Global brands must change their approach to localization, or risk unprofitable growth in emerging Asia
London, 12 June 2013
The role of emerging Asian markets has changed and these markets are now the engine of profitable growth for global consumer products (CP) companies and retailers. In order to capture this opportunity, companies must change the way they approach localization - through greater local autonomy, granularity, focus and agility to ensure the consumer at the center. This is according to the new Profit or lose executive summary launched today by EY.
- Asia now center of gravity of profitable growth for global consumer products and retail
- By 2016, emerging Asia will account for almost a quarter of global consumer products markets and 37% of total consumer products growth
- Only 20% of Asia-based senior executives, currently achieving both accretive margins and sustaining significantly high growth
- Companies must ruthlessly implement eight business imperatives for profitable growth
The report canvasses the opinion of 276 Asia-based senior executives of leading CP companies and retailers in eight markets. It identifies that 69% believe emerging markets will be the main driver of growth and profit over the next three years. However, while Asia provides opportunities for global companies enduring tough trading conditions in mature markets, only 20% of those polled currently report both accretive margins and sustained significant high growth.
Commenting on the report’s findings, newly appointed EY Global Consumer Products Emerging Markets Leader, Kristina Rogers says:
“The pace of change in Asia is dizzying. Consumerism has matured over a short span of years rather than the decades witnessed in developed markets. Global companies stalking growth in Asia are finding the well-established local and multinational players tough competition. Global companies need to be agile and light on their feet, by putting consumer value first and foremost, in order to win over the increasingly sophisticated and demanding Asian consumer.”
The key to long-term profit in emerging Asia is balance, and the report identifies eight business imperatives that CP companies and retailers must manage simultaneously in order to succeed.
Andrew Cosgrove, EY Global Consumer Products Lead Analyst adds:
“Profitable growth does not mean cutting costs. Global CP companies need to adopt a selectively localized portfolio approach across all the elements of the supply chain from conception to consumption. Whilst this approach incurs higher costs in terms of time and resources, versus a universal approach, it is a price that companies must be prepared to pay in order to capture profitable growth.”
When looking at the future for global CP companies within Asia, Rogers summarizes:
“Today’s high performers are adopting a ‘pay as you go’ approach, with profits reinvested locally to generate even more profit and sustainable growth. By 2016, emerging Asia will account for almost a quarter of global consumer products markets and 37% of total consumer products growth. Companies wanting to win in Asia must adopt a highly disruptive approach to managing their business through selective localization and above all, flawless execution.”
To download the Profit or lose executive summary and read more about the eight business imperatives for profitable growth, visit www.ey.com/GL/en/Industries/Consumer-Products/Profit-or-lose
The eight business imperatives that CP companies and retailers need to address are:
- Empower local leadership to be agile
- Disrupt traditional approaches for local relevance
- Be granular in understanding current and future profit pools
- Create scale by placing bets across price tiers and channels
- Balance efficiency with consumer immediacy
- Cluster for synergies based on common characteristics
- Flex the approach as the market develops
- Create a culture that mandates disciplined execution
Notes to editors
About the survey
EY commissioned the Economics Intelligence Unit (EIU) to survey 253 Asia-based senior executives from consumer products and retail companies between February and March 2013. The markets surveyed were China, India, Indonesia, Malaysia, Singapore, Taiwan, Thailand and Vietnam. An additional 23 in-depth interviews were also conducted by EY.
How EY's Global Consumer Products Center can help your business
Consumer products companies are operating in a brand new order, a challenging environment of spiraling complexity and unprecedented change. Demand is shifting to rapid-growth markets, costs are rising, consumer behavior and expectations are evolving, and stakeholders are becoming more demanding. To succeed, companies now need to be leaner and more agile, with a relentless focus on execution. Our Global Consumer Products Center enables our worldwide network of more than 18,000 sector-focused assurance, tax, transaction and advisory professionals to share powerful insights and deep sector knowledge with businesses like yours. This intelligence, combined with our technical experience, can assist you in making more informed strategic choices and help you execute better and faster. If you want to compete powerfully in your market, we’ll help you achieve your potential today and tomorrow.
EY is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
EY refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.