Hope and challenge in Asia’s emerging markets

While China and India remain Asia's key growth engines, new economies are also entering the spotlight: markets such as Pakistan, where the FMCG sector has more than doubled over the past three years, represent an enticing prospect for global brands. But although it is quite possible for McDonald's to become as well known in Lahore as in Los Angeles, the diversity of infrastructure, income, culture, language and maturity necessitates an entirely different approach to that taken in more familiar territories.

Raghavan Srinivasan, managing director for TNS in Indonesia, says Asia's emerging markets have little in common outside the fact they are growing fast. "There are vast differences across these markets and each of them is large enough to be treated as unique," Srinivasan says. "The one common factor in consumer behaviour is the fact that price and value for money are important."

Sarwar Khan, managing director for Maxus in Pakistan, confirms that pricing is a primary concern in that market. He adds that different demographics mean that messages crafted for Pakistan are delivered to a much younger audience than in many more developed markets.

"We have a young population; 43 per cent are younger than 15 and one third of people live below the poverty line, so it makes it very complicated to talk to them," he says. "For a long time, most marketeers, especially those from telcos, have been very functional in almost all of their communications, and have ignored emotive advertising. But lately the need to build a dialogue with the consumer and engage him in a meaningful discussion has taken the front seat."

With this realisation, Khan says that marketers are now trying to reach their audience in multiple ways. Consumer activation and even digital media are increasingly supporting the more traditional out-of-home and TV platforms.

Hasan Azim, managing director of Tmedia, a division of JWT in Pakistan, says that multinational brands have done well in Pakistan because customers appreciate the quality of goods and services they offer. Financial companies Citi, HSBC, Standard Chartered and Barclays all have a solid reputation in the market, as have Telenor, Etisalat and Mobilink in the telecommunication sector.

"New wholesale outlets like Macro, Hyperstar (Carrefour), and Metro have opened, which have given new meaning to consumers' demands," adds Azim. "High fuel prices and logistical problems have hindered traders, but this has not discouraged foreign investments."

Across Indochina, brands are also likely to be welcomed by a young, optimistic population, according to Ralf Matthaes, MD of TNS Global for Cambodia and Laos."They are much more impressionable, into technology and hence more eager to catch up and proudly wear their brands on their sleeves. In contrast, young people in developed countries tend to openly revile big brands and the World Trade Organisation (WTO) as evils of commercialism."

Despite an apparently enthusiastic population, Matthaes says because western-style consumerism has only existed in Cambodia and Laos for a decade, many people are vague as to what brands stand for and how they fit into their lives. However, he says the situation is gradually evolving.

"Indochina's youth are beginning to understand that brands go beyond a logo. Brands are moving more towards standing for efficacy, aspiration and differentiation."

Further afield, with a population of 230 million, Indonesia is also an enticing prospect for multinationals and firms like Kraft and P&G have been active in establishing themselves in the market. However, working against them are factors peculiar to Indonesia, such as the fact the country is made up of more than 1,000 islands and already has keen local brands targeted to the urban and rural markets. And one challenge facing all brands hoping to crack developing markets is the need to recruit and retain good staff.

"Indonesia has much local talent, but it's vital for agencies to have good systems to groom and bring out the very best in them," says Joseph Tan, Indonesia country adviser for Lowe Worldwide. "This regeneration needs to be accelerated to put Indonesia on par with its more advanced neighbours."
The difficulty in hiring local talent is a problem echoed by agencies in Pakistan and Bangladesh, with the result that new recruits often have to be trained on the job.

"The lack of professionally-trained personnel is a big issue here due to the lack of specialised education within the country," says Syed Gousul Alam Shaon, vice president and country head for the Grey group in Bangladesh.

Meanwhile, infrastructural challenges exist across the board. The obvious issues such as the quality of roads, railways and ports are joined by country-specific hurdles such as Bangladesh's national banking policy, which hampers financial transactions outside the country. In Cambodia, one of the main difficulties lies in finding qualified local advertising partners to operate with.

But despite the challenges, pundits agree the potential makes these markets worth investing in. According to Miles Young, Ogilvy's worldwide CEO, two factors are critical to success: patience and localisation. "People often want to move too quickly-they become greedy," he says, noting that Ogilvy is enjoying high growth in Pakistan three years after entering. "If you set out to be as local as you are international, on the whole you will do well."

