$4 trillion at stake for consumer packaged goods companies in emerging Asia

26 April 2018 Consultancy.asia

Described as an ‘opportunity of a lifetime’, the global strategy firm Accenture has in a new report highlighted the $4 trillion in new spending and 400 million first-time and upgrading consumers up for grabs for multinational consumer packaged goods operators in Asia. 

With growth in the global consumer goods sector stalling almost completely in recent years, from a rate of 10% in 2011 to under 1% just five years later, multinational industry players are, according to the strategy division of Accenture, desperate to tap into new and emerging markets – such as those of China, Indonesia, the Philippines, Vietnam and Thailand.

The strategy firm argues however that, while attractive, these markets are difficult to penetrate, with prevailing traditional trades, underdeveloped rural distribution networks, and a commonly out of reach target audience with respect to conventional advertising.

Yet, with an estimated 400 million new and upgrading consumers to be won over, representing spending in the range of some $4 trillion, the consumer-goods companies that can engage this elusive audience and adapt to the characteristics of the local landscapes will, says Accenture, be best placed to capture disproportionate growth. 

CGP Companies Still Spend 70%

The three major hurdles, and thus opportunities, for market capitalisation in emerging Asia cited by Accenture Strategy – which positions itself at the intersection of business and technology – could according to the firm be addressed through a greater digital approach, such as through modern marketing channels, supply-chain analytics, and elevated in-house operational support.

Firstly, in reference to the firm’s own research, Asian consumers predominantly lean toward digital channels in evaluating products before purchase, with up to 71% of Indonesians electing digital platforms as their main source of consumer information. This figure is backed by numerous other studies into purchasing patterns, such as a recent BCG report finding that ecommerce in China had risen beyond a 15% market share, along with double-digit growth rates in Thailand.

Despite this, the Accenture report notes that consumer packaged goods (CPG) companies still spend some 70% of their media budget in Asia on television advertising. Further striking, the firm’s research suggests that if companies were to increase their television spend ten-fold, most would only reach an additional 1 percent of additional potential consumers. Digital marketing strategies however, could reach and better engage with up to 70% of the untapped market.Route-to-market map for consumer goods companiesFurther, and although ecommerce continues to grow, the emerging markets of Asia are still commonly marked by their predominance of small trade enterprises – or mom-and-pop stores – which, in Indonesia for example, account for 84% of sales in the country. This poses a particular challenge for multinationals on numerous fronts, not in the least that many of the 25 million of these shops spread across Asia do not carry a determinable address.

And to capture the requisite scale for sustainable growth, Accenture projects that a between two-to-five times greater coverage in these small outlets would be needed (with the number currently standing at about 10% to 20%) – yet, as stated in the report, “Industry players lack the reach and relationships with locals to increase shelf space, and in turn, grow brand awareness and consumer purchasing. Locals are served through multi-tiered distribution networks of third parties. Their interest is selling any product fast, not your product first.”

Here, digital marketing and distribution tools could help companies to incentivise the small proprietors to favour their products over local brands, open better communications channels, and improve route optimisation, inventory visibility, in-field execution, trade spend performance and much more through sales force automation services – which, as the firm notes, can also help overcome the impossibility of having sufficient sales representatives to cover the more than 25 million scattered ma-and-pa retailers across emerging Asia.

OC&C survey of 15,000 consumers uncovers distinct Gen Z characteristic

30 January 2019 Consultancy.asia

An emerging borderless tribe; that’s how OC&C Strategy Consultants has characterised Generation Z following a comprehensive study of the globe’s youngest generation.

As the older members of Generation Z reach maturity, born from the mid-to-late-nineties and on, the international strategy and management firm OC&C Strategy Consultants has undertaken an in-depth study of the world’s generational habits and perspectives, describing those of Gen Z as belonging to an emerging borderless tribe – hungry for uniqueness but with the most globally consistent attitudes and behaviours.  

In an effort to gain a clearer understanding and insight for business and retailers into the youngest generation, OC&C altogether surveyed more than 15,000 respondents across four generations (Baby Boomers, Gen X, the Millennials and Gen Z) residing in nine countries, including 2,000 citizens in China, with Gen Z’s accounting for approximately one fifth of the Chinese population and 30 percent of world’s overall total.Chinese Gen Z ratio of household spend compared to globe

The findings of the survey demonstrate that while Gen Z is similar to its Millennial predecessor in certain respects, such as featuring experience-led and socially conscious consumers, the younger cohort has developed some distinct traits which set them apart – fittingly, one example being the desire as individuals to stand-apart. The other defined markers however may strike as an immediate contradiction; Gen Z is the most likely to be influenced by peers, and as a group is the most closely aligned in behavior and perspective at a global level.

The ready explanation to this apparent contradiction is of course social media. As stated by the report, whereas Generation X, the Millennials and Gen Z – the latter soon to account for one third of all consumers worldwide – may all shop online and are all influenced by social media, Gen Z’s list of influence extends further on digital media channels; “Brands’, friends’ and celebrities’ social media and blogs have bigger influences for Gen Z than for older generations.”

“China’s Generation Z are the first Chinese generation to be born in a fully digital age,” said Adam Xu, who was recently made Partner with OC&C. “They are an extremely tech-savvy crowd, willing to share their feelings and experiences in forms of online reviews, blog posts and other means of self-expression. Chinese Gen Z are more likely to make their social media public compared to their Western counterparts who prefer to limit their social media audience to people they know in real life. This suggests that information sharing extends even further beyond their immediate circles for Chinese Generation Z, a trend that presents immense marketing potential if leveraged appropriately.”

One area where this is apparent is in terms of brand discovery channels, with Gen Z’s citing a friend’s influence in 21 percent of recent occasions where they’d been introduced and subsequently purchased an item from a fresh brand, compared to 14 percent of Baby Boomers and Gen X’s and 17 percent of Millennials. The influence of social media and the internet can also be evidently credited for Gen Z’s sharing the greatest cross-border similarities in behaviours and attitudes compared to other generations.Social responsibility priorities for Gen Z As to those shared behaviours and opinions, Gen Z is distinctly socially-minded, or its members at least state a variety of social concerns as having a greater level of priority than their generational peers – building on the Millennial mind-set. Issues such as human rights, diversity, and building local communities all attract concern at far higher levels than the generational average, while for the Gen Z’s of China, environmental-friendly consumption features prominently – at 25 percent compared to the 13 percent global Gen Z average.

While those of Gen Z expect brands to adhere to high ethical standards, and are for example more willing to take extra steps to research a brand’s supply-chain and employment practices before making a purchase, the stated environmental concerns of the newest generation don’t necessarily translate however to broader purchasing activity, with its shoppers favouring passing trends and showing the lowest tendency to preference products that can be used repeatedly. This would suggest opportunities for brands which can meet both the Gen Z need for individual style while leading on social and ethical issues.

And for those same brands, retailers and manufacturer looking to the Gen Z market, it may be worth noting than the Chinese segment of young consumers – most still just teenagers or even younger – account for a massive 13 percent of direct or influenced total household spending in the country – 10 percent of that from their very own pockets – against comparative overall figures of just 3 percent in the US and UK. “These statistics are enough to urge brands to rethink their business strategy if they want to capitalise on China’s booming market,” concludes OC&C Strategy associate partner Veronica Wang.