navigating the future of fmcg in asiaresearch.vietnambusiness.tv/navigating_fmcg_future.pdf ·...

NAVIGATINGTHE FUTUREOF FMCGIN ASIA

TREND 1INFLUENCING ASIA’S MOSTVALUABLE SHOPPERS MEANSINFLUENCING THEMTHROUGH A SMARTPHONE

TREND 2ANTICIPATING THEECOMMERCEREVOLUTION

TREND 3MEETING CONSUMERS’CHANGING EXPECTATIONSOF FMCG BRANDS

WangJoa

Stamp

01

To navigate the future of FMCG, start in AsiaIn the FMCG category, to quote the science �ction writer William Gibson, “the future has arrived – it’s just not very evenly distributed.” The trends de�ning the future of FMCG are concentrated in the same region that drives most of that category’s growth in the present. That region is Asia.

Understanding the trends shaping Asian markets is essential for brands looking to grasp future growth opportunities for FMCG globally. Asia represents a huge current opportunity due to its large, diverse consumer base and its steady increases in household spending. However, it also represents a real-time preview of the FMCG trends that will shape all markets over the next few years. The landscape that marketers must navigate to tap into Asia’s growth opportunities today, is very similar to the landscapes they must navigate to �nd growth in other markets tomorrow.

That landscape is shaped by three trends that are altering the relationship between consumers and brands – and the journey that shoppers take:

• The role of smartphones in the lives of the most valuable shoppers

• The transformation of retail driven by eCommerce

• Consumers’ changing expectations of FMCG brands

In this paper, we will explore each of these trends in turn, interrogating their signi�cance for both FMCG manufacturers and retailers in Asia today.

0202

Mapping the correlation of smartphones and FMCG spending power needs to be done slightly di�erently in China, for the simple reason that smartphone penetration in the country is more than half the population and continues to climb fast. To analyse this market, we classi�ed consumers based on the time they spent online using their smartphones. We found that higher FMCG spend correlates strongly with more intensive internet use.

TREND ONE

In�uencing Asia’s most valuable shoppers means in�uencing them through a smartphone

Mobile digital consumers, those who access the internet predominantly through their smartphones, matter to FMCG brands in Asia for two very important reasons. Firstly, they represent the majority of FMCG spending – and they have higher household spending power than those who are not mobile consumers. Secondly, they o�er the opportunity to develop engagement models that can have a profound in�uence on their behaviour as shoppers.

Evidence of superior spending power comes from across Asian markets. In SE Asia, for example, urban households that use smartphones to access the web represent 60% of all FMCG spending in the country. They also have a household spending power 30% higher than non-smartphone users. The importance of mobile digital consumers isn’t limited to cities either. In rural areas, the consumption power of smartphone users’ households is 39% higher than that of non-smartphone users.

SE Asia Digital users contribute higher FMCG spending than Offline users

52

48

59

41

130

Population split

SE AsiaUrban

FMCG $ split Avg. Spend per HH(Index Online-O�ine)

48

52

4O

60 139

Population split

SE AsiaRarual


DIGITAL HH

OFFLINE HH

Note: Digital households is de�ned as households with access to smartphone

Mobile digital consumers are the shoppers that FMCG brands and retailers must in�uence – and they are also the consumers whom those brands have most opportunity to in�uence. The ways that Asian shoppers use their phones throughout their purchase journeys create powerful new possibilities for shopper marketing: through in-store research, through the in�uence of social media on purchase decisions, and through the growing role played by mobile apps.

Asian shoppers’ use of mobile at the point of sale is unprecedented. This creates opportunities for in�uencing shopper choices that do not exist on the same scale in

any other region. A Kantar Futures report of 2014 found that 38% of Asian consumers regularly use their smartphones to research purchases and pricing when inside a store, bringing new levels of transparency to their transactions. This presents obvious challenges to retailers – but also provides the opportunity to support and smoothen the shopper journey. Smartphones are already used to deliver geo-targeted price promotions. Chat bots have the potential to deliver new kinds of in-store customer experiences, removing sources of friction such as a lack of information – or a shortage of available sales assistants.

