Slowdown in the Fast Lane

By Alejandro Pinedo

As Interbrand looked ahead to what 2012 would bring for fast-developing markets, “slowdown” was the buzzword that seemed to best describe the economic situation. The economic growth of the BRIC countries has indeed slowed, and the reasons differ from country to country. Governments are taking assertive measures to stimulate economies, including interest rate reductions, tax incentives, and providing easier access to credit. While the economic expansion has decelerated, growth potential still exists and emerging markets continue to be an interesting arena for brand development. Competition in some of the larger developing countries is fierce.

FMCG giants battle for growth

Fast-moving consumer goods giants Unilever and Procter & Gamble (P&G) were featured in a recent article in The Economist. It showed how both companies are competing aggressively not only against each other, but also with local brands in countries like China, Brazil, India, Bangladesh, Pakistan, and Sri Lanka. Agile and effective innovation among local competitors has proven to be a critical factor that Unilever and P&G have had to face around the world.

Both companies depend on developing markets to achieve their long-term growth objectives. P&G expected to add 1 billion new customers by 2015, while Unilever wants to double its revenues by 2020, with 70% of sales generated in developing markets.

Large emerging markets are particularly challenging because they have consumers across the income spectrum, all with ample access to information via the internet. In order to grow in these markets, both Unilever and P&G invest a great deal of time deciphering consumer preferences to gain local relevance.

Successful multinationals realize that building the corporate brand is as important as building product brands in emerging markets.

Building consumer engagement

Sports events are one way in which brands have effectively established consumer connections and positioned themselves in large-population, fast-developing markets. Sports events such as the 2012 UEFA European Football Championship have provided golden opportunities to establish positive emotional connections with consumers.

P&G’s “Thank You Mom” campaign, which aired in emerging markets, demonstrates how brands can connect with global audiences. With high visibility and a strong emotional resonance, events enable brands to connect with fans in a new way. This becomes more valuable in high-population, developing countries where, due to low internet penetration and fewer communication channels, there are fewer opportunities to reach a large number of consumers in a non-intrusive way.

Respecting local preferences

Another interesting story is developing in India, involving Coca-Cola and the leading local cola brand, Thums Up, which enjoys more than 40% of the local market share. When the Indian government introduced rules limiting foreign ownership of local companies in 1977, Coca-Cola and Pepsi pulled out of the country. Thums Up was launched as an alternative to Coke and was an immediate hit.

Coca-Cola returned to India in 1993, bought Thums Up, and tried to use the local brand to compete against Pepsi. More recently, Coca- Cola tried to kill Thums Up, pushing itself as a replacement. Yet local consumers won’t give up the Thums Up brand.

International marketers must not underestimate the importance of consumer knowledge and preferences in fast-developing markets. Companies that ride roughshod over local preferences do so at their peril. Opportunities exist for those brands that can build meaningful, authentic connections with consumers.