Posted on : 2023-03-23 23:49:02
Article : Good evening, Friday Management TASK 234-How global Brands respond to Local competitors when domain brands enter the top 10 of those markets within five years of launching.
Big global brands in the $1.2 trillion CPG industry are facing a competitive wake-up call in some unlikely places like China, Indonesia, India, and Brazil. Executives of well-established companies in this space know that the alarm bell has been ringing for some time as they lose ground to smaller, more local brands -but responding effectively has proven difficult.
Emerging markets have been strongholds for big consumer-packaged-goods (CPG) brands like Colgate, Avon, Axe, and Olay, which are backed by large, incumbent companies. In China, Indonesia, and India, this market has been growing at about 9% per year over the past 10 years; Brazil has seen about 3% annual growth. But big “power brands” have been losing market share to smaller rivals. In China and Indonesia, their negative trajectory is getting worse. These markets, in addition to double digital CPG growth, have bourgeoning middle classes, fragmented mass media, and often have complex “last mile” delivery of products due to complex infrastructure. Plus, many aspiring consumers in these markets are often buying a brand for the first time hence in these markets, small brands have power.
Sometime ago Brands like Vini deodorant in India or Chando facial care in China have entered the top 10 of those markets within five years of launching. Large consumer brands needed to better understand what’s behind this growth to more effectively compete. Small consumer brands are better built to create hyper-targeted products and distribute them locally. Global supply chains, built to make and move large volumes of more broadly attractive products and are inflexible by comparison. Small companies are gaining real-time, direct insight into niche consumer groups. They quickly use this unfiltered information to develop and refine hyper-relevant products unlike big R&D processes built to assess mass need. And smaller companies are using social media and consumer engagement on the ground to great effect. They don’t need the “stamp of quality” that comes with the backing of a long-established global company; consumers themselves are building brand trust in real time with their reviews, creating a new competitive arena in which, smaller offerings can flourish through word of mouth. To compete in this new environment, big brands need to become more pliable, and develop an ability to build more personal and trusting relationships with smaller groups of consumers. They need to be like “living businesses” intelligent enterprises that use data to deeply understand, anticipate, and adapt to smaller segments of consumer needs and to evolve when consumer needs evolve.
Although large incumbents owe their scale to big brands, to win in the future they will need to build hybrid portfolios that include small, focused, local brands alongside their big global brands. Importantly, while these brands might remain smaller than their bigger siblings. Current trends suggest that they will ultimately contribute significantly to a company’s overall growth.
To prove the point there are greater number of product/brand examples and in our solution part of this TASK we would discuss on an Indonesian cosmetics brand WARDHA to understand its market penetration strategy being a small domain brand. Post your comments and classic brand cases that you might have come across. Our Management Solution will be posted on our Good Morning Management Solution for TASK 234 on Monday 27th March 2023.
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