03

17

83

22

78 120

Population split

CHINAOUTSIDE KEY+A


Heavy digital users contribute higher to FMCG spending than light digital users

20

80

23

77 113

Population split

CHINAKEY+A CITIES


HEAVY DIGITAL

LIGHT DIGITAL

Note: Heavy digital HHs consume internet for more than 1 hr per day and light digital HHs consume internet for less than 15 mins in a day HH ~ 100% digital market like China between heavy and light digital HHs

Asia has the largest number of mobile social media users in the world with engagement levels far above those of North America and Western Europe. According to research, Asian shoppers are also signi�cantly more likely to turn to social media when making purchase decisions*.Engagement on social platforms therefore represents an increasingly important opportunity for brands to in�uence the shopper journey. *Kendall Goodrich and Marieke de Mooij in 2013

Instant messaging apps such as WeChat and QQ represent one of the most important touchpoints through which social platforms impact purchase behaviour, especially given the constant use of these platforms throughout the day. However FMCG brands will also need to consider the role of eCommerce apps such as Taobao and payment apps such as Alipay, looking beyond these platforms’ active user numbers to identify their reach amongst FMCG buyers in particular.

04

38

GM AVG SKOJAPTHAINAINDCHI

44

61

53

28

4240

The rapid increase in smartphone penetration across the region is making research possible during,as well as before shopping

Source: Kantar Future: Changing Asia - The Asian Energies 2014

100%WeChat

50%

25%

13%

6%

3%00:00

-06:00

10:00-

11:00

13:00-

14:00

19:00-

20:00

21:00-

22:00

20:00-

21:00

22:00-

23:00

23:00-

24:00

17:00-

18:00

16:00-

17:00

15:00-

16:00

14:00-

15:00

18:00-

19:00

12:00-

13:00

11:00-

12:00

09:00-

10:00

08:00-

09:00

07:00-

08:00

06:00-

07:00

QQ Taobao Alipay QQ BrowserTime Slot During a Day

(Total Femcare %)

In top 4 tier APPs, most active 20:00-22:00 in general, especially for WeChat & QQ. For Taobao &Alipay exposure, 10:00-11:00 & 12:00-13:00 in relative strength instead.

Data Source: Kantar Worldpanel APPs usage 16P3 ~ 16P5

The smartphone provides FMCG brands with relevant opportunities to in�uence the behaviour of Asia’s most valuable shoppers, at key touchpoints throughout the purchase journey. Optimising their use of these opportunities will require marketers to pay close attention to attribution. They must �nd a way to connect new types of digital communication to sales, and avoid phantom metrics such as shares, likes or other engagement metrics that do not correlate with shopper decisions and the bottom line. This will require new KPIs for a new media landscape, and an ability to distinguish between the touchpoints that simply deliver shopper attention, and those that in�uence shopper behaviour. Automated targeting and programmatic buying will play a growing role in leveraging these touchpoints e�ectively.

05

WeChat AiqiyiBaiduQQBrowser

UCBrowser

TencentNews

TencentTaobaoQQ Alipay

90%

53%37%

24% 19% 17% 15% 14% 12% 11%

11-20 Apps

1-10 Apps

Weibo YoukuMeituan Toutiao Kugou QQ Music Baidu Map MeituVIP Didi

21-30 AppsAmap Meiyan

Quanmin King Moji JD Dianping QQ Space LeTVNuomi Tmall

Top 30 APPs (Total Buyers, Monthly Reach)

Data Source: Kantar Worldpanel mobile medias pro�ler 2016 P7-P9

ASIA TREND TWO

Anticipating the eCommerce revolutionEven in China, the world’s largest and fastest-growing eCommerce market, online purchases still represent a relatively small proportion of total FMCG sales. However, in both China and other Asian markets, the penetration of eCommerce shows signs of reaching a critical tipping point.

From a global perspective, the Kantar Worldpanel eCommerce report predicts that online FMCG sales will represent 9% of all FMCG sales by 2025, more than double their share today. However, key indicators suggest that the impact of eCommerce on FMCG sales in Asia could be more signi�cant – and could arrive signi�cantly faster. FMCG eCommerce in East Asia grew at 38% in 2016, more than double the rate of eCommerce globally, and over 10 times the 3% growth delivered by the East Asian FMCG category as a whole.

06

In East Asia E-commerce shippers control more than 50% of the FMCG market

Market Share-FMCGValue(%) Propensity(%) Loyalty(%)= x

Korea

Taiwan

China

1713125

4

3

4

3

2

696264

544944

514135

543

432

252119

1098

876

2016

2015

2014

Source: Kantar Worldpanel MAT Q2 2014, 2015, 2016

Kantar Worldpanel explores the potential of eCommerce growth by examining both Propensity and Loyalty. Propensity refers tothe number of people who have bought FMCG products online, and those people’s value as FMCG shoppers. Loyalty shows what proportion of their FMCG purchases these eCommerce shoppers make online. The di�erence between the two represents an immediate growth opportunity for eCommerce in FMCG – if shoppers who have bought online are persuaded to do so more often.

