Global brands must change their approach to localization in emerging Asia

The FINANCIAL — 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, according to the new Profit or lose executive summary launched today by Ernst & Young.

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.

The report 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.

“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,” said newly appointed Ernst & Young Global Consumer Products Emerging Markets Leader, Kristina Rogers.

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.

“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,” said Andrew Cosgrove, Ernst & Young Global Consumer Products Lead Analyst.

“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,” said Rogers.