Trends Changing the Face of FMCG in Asia

Published on 20 Aug, 2019

The FMCG sector is growing, especially in Asia. Various technological, demographic and economic changes in the region have given rise to certain trends. For multinationals looking to enter the Asian market, lured by its attractiveness, it is important to scrutinize the trends and accordingly plan out their business strategies.

Fast moving consumer goods (FMCG) is a dynamic sector, evolving constantly to meet changing consumer preferences.

In recent years, the Asian FMCG sector has recorded significant growth, gaining major share in the global FMCG market. The region has undergone economic, industrial and social changes that have transformed lifestyle and consumption patterns. Lured by its growth prospects, multinationals are looking to expand in this region.

Companies eyeing a share in the pie need to be watchful of trends shaping the sector currently and likely to affect its prospects:

  1. Emergence of e-commerce: The e-commerce wave is taking over Asia, amid increasing internet penetration and rise in usage of smartphones in the region. The phenomenon, well- established in the Western world, is now expanding roots here. Online sales of FMCG grew approximately 20% globally in 2018, with the major contribution coming from the Chinese Mainland that recorded almost 32% increase in online FMCG sales. Numbers from other countries are also promising. Over 19% of all FMCG sales in South Korea are now online, while in Taiwan and Japan, online FMCG sales have increased to about 8% each of total sales.

    Change in consumer preference for online shopping is an important factor impacting the FMCG sector.

  2. Affinity to premium goods: Amid increasing urbanization, higher GDP growth and changing lifestyle, popularity of premium goods has increased in Asia. The trend, while more relevant for the fashion, automobile and travel industries, has not spared the FMCG sector. Certain products, for instance, command prices up to 20% higher than the average price in that category. Demand for premium FMCG is growing by 20–22%. This is particularly noticeable in China, where premium and luxury purchases even in smaller cities and rural areas are rising.

  3. Veganism: The new buzzword and a lifestyle choice across the globe, veganism has broadened in scope beyond food to include ingredients used in manufacturing. This is a major factor influencing the behavior of consumers. The shift in inclination is increasingly becoming widespread in Asia.

    Startups such as Impossible Foods and Beyond Meat launched products in Hong Kong, Singapore and at other places in South East Asia with some success. With veganism gaining traction, vegetarian and vegan product launches (in various sectors, including FMCG) increased over 100% in Asia between 2012 and 2016.

    In China, the government has recommended that consumers cut meat consumption by 50%. It is believed that this will lead to over 17% growth in vegan markets in the five years to 2020.

  4. Demographics: Most Asian countries are struggling with the issue of a growing post-retirement population. Asia’s elderly population is estimated to reach 900 million by 2050. In the next few decades, the continent will be home to the oldest population in the world. According to data provided by World Bank, almost 27% of Japan’s population is above the age of 60. It is 12% for Thailand and 11% for China. In South Korea, the elderly account for more than 14% of the total population.

    Shifting demographics would imply change in demand scenario and growing requirement for certain products. It is, therefore, an important factor to consider while devising a strategy to enter these markets.

  5. Local brands: Local brands in Asian countries are fairly strong with a loyal customer base. Brands in India, Indonesia and China have mastered effective targeting, flexible distribution, and social media marketing to engage and attract consumers. Home-grown brands understand the local consumer, are efficient and cost low. They have developed effective relationships with retail partners (a must for FMCG businesses). A good example of this is Patanjali. Founded by a yoga guru, the brand has built its identity as a series of products that only use natural ingredients. This has struck a chord with Indian consumers, given that ayurvedic products are intrinsic to the heritage of India, catapulting the brand to become the fastest growing FMCG company in the country—its revenue grew by 20 times over 2012–17.

The trends mentioned above continue to transform FMCG markets. Brands are vying with each other to offer customized products, technology-driven benefits and make a strong impact through focused marketing based on consumer insights. Multinationals hoping to gain market share need to take a holistic approach inclusive of trends affecting various aspects of business. Asian markets are fiercely competitive and, to gain advantage, companies must do a deep-dive research on all aspects.