Bates 141 is one of the most recent agencies to open for business in Bangladesh in an indpendent capacity. "In Bangladesh the advertising business is evolving rapidly," says Abeer Chakravarty, the agency's CEO for Bangladesh and Kolkata. "We have the infrastructure for traditional media, as well as activation and events." But he admits that specialisations like design, CRM and digital communications are as yet virtually non-existent. "While you can find talented filmmakers, choice is restricted to a few specialists and post-production, for instance, is done either in Bangkok or India."

Most major agencies are now represented in Bangladesh and Chakravarty says some are changing their status as their commitment to the country deepens.

"Initially, multinational agencies sought local affiliates, without expecting any financial returns, simply to ensure their global clients a presence. Investing in the local business with ownership is a fairly recent phenomenon," he explains.

In terms of clients, Chakravarty says the market potential-particularly in the telecom, social welfare, finance and FMCG sectors-draws big players to Bangladesh. Shaon agrees saying Unilever, British American Tobacco, Nestle, and GSK have all performed well there.

"Their success is attracting more global companies and a lot of them are in the process of entering the market. We hear this from global clients almost every day," Shaon says, "But local companies are starting to turn the tide and fight with a more strategic approach. Our experience says the future is bright for both."

Shaon says the market is booming across sectors and the maturity means that even products that were viewed in the past as commodities are now branded.

"Nearly everyone, starting from the service sector (banks and hospitals) to basic commodities (rice, water and wheat) to industrial products (steel and cement), has become active in communication," he says.

While newer channels are being explored, TV still dominates advertising in emerging markets, with varied penetration. In Bangladesh, the affluent watch mainly satellite TV, while others rely on BTV, the only terrestrial channel. In Indonesia, TV offers fewer than 10 channels, while Pakistanis have access to hundreds.

"Privately owned commercial media has been enabled by the Musharraf-era deregulation, and funded by the tremendous growth in revenue from advertising targeted at the burgeoning urban middle class consumers," Khan says. The country supports 150 advertising agencies and 74 production houses.

Digital remains a niche channel in all markets, but is likely to develop.

"I believe that digital will hold sway in the next five to 10 years," Srinivasan says, noting that Indonesia has the world's fourth largest population of Facebook users.

In line with many economies, Pakistan was hit by the global financial crisis of 2009. It is also battling political troubles, but Khan says that last year Unilever Pakistan delivered a 54 per cent profit increase on the back of a 23 per cent growth in sales.

Khan points to Surf Excel, Lifebouy and Lux as brands making particularly good headway in the market. Big opportunities also remain in telecoms and banking: less than 20 per cent of adults have access to formal banking, and high mobile penetration could open up a new world for mobile banking services.

For markets like Cambodia, it is too early for local brands to compete on the global stage, but in Indonesia and Pakistan, homegrown players are already extending their reach.
"Indomie is the world's largest manufacturer of instant noodles and it's marketed globally," says Tan "Watch this space-there will be more of its kind to come."

Unilever case study

Unilever advertised its Rinso clothes detergent worldwide with the message that 'Dirt is good'. The challenge was to adapt the message to Indonesian mothers, who research indicated thought that time their children spent playing was wasted.

Working with Lowe Worldwide, Unilever upgraded the Rinso brand with a new 'splat-pack' design and the original message supported by a 'Let's play' campaign that urged mothers to let their children play more freely.

The multi-stage initiative began by tackling prejudices held by mothers against playing. A 'Let's play'-themed TV programme launched a nationwide survey to determine how much Indonesian children played and suggest how they could benefit from more play time; it also featured psychologists in an informal environment who could explained the impportance of playing to a child's healthy development.

To add credibility, Rinso conducted a survey of Indonesian children that found them to have poor physical and play ability. Together with the TV programme, this generated additional publicity via newspaper and magazine articles that started to push the Rinso message that children should be given the freedom to play, while Rinso took care of the dirt. Play-related books on sport, science, art and nature were developed and the activities they contained were brought to life through in-store demonstrations. The books were free with a purchase of a 2kg pack of Rinso.

In the school holidays, Rinso ran a branded 'playland' in key cities for thousands of children and parents to come together and play. In addition, the 'Let's play' TV show ran once a week at peak children's viewing time.

The campaign helped raise Rinso's equity and the brand grew enough to become the market leader in terms of volume. From a branding perspective, it helped distinguish Rinso from competitors and move it from being just another detergent to one that had a positive, healthy message specifically for Indonesian mothers and their children.

This article was originally published in the 17 June 2010 issue of Media.