Propensity data for China, Korea and Taiwan shows how eCommerce has already captured a broad base of FMCG shoppers. Close to half of all shoppers in these markets have bought from the category online and these shoppers have higher than average FMCG spend. This data suggests that eCommerce’s relatively low share of total FMCG spending in these markets so far (17% in Korea but only 5% in Taiwan and 6% in China) results from fewer return shoppers. Those in Korea who have bought online have only made one in four FMCG purchases this way on average; in Taiwan and China, this drops to 10% and 8% of their FMCG purchases respectively. As those new to buying online start to use eCommerce more regularly, this share of their spending could quickly increase.

The immediate growth potential for FMCG eCommerce in all three of these markets is therefore strong. Those who have bought FMCG online have indicated a willingness and ability to overcome the potential barriers to buying this way. If eCommerce platforms and FMCG brands can develop propositions and incentives to increase online shopper frequency and return rate, we are likely to see rapid growth in online’s total share of FMCG spending.

What impact is the growth of eCommerce in these markets likely to have on the FMCG retail landscape? To understand this, we need to distinguish between two di�erent types of eCommerce growth. Our analysis shows the 54% of the growth in eCommerce is organic. It results from transactions taking place that could only have happened online – because niche products would not otherwise have been available to shoppers. The other 46% of eCommerce growth results from shoppers making a conscious decision to buy something online, rather than going to a shop to do so. This is often because online shopping is either more convenient – or more a�ordable.

07

Transactions do not shift online from other channels at an even rate – and the impact on the existing retail landscape varies from market to market. In both China and Korea, the biggest impact in terms of lost sales a�ects supermarkets and hypermarkets, however smaller shops are also a�ected.

The organic growth of eCommerce has a broad impact on the brand landscape that goes beyond how shoppers choose to shop. A platform such as Alibaba, which connects buyers and sellers in new ways, is also a brand-building opportunity. In lowering the cost of entry to the market, it produces a far more competitive FMCG landscape �lled with challenger brands that are built within the eCommerce environment.

As the logistics, customer service and mobile payment mechanisms of eCommerce platforms improve, they help to overcome the constraints of poor infrastructure and limited product availability. As a result, they enable economic growth in countries and regions where it was simply not possible before. In China, eCommerce in general is playing a highly in�uential role in the move from manufacturing and investment-led growth to a consumption-driven economy. This in�uence will only increase as online increases the FMCG brand choices available to consumers.

To negotiate the transition to eCommerce in Asia, brands and retailers must act decisively, anticipate the di�erent reasons for shoppers buying online, and provide compelling eCommerce propositions that enable them to protect and grow market share. They must be aware, not only of the impetus for shoppers buying familiar FMCG brands online – but also the impact of eCommerce platforms in lowering barriers to entry, and increasing competition in the FMCG space.

54%

46%+38%

Organic growth on the back of new/ niche brand availability, newshopping occasions,etc.:EXCLUSIVITY

Switching fromother channels

thanks to e-commerce’s

competitiveness:AFFORDABILITY &

CONVENIENCE

AVE. GROWTH OF E-COMMERCE

08

Digital Shoppers are deeply a�ecting the Retail Structure

Source of Growth Source of Shifting Interaction Index

Korea

China100%

9%

43%

48%

100%

15%

30%

54%

Total Value Growth

Added toRepertoire

Retained Buyers

Shifting

22%

19%

9%

4%

46%

Hypermarkets

Supermarkets

GT

CVS

Others

36%

17%

8%

1%

40%

Hypermarkets

Supermarkets

GT

CVS

Others

100

70

150

100

112

Hypermarkets

Supermarkets

GT

CVS

Others

124

61

133

-50

114

Hypermarkets

Supermarkets

GT

CVS

Others

ValueShares

Hyper

Super

GT

CVS

Others

22%

27%

6%

4%

41%

ValueShares

Hyper

Super

GT

CVS

Others

29%

28%

6%

2%

35%

Total Value Growth

Added toRepertoire

Retained Buyers

Shifting

Source: Kantar Worldpanel MAT Q2 2015 vs 2016

New communications platforms and the disruptive impact of eCommerce are not the only forces de�ning the FMCG category in Asia. Just as signi�cant are the evolving attitudes and expectations of shoppers towards the brands they buy. Superior value is not always enough. Consumers are actively seeking FMCG brands that align with their values and re�ect their deeper motivations and needs.

