global, regional, local and retailer brands. The erstwhile Chairman of Unilever India has gone on record saying that there are more than 1000 documented brands of detergents in India! This increase in number of brands is happening for a number of reasons -

Many marketers use new brands as a strategic initiative to increase shelf space (and hence bargaining power with the retailer). Many local brands also quickly replicate new initiatives of global marketers to blunt any competitive edge.

Launching a new (follower) brand in any category is also relatively easy today as costs of entering any category go southwards. This is because suppliers, material and even formulations are becoming standardized and common.

3. Bewildered consumers

Not so long ago, consumers were excited by choice and saw the trip to the supermarket as entertainment. But as this choice explodes, trade consolidates and competition becomes shrill, consumers increasingly are bewildered and confused by the sheer claims and counter claims made by several brands (within a category).

Hence as human psychology would dictate, in an environment of confusion, consumer lapse back to their previous habit (read safe choice). Alternatively, they are becoming trained into a promotion seeking behaviour.

And to make matters worse, they do not find any perceivable differences within the various brands. This can be evidenced in recent global phenomenon - consumers down trade to value brands on essentials while they upgrade on non-essentials like holidays and luxury products. This behaviour is also expected to be on the rise as cost of living (basic foods, housing and education) goes up in various cities across the APAC. This would further propel consumers to cut back on non-essential FMCG categories.

4. Reducing impact of mass media

Mass media (like television and print) is more fragmented today. The costs of reaching the same consumer over mass media are also increasing. Combine this with the fact the number of media properties that aggregate consumers are also reducing (one big aggregator this year – The Beijing Olympics - needs to be evaluated for its consumer consolidation prowess).

Content is becoming screen-agnostic. The same content can now be viewed on your PC, mobile, retail screen, hand held PDA, Podcast (and in many instances) without the advertising. And this is not only for a narrow niche of “kids”. This phenomenon is increasingly becoming main-stream as technology becomes accessible for all.

From a consumer perspective, there is increasing rejection of intrusive advertising (refer - the dreaded TV remote). However, they now love participating in immersive, engaging and entertaining brand experiences. Most media (both conventional and new) today offer such opportunities to marketers (for example – branded content on television / retail merchandising / blue-casting / Text SMS promotions and many more). The time is ripe for a transition from intrusion to engagement.

5. Absence of major innovation

In this decade of ‘power brands’, we see very little innovation in the FMCG category (unlike for example – mobile phones, automotive etc.) Most innovations are minor in nature - focused on packaging, incremental formulation improvement and delivery mechanisms. The result – we have not seen any dramatic new news in this category for some time now.

This is an indication of a maturing category desiring consolidation. But this also implies that consumer attention and wallets are diverted to the more ‘sexier’ categories.

How does one bring back the spirit of true innovation and enhance the momentum / energy of the brand? How does one (again) reward risk taking in the category? How does one satisfy eternal consumer needs in dramatically new ways? Questions that keep many marketers awake in the middle of the night!

In summary

The FMCG marketing environment is fluid, dynamic and ever-changing today. It needs the marketer to be strategic and tactical, intuitive and analytical, experimentative and best practice, brand-led and sales-led, innovator and implementer – all rolled into one. Interested in sailing – anyone?