As local FMCG brands strengthen, foreign brands are challenged in SE Asia

19, Apr. 2021

A salesgirl promoting Vietnamese teas in a supermarket in Singapore in April 2021. Although local brands are selling better than foreign brands, her teas are flavored with fruits that are familiar with locals. A survey has found that local brands are driving the market for fast-moving consumer goods in Asia. (NNA)
A salesgirl promoting Vietnamese teas in a supermarket in Singapore in April 2021. Although local brands are selling better than foreign brands, her teas are flavored with fruits that are familiar with locals. A survey has found that local brands are driving the market for fast-moving consumer goods in Asia. (NNA)

By Celine Chen

SINGAPORE, NNA - Local brands of fast-moving consumer goods (FMCG) in Asia are winning as they keep chipping away at the position of formidable, global multinational companies (MNCs).

A NielsenIQ report issued this month said both local as well as innovative products are now driving sales for the industry.

Asians' preference for local products has continued to grow, taking up a majority market share from 60.1 percent in 2018 to 61.7 percent in 2020, according to the report. On the other hand, the market share of MNCs dropped from 25.2 percent in 2018 to 24.1 percent last year.

While FMCG sales took a big hit in Southeast Asia because of the pandemic, the 6.6 percent decline for local brands was less severe than the 6.9 percent for MNC products.

Nielsen also noted that more than two-thirds of sales of 52 winning brands in Asia actually came from local brands last year.

A consumer survey by the company also shows that nearly half of Asian consumers prefer buying local to support homegrown brands. They also felt that local products are better priced and fresher.

Expecting the Asian market to 'normalize' this year, Justin Sargent, president of retail intelligence of NielsenIQ Asia, said, “2020 was a challenging year with most Asian markets experiencing a decline or lower growth in FMCG. We believe the pace will pick up and normalize this year though as consumer and business confidence rebounds."

He said much growth potential can be found in the right stores, categories, segments, occasions and right price tiers.

"There is plenty of room for opportunity and growth. We have witnessed remarkable winning stories from some brands, who have paired innovative ideas with the right in-market activation," said Sargent.

“Dynamics are still uncertain but those who are more agile will be the big winners in 2021," he added.

However, Singapore bucked the trend of flat FMCG sales in Asia last year.

The city-state saw a record growth of 15.5 percent, with the sharpest spike at 50 percent when a stringent lockdown was imposed in April.

Many businesses were forced to digitalize, expand e-commerce and social media presence to engage consumers and pander to their needs. In other words, to be nimble in the face of an unprecedented crisis that contracted the Singapore economy by 5.8 percent.

Local health food brand Ocean Health, whose Omega-3 supplement has remained popular at pharmacies from 2013 to 2020, seized the opportunity to launch a new supplement for joint mobility in February this year. The launch came at a time when people were curbing their movements outside as they worked from home because of lockdown restrictions.

Expectedly, health, safety and hygiene are among the chief concerns of consumers during the COVID-19 pandemic which has killed 2.97 million people across the globe.

The Nielsen survey shows a growing concern for health and the environment at the same time with most Asian consumers saying they are willing to switch to an eco-friendly alternative with the same price and quality. They also value naturally produced products much more than three years ago.

Despite the proliferation of fresh juice shops and milk tea-cum-juice outlets in Singapore, Jeremy Tan and two partners took the brave step to set up a juice store at a hotel in Lavender Road, near the heart of the city, in December last year.

To stand out from the crowd, their Jus Juice It shop offers fiber-rich chunks of fresh fruit atop a squeezed juice rather than just the juice.

"In the past few months after opening, we have seen many regular customers. We believe consumers are even more conscious about their health and wellness than ever before and want to boost their immune system," Tan said.

To attract customers, another new local operator, Rrooll, which runs a cinnamon rolls kiosk at Jewel Changi Airport, came up with unique, savory and local flavors such as Japanese curry, garlic onion cheese and kaya cheese to complement its sweet range.

Sales exceeded its expectations with items selling out way before closing time in the first two weeks of its opening in late December last year. This shows consumers are always game to try new products that are made with decent ingredients and are affordably priced.

Rrooll also sells online, which is helpful, as there are food businesses that have been closed or struggling to survive as flight visitor numbers to the Changi Airport have nosedived since last year.

Based on consumer feedback in the survey, Nielsen has identified five key trends as growth drivers this year. They are convenience, services complementing homebound experience, alternative or eco-friendly products, natural products and new products from familiar brands.

Where uniform distribution may have succeeded in the past, global brands are now challenged to restrategize to ensure that products are available where and how shoppers want them.

Some MNCs are already aware that when they go global, they need to go local too in order to compete with local brands. Or have collaborations with them to include local touches.

Some recent Asian examples are Cadbury's durian flavored chocolate in Thailand, Horlicks beverage with local 'Teh Tarik' tea flavor and KitKat chocolate made with Japanese green tea powder.

In line with consumer aspirations, 10 leading FMCG companies in Malaysia set up an alliance earlier this month to not only boost the value chain but also significantly improve the collection and recycling of post-consumer packaging.

The group include MNC giants like Coca-Cola, Colgate-Palmolive, Dutch Lady Milk Industries, Fraser & Neave, Mondelez International, Nestlé and Unilever.

While Southeast Asia has seen a big boom in e-commerce with people snapping up FMCG products for daily needs because of the pandemic, offline businesses and malls are expected to focus more on activities and experiences to woo shoppers as they emerge from lockdowns.

At a Credit Suisse Asian Investment Conference held in March, industry watchers stressed the need for businesses to run an omni-channel operation to engage consumers by balancing online and offline sales.

Credit Suisse expects the 93 percent of users in Indonesia who began using digital services during lockdowns would continue doing so post-pandemic.

But costly logistics and consumer preference for human interaction and lifestyle events at shopping centers will mean that brick-and-mortar businesses are here to stay.

Likewise, people in the Philippines are still facing poor mobile connectivity and access to digital payments.

Vietnam is expected to see brick-and-mortar stores expand widely due to the lack of alternative retail channels.

Credit Suisse added: "E-commerce is still at a very early stage in Indonesia, the Philippines, Thailand and Vietnam, and remains an important reservoir of growth for the region."

Consultancy.asia platform, which works with consultancy firms, has noted a positive shift in Indonesia.

In a report this month, it said, "The fact is that market conditions have aligned perfectly to boost online procurement. Digital literacy is on the up in Indonesia and across the Asia Pacific, further turbocharged by the pandemic-induced shift to online consumption. In the backdrop, delivery and logistics infrastructure is significantly improving in Indonesia, driven by myriad new innovative startups."

It also praised the quality of B2B e-commerce marketplaces, which offer high visibility, price comparisons, stock availability, a wider selection of products and tools for optimized restocking. So, store owners no longer have to waste time visiting wholesalers in person.

"The upshot from all this is that B2B ecommerce is a highly enticing prospect for Indonesia’s multi-billion-dollar general FMCG trade segment – a glittering market opportunity for those interested," Consultancy.asia concluded.