US$213 billion prize: Brands compete for Asia's new markets

When the first KFC in Myanmar opened its doors in central Yangon in June, so many people tried to get in, security guards needed to hold them back. This enthusiasm for a fast-food chain is a symbol of Myanmar’s economic liberalisation since the election of a reformist government in 2010.

International companies are seeing opportunities in Asia’s new markets. Bangladesh, Cambodia, Laos, Myanmar and Sri Lanka are home to a combined 253 million people—a total consumer market of US$213 billion.

Bangladesh’s market is by far the largest of the five countries—bigger than the other four combined—with consumer expenditure of US$139 billion in 2014. Euromonitor says that the country’s biggest consumer-product categories, packaged food and apparel, achieved sales of US$9.8 billion and US$3.4 billion, respectively, in 2013. Laos is the fastest growing, with consumer spending expected to triple between 2015 and 2030.

Across the region, consumption is being driven by strong economic growth, urbanisation, poverty reduction and the development of modern retail destinations. Four of the five are urbanising faster than average for emerging and developing Asia.

A rising middle class has increasing ability to travel, driving familiarity with international brands. Populations are young; with the exception of  Sri Lanka, the age profile is much younger than the average across both emerging and developing Asia.

“To market effectively, companies have to know about the daily living circumstances and issues facing people in the market. That means they have to get their expensive shoes dirty doing some on-the-ground research, speaking to people and seeing how the retail sector works.” —Matthew Crabbe, Mintel

Spotting gaps in the market is key. Heineken recently launched in both Myanmar and Cambodia, citing demographic opportunities.

“Cambodia’s a very young market with over 40 per cent of the population under 25,” says Brenden Arnold, managing partner at Cream Communications Group. “Cambodia’s relatively low per capita [beer] consumption of only 13 litres, when coupled with the country’s age profile and booming middle class, offers large growth potential.”

But what has worked elsewhere in the world — or even elsewhere in Asia — is not guaranteed to work in the emerging economies.

“In comparison to Western countries, markets of the future still lack sophisticated media platforms on TV or the internet,” says Justinas Liuima, senior industry analyst at Euromonitor. “As an alternative, multinationals are marketing on billboards and in newspapers or using product promotions and charity events.”

Big brands are making very local plays. Grameen Uniqlo in Bangladesh began with door-to-door sales in farming villages – offering affordable, quality clothing to people below the poverty line. The company’s business plan was based on all functions taking place in Bangladesh: sourcing raw materials, production, logistics and sales.

Similarly, when Coca-Cola returned to Myanmar after a 60-year absence, it spent time conducting demos and explaining the best way to drink the beverage, adding instructions to labels.

“Consumers in emerging markets are keen to learn,” says Matthew Crabbe, research director, Asia-Pacific at Mintel. “But that does not mean naive: they are not stupid, but they need answers to practical questions. To market effectively, companies have to know about the daily living circumstances and issues facing people in the market. That means they have to get their expensive shoes dirty doing some on-the-ground research, speaking to people and seeing how the retail sector works.”

Big brands have to compete with more established local players. “Competition is particularly fierce in nonalcoholic-beverage and packaged-food markets, where domestic companies have the advantage with better knowledge and longer experience in the market,” says Liuima.

As the queues outside Myanmar’s first KFC show, for those who can correctly gauge their markets, the potential is huge. 

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CASE STUDY: Heineken raises the bar in Myanmar

Heineken quit Myanmar 20 years ago amid global sanctions. Now, the Dutch beer maker is back: it opened a US$60 million brewery near Yangon in July, with a glittering party in October followed by events in supermarkets and bars.

“We invest significantly in emerging and frontier markets like Myanmar, because we strongly believe that is where our future growth will come from,” says head of marketing Valentina De Luca. 

The country’s annual per capita beer consumption is currently just 3.5 litres—not even one eighth of the figure in Vietnam. Initially, Heineken will be distributed in Yangon and Mandalay only on draft, and on a wider scale through cans and bottles.

Alongside the launch of Heineken was the launch of a cheaper local beer called Regal Seven. De Luca says this is ‘tailored to local taste and needs’.

“We have big plans for Regal Seven to become the icon of the man of New Myanmar, and to allow him to move forward in his life and take part in the opening of the country,” she adds. “He is very much open to trying new things and stepping outside his comfort zone, but at the same time he doesn’t want to disrespect his traditions.”

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Our view: Brands need to offer suitable, not cheaper products to these consumers, while advertising needs to be more education focused.