March 23, 2015
$770 Billion Opportunity Awaits Consumer Packaged Goods Companies In ASEAN Region’s Burgeoning Consumer Market, Accenture Analysis Shows
Digital strategies critical to capturing the loyalty of 100 million new, wealthier customers
HONG KONG; Mar. 23, 2015 – Robust consumption fuelled by a rapidly growing consumer class, rising incomes and urbanization will generate $770 billion in new consumer spending in the ASEAN region over the next few years, according to a new report from Accenture. This is creating tremendous new business potential for consumer packaged goods (CPG) companies if they can tap into burgeoning consumer demand by applying digitally-driven strategies to reach the increasingly connected ASEAN consumers.
The ASEAN economy, one of the fastest growing in the world, is expected to reach $3 trillion by 2020, and Accenture Strategy forecasts that over the next five years, 60 million people will become part of the region’s consuming class, with the means to purchase goods beyond subsistence for the first time.
According to the report, “ASEAN’s Limited Time Offer: 100 Million New Consumers to Win and a $770 Billion Reason to Move Now,” rising disposable income will propel an additional 40 million people into higher income tiers by 2017, enabling them to trade up to premium products.
The report notes that the CPG industry’s growth in the region, forecast to increase by nine percent annually to $220 billion in 2017, will be enhanced by the formation of the ASEAN Economic Community (AEC), which is scheduled to take effect this year. One of the expected benefits of the AEC is to enhance the region’s appeal as one of the world’s most attractive consumer markets by making it easier for companies to do business across country borders within the region.
“The spectacular growth of the ASEAN economy represents one of the biggest opportunities on the planet for consumer goods companies today,” said Dwight Hutchins, a managing director, in Accenture Strategy, Asia Pacific. “All that growth, however, means that markets are changing very quickly while digital technologies lift expectations for more tailored and engaging consumer experiences. Companies that hope to compete for new consumers must be bold and move fast if they are to take advantage. The best advice for CPG companies entering or expanding in the region can be summed up in four words – be aggressive, move now.”
According to the report, while CPG companies have a singular opportunity to turn millions of ASEAN consumers into loyal customers over the next few years, these business face distinct challenges, from delivering products across a physically fragmented landscape, to winning the loyalty of rapidly changing consumers.
Delivering products across the physical diaspora
The region’s highly fragmented market – comprised of big cities with wealthier consumers, newly urbanizing areas, diverse cultures and multi-layered distribution networks with minimal reliable market data – makes it very challenging for CPG companies to reach consumers efficiently.
For example, while the region’s Tier One cities have networks of retail outlets knitted together by convenience stores, supermarkets and hypermarkets, five million “mom and pop” operators handle 75 percent of the region’s grocery sales. Additionally, a relatively poor transportation infrastructure outside of the region’s major cities often necessitates the use of several modes of transport to move goods, which creates additional business challenges and greater cost.
Reaching and winning the loyalty of rapidly changing consumers
The report reveals that the region’s highly connected consumers have a growing tendency to switch brands and products – as well as rely on digital technologies for all stages of the purchasing process. CPG companies need to go beyond traditional media channels to engage them and sustain their interest by providing a more personal customer experience. According to Accenture Strategy’s consumer survey findings, only 34 percent of ASEAN consumers are loyal to specific brands, an indicator that two-thirds of consumers are potentially up for grabs and vulnerable to switching to competitor products. Additionally, 70 percent of survey respondents said they expected more from companies, and 80 percent said they evaluated brands more closely than ever before.
Competition in the region is coming from all directions across product categories
In the food and beverage product categories, for example, local brands remain strong, usually ranking among the top five in the market by retail sales and have expanded aggressively beyond their traditional markets and country borders. At the same time, foreign multinationals are expanding their ASEAN footprints, total inbound investment for the CPG and retail industries has grown significantly in recent years, while mergers and acquisitions have intensified, particularly among Japanese multinationals that are targeting the region.
ASEAN’s Limited Time Offer: Strategies for Customer Success
“In order to overcome the hurdles to achieving success in maintaining and expanding customer loyalty in the ASEAN region, CPG companies must take the steps right now that will help them lock in consumer demand, ensure that their products are within easy reach of the markets they serve and build an operating model that balances regional efficiency with local agility and data-driven insight,” said Rajat Agarwal, managing director in Accenture’s Asia-Pacific Consumer Goods and Services practice. “By 2020, we expect that the ASEAN economy will be the sixth largest in the world at $3 trillion.”
Accenture’s report recommends three strategies to CPG companies seeking to cement customer loyalty in the region:
Lock in demand from new and more affluent consumers
- Move fast, spot trends and act on opportunities first
- Speak directly to consumers and their needs
- Engage consumers through digital channels
Ensure supply is only a fingertip away
- Invest in relationships with reliable retailers, distributors and wholesalers by creating a network to reach markets of every size
- Optimize in-store execution
- Use analytics to predict demand and plan supply
Build an effective operating model
- Adopt a regional model focused on capability and value
- Balance regional efficiency with demand for local agility and data-driven insight
“With so much at stake, leaders of consumer products companies must view the ASEAN market opportunity as a limited time offer and do all they can now to secure their standing in the region,” said Agarwal. “Both multinational corporations and local companies will need to continually invest in the right strategies and capabilities to expand their presence and increase consumer engagement. Winning consumer loyalty demands fast execution of a clear plan while having the flexibility to contend with the region’s enormous diversity, fragmented geography, and rapidly changing consumer behaviour.”
To gain insights into new opportunities for CPG companies and to better understand the changing market dynamics and preferences of consumers in the ASEAN region, Accenture conducted a survey of 1,800 consumers across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam as well as in-depth country research and analysis on market, regulatory, consumer and retails trends, based on data from sources including IHS Global Insights Inc. and Euromonitor International.
Accenture is a global management consulting, technology services and outsourcing company, with approximately 319,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US $30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com.
Accenture Strategy operates at the intersection of business and technology. We bring together our capabilities in business, technology, operations and function strategy to help our clients envision and execute industry-specific strategies that support enterprise wide transformation. Our focus on issues related to digital disruption, competitiveness, global operating models, talent and leadership help drive both efficiencies and growth. For more information, follow @AccentureStrat or visit www.accenture.com/strategy
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