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The rise of local giants continued through the year, signalling the growing clout of home-grown brands over multinational labels, writes Hemant Mehta
Do consumers choose brands basis the origins of their manufacturers; do they know the companies behind the brands they love and buy?” Empirical evidence seems to suggest that the answer to both questions is a resounding no.
Do consumers choose brands basis the origins of their manufacturers; do they know the companies behind the brands they love and buy?” Empirical evidence seems to suggest that the answer to both questions is a resounding no.
A brand is the function of product, proposition (value-add to the consumer), customer-connect and (relative) differentiation in the solution it offers to the consumers. If we look beyond these, the mega trend worldwide is the rise of local brands. The Kantar Worldpanel’s Brand Footprint study for the past few years has had local brands consistently outperforming global brands. The top 50 Indian brands (based on Consumer Reach Points) for 2015 had 35 local and only 15 multinational brands of which just three were in the top 10.
Be it China, Ireland, Vietnam or the UK, this is the story being played out. The study also revealed that local and regional FMCG brands accounted for 46% of total FMCG spend in 2015 and over half of FMCG market growth (58%) was driven by local brands. While the total value of FMCG grew by 4.7% in 2015, local players grew by 6.2%.
Brand choices were dominated by local players in terms of both the number of brands available as well as in the number of times they were chosen. In China, local brands comprise 75%of shopper decisions followed by Indonesia (61%) and India (57%). What drives a consumer to go local?
Local tastes, local fare
One big change is the waning allure of ‘phoren’. Consumers now believe that local brands can compete with global brands. Indian consumers have changed not only how they shop but also what they buy. They are more sophisticated and well informed and choices are defined not just by the name of the brand, but also on the proposition or benefit that the brand promises, the value it delivers and the efficacy of experience or outcome.
Most of today’s large local Indian brands started out by launching their products in a small town (eg Ghari in Kanpur). Local operations helped custom craft products/offers to suit the local tastes as well as, in some cases, the local environment (eg the hardness of water).
Culture and context
Local brands have a big advantage of deep understanding of the cultural context. Paper Boat is one example. It has not only catered to local tastes but has also tapped into the local cultural ethos. Through this, it has managed to be distinctive and extract a premium as against the global beverage giants. Several personal care categories have also successfully leveraged cultural knowledge; Chandrika, Vicco, Himani Navratna Hair Oil amongst others have built strong and successful brand franchises. Patanjali has cleverly combined three values which Indian consumers hold dear: the faith and belief in the power of Ayurveda, provenance and fair value.
Local brands have successfully leveraged the global trend in favour of herbal naturals. Categories as diverse as bathing soaps (turmeric and sandalwood in Santoor), shampoos (Forest Essentials), food and beverage (Patanjali Ghee, Tulsi Tea), skin care (Bon Organics, Osha) and apparel (indigreen, No nasties) are all riding the wave. Being strongly culturally aligned, local brands benefit from the migration (inter-state and international) of traditional consumers. Kantar IMRB’s TGI India data shows that 31% of Amrutanjan users outside of Tamil Nadu are Tamils. Similarly, over 40% of Ghari users outside UP are Hindi speaking consumers.
National pride, local choice
Nationalism and pride in being Indian are also tilting the scales in favour of local brands. It has also led to the growth of a category termed hyperlocals. Hyperlocal brands operate in a small, well-defined geography and are ruthlessly focused on growing their franchise within their defined sphere. Examples include Aachi, a spices brand from Tamil Nadu, Raja a brand of biscuits and cookies and Safed a detergent brand in West Bengal. Aachi sales volumes grew 39% in 2016 over 2013 while Raja and Safed grew 20 and 18% respectively. To tackle hyperlocals, corporates must have a different and even more micro level of brand planning. It could mean rejigging production, marketing and distribution systems.
Easy to find
Most local brands are entrepreneur-owned and agiler. Being focused on a tighter geography also helps local brands build their own unique distribution models — driving their brand rapidly to as many shop shelves as possible in a relatively short time. Another advantage is their ability to go deeper (eg rural markets), which is a challenge for national brands.
Price advantage
The Indian consumer continues to remain fiercely ‘value for money’ conscious, but she is increasingly trading up on the price pyramid. This is best characterised by the premiumization wave across FMCGs and several other categories. This, to a large part, negates the argument that local brands win big by going low on price. The truth is that they are better able to understand the value proposition.
The author is senior vice president, Kantar IMRB. