the digital imperative in seathink.storage.googleapis.com/docs/twg-apac-cpg-report.pdf ·...

The digital imperative in SEA

This is a summary deck - To download the full report click here.

September 2017

http://media-publications.bcg.com/BCG-Google-Digital-impact-in-FMCG-Sep2017.pdf

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Executive Summary

Digital penetration: Video, vernacular, and views 650M+ users will be online by 2020 | Time spent on Digital same as TV

Digital households: More valuableSpend 2X of non-digital HHs | Riding the natural wave

Digital influence: Large, brace for exponential growth$45B digitally influenced FMCG consumption by 2020 | 7X e-commerce

Winning strategy on digitalDigital playbook for FMCG organizations

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Digital penetration:An all-pervasive force

4

India’s Internet user base is expected to surpass the population of G7 countries.


Sources: TRAI, March 2017, BCG CCI Digital Influence Study, 2016

2016 2020

Population of G7 countries

Internet users in India

0

100

300

500

700 650+Million

650+Million

~390Million

~600–650 Million

55

Time spent on digital was the same as time spent on TV in 2016.


Time spent by urban internet users with digital access on various media channels (Hours/day) in 2016Source: BCG CCI Digital Influence Study, 2016

3.6 Hours

Digital: 1.5 Hrs

TV: 1.5 Hrs

Print: 0.6 Hrs

Vernacular

Video

Views

6

Digital video has grown significantly over the past two years.


Source: BARC Broadcast Survey of India 2016 (BARC Urban Universe 15+); BCG analysis

of TV reach

Digital video reach 2015

Digital video reach 2017

Urban TV reach 2017

in two years3x

60M 200M 275M

2/3

7

There’s been a significant boom in digital video since last year.


Given as a % of users trying the mentioned activity for the first timeSource: BCG TiE Billion Digital Volcano Study, 2017

0

10

20

30

40

50

Key activity being tried out for the first time on mobile by adopters on a new entrant’s network

11% 14%24% 28% 31%

42%

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Consumers are increasingly searching, viewing, and demanding content in their local language.


2X

5X

10X

Higher growth in Hindi content consumption on websites than English content

Growth in watch time forregional content on YouTube

Growth in “local language”searches over the past 18 months

88% of Indian-language internet users are more likely to respond to adigital advertisement in their local language than they are to one in English.

Sources: Google Internal Data, Indian Languages - Defining India’s Internet report 2017

99

Consumers turn to digital to look for views of advocates.


6X 5XCooking Beauty and

FashionWatch time YoY growth

Watch time YoY growth

On YouTube... ... and on search

0

20

40

60

80

100

100

80

40

5

Food & recipes Beauty & personal care

Baby care Home care

Sources: Google Internal Data, YouTube Watch Time growth in H1’17 vs H1’16, Monthly Searches Indexed to the largest category (Jul’16-Jun’17)

1010

Higher searches for “problem solutions” vs “products”

Sources: Google Internal Data Jan’17-Jun’17; Relative Search Volume for different spaces


Skin care

Oral care

Hair care

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Digital households: More valuable

12

Consumers with digital access spend 2X more on FMCG than offline consumers.


Relative spends on purchased product in Online Household to Offline Household; Online Household defined as a household with access to internet via Desktop, Laptop, Tablet or Smartphone Source: IMRB Kantar Worldpanel 2016

Home care

Food andbeverages

Personal care

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Consumers with digital access spend even more on natural brands.


Relative spends on purchased product in Online Household to Offline Household; Online Household defined as a household with access to internet via Desktop, Laptop, Tablet or SmartphoneSource: IMRB Kantar Worldpanel 2016

+25%+22% +64%

1.5

Average Naturalbrands



1.4

2.32.21.8

1.2

24

Skin creamShampoo Toothpaste

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Digital influence: Brace for exponential growth

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$45B digitally influenced FMCG consumption by 2020.


Digitallyinfluenced

spend

E-commerce

$6-7B $45B*

Digital influence is defined as the use of internet for conducting pre-purchase, purchase & post-purchase activitiesSources: BCG CCI Digital Influence Study – 2016; BCG – RAI report: “Digital in Retail”, Feb 2017; *Constant currency

*7X of e-commerce in 20202016 2020

40%

10-15%

$7-10B

$45B

1616

<25% 25%-50% >50%

Digital influence by category.Digital influence: Brace for exponential growth

Digital influence is defined as the use of internet for conducting pre-purchase, purchase & post-purchase activitiesSources: BCG CCI Digital Influence Study – 2016

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28M elite + affluent households (HHs) contribute 60% of digitally influenced consumption.


Sources: BCG CCI Digital Influence Study – 2016; BCG – RAI report: “Digital in Retail”, Feb 2017

Next billion + strugglers

Total 265M 287M

Aspirers

Affluent

Elite

Type of HH basis annual incomeNo. of HHs (million) 2015

No. of HHs (million) 2020

Consumptioncontribution 2020

Digitally influenced FMCG consumption 2020

20 (8%)

224 (84%)

11 (4%)

10 (4%)

31 (11%)

228 (80%)

13 (5%)

15 (5%)

22%

40%

39%

18-20%

18-20%

60-65%

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Higher digital influence was observed in relatively underpenetrated categories.


Source: BCG CCI Digital Influence Study – 2016

5x 5x 5x

2x 2x

1.2x1.5x 1.5x

1x 1x

3xUnderpenetrated categories

Penetrated categories

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Winning strategy on digital

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Digital spend doesn’t equal time spent by consumers on digital.


90%

2016Others Digital

10%

$ $ $$ $ $$ $ $

$ $ $$ $ $$ $ $

Share of advertising spend on different formats (%); Others includes Print, TV, Radio, Cinema and Outdoor.Sources: Pitch Madison Advertising Report – 2017; Google Internal YouTube Auction Data, 2017; BCG analysis

3X

While costs of online video advertising reduced by 66% in last two years

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Advertisers lag for multiple reasons.Winning strategy on digital

Source: BCG–Google CXO Survey, Aug-Sep 2017

63%

38%

13% 13%

Lack of clarity on what to do in digital/returns from digital

Limited capability in the organization for digital

Inertia of current way of working/ traditional media

Lack of awareness of importance of digital

What stops you from spending more on digital?

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Advertisers lag for multiple reasons.



Clear understanding of returns on digital spend with defined metrics

Metrics in place with limited linkage to business results

Limited understanding of returns from digital campaigns

75%25%0%

Which of the following best represents the current state of your digital impact measurement?

2323

Companies are aware of importance but leadership isn’t spending adequate time driving digital.



25% 75%

>10% of the management committee’s time

<10% of the management committee’s time

0%63% 37%

Is progress on digital strategy clearly monitored and discussed with the management committee?

Do you see using digital as one of the top priorities for your business?

Top 5 Top 10Top 3

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Magnitude and shape of digital influence varies significantly based on intent of consumption and category penetration.


Intent: Conventional usage Intent: Solutions space

Soap, home cleaner,edible oil, etc.


Hand wash, deodorant, conditioner, etc.

Underpenetrated categories

Weight loss, natural breakfast, hair style, etc.

Problem solutions space

Increasing order of digital influence

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Brands can follow a simple approach to understand how best to approach digital.


Intent: Conventional usage Intent: Solutions space

Remain relevant and capture attention. Use digital as one more medium to engage the customer.


Think digital first, invest in online for cat. creation. Think digital first to target the right customers and create/adapt content specially for digital.

Underpenetrated categories

Establish content destination backed by authority of trust. Drive association with trust, build familiarity, and use insights for innovation.

Problem solutions space

Increasing order of digital influence

2626

The share of digital in ad spend for FMCG can potentially grow to ~30% by 2020.


Share of advertising spend on different formats (%)

Others Digital

70%

25-30%

50-75%

2020

Can be significantly higher for select, premium spaces

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Key implications for FMCG companiesWinning strategy on digital

Digitally influenced spend in FMCG likely to rise to $45B by 2020

Significant growth of 3 Vs: Video, vernacular, and views

10% of households to account for 60% of digitally influenced FMCG consumption by 2020

Extent and nature of digital influence depends upon the intent of consumption and category penetration

Spend in digital is under-indexed. Organizations are unclear of how to leverage digital effectively.

The new reality

Leverage digital across touchpoints in consumer journey

Actively create and shape the digital strategy around the 3 Vs

Invest in data driven marketing to win with these HHs

Index the extent of digitally based relevant categories; differen-tiated approach for different spaces

Institute the right measures of performance for digital spends and build capability in the org.

Call for action

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Are we ready to make the shift?

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THANK YOU September 2017

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