Humanising brand experiencesThe FMCG brands prospering in Asia tend to be those that succeed in showing a human side – and demonstrating an interest in consumers as individuals. As we identi�ed in our 2015 Asia Brand Power study, which analysed the characteristics of successful local brands, this humanisation could take di�erent forms. It could come through building a brand around real-life customer stories, for example, or through prioritising genuine two-way interaction on social media and other channels. It can also come through demonstrating a commitment to collective responsibility – to improving lives in the community and the country as a whole. Our tracking shows that brands that succeed in humanising their approach are signi�cantly more likely to enjoy steady growth.

TREND THREE

Meeting consumers’ changing expectationsof FMCG brands

Making shoppers’ wellbeing a priority

09


Health is the new wealth in the eyes of many Asian consumers – and wellbeing is more likely to be seen as a sign of status than being rich. In a study by Kantar Futures, more Asians identi�ed being physically �t and in good health as a sign of success than chose being wealthy. A growing proportion are seeking ways to achieve such wellbeing by simplifying their lives and reducing stress – and this provides an opportunity for FMCG brands to make a tangible contribution. After the Indonesian cosmetics brand Wardah launched a range of halal products, designed so that women could use beauty products without compromising their core beliefs, it saw its market share grow from 20% in 2015 to 27% in 2016.


The Carbon Map identi�es Asia as the region with the highest risk of people dying, being injured or being made homeless due to climate change. As awareness of the threats has grown, shoppers increasingly demand �rm evidence of sustainability from the brands that they buy. Research from Kantar Futures shows that sustainability is a key consideration in purchase decisions for all Asian markets.

The key to riding the FMCG wave is reading it

The three trends that we have identi�ed in this paper do not enable marketers to predict perfectly the future of the FMCG category, either in Asian markets or elsewhere. Their precise impact will vary according to the di�erent market conditions that they encounter: the nature of established FMCG channels, the brand landscape, the types of eCommerce platforms that emerge and the levels of smartphone penetration, to name but some.

However, across Asia and in many markets beyond Asia, it is these three trends that will drive the FMCG category forward. For marketers, the key to riding this wave will be understanding the forces that drive it. Analysing how these trends play out in each market will enable them to do so.

10

58

35

GM AVG CHITHAINAINDSKOJPN

42

24

3443

55

18

82

6772

5261

48

Personally consider to be a sign of success or accomplishment Being physically �t and in good health Having a lot of money


6269 69

62

7880

00 0 0

5564 6262

68 6668 68 6468 70

More and more, I �nd I am looking for ways to simplify my life (Standarized)

2011 2012 2013

Source: Kantar Future: Changing Asia - The Asian Energies 2014GM AVG CHITHAINAINDSKOJPN

52 55

60 COUNTRY AVG

SINMYSINATHAVNMPHI

76 79

48 4849

57616566

716873

Personally consider to be a sign of success or accomplishment Purchased at least one product/service in the past 6 months from a company committed to making a positive social/environmental impactWilling to pay extra for products/services that come from companies committed to positive social/environmental impact


For more information, please contact

www.kantarworldpanel.com

tracking the purchase of more than 500,000 shoppers in key countries spanning three continents. All of the data is correct as of June 2016 and annual increases are the 12 months leading up to this date.

on a continuous basis. This means we can understand online dynamics and its impacts

drive revenue by showcasing best-in-class performance from a brand or retailer perspective from around the world.

About Kantar Worldpanel

Kantar Worldpanel is the global expert in shoppers’ behaviour.

Through continuous monitoring, advanced analytics and tailored solutions, Kantar Worldpanel inspires successful decisions by brand owners, retailers, market analysts and

60 years’ experience, a team of 3,500, and services covering 60 countries directly or through partners, Kantar Worldpanel turns purchase behaviour into competitive advantage in markets as diverse as FMCG, impulse products, fashion, baby, telecommunications and entertainment, among many others.

ABOUT USMarcy KouCEO, Kantar Worldpanel, [email protected]

Jason YuManaging Director, Kantar Worldpanel China & [email protected]

Hernan SanchezHead of Expert Solutions, Kantar Worldpanel [email protected]

www.kantarworldpanel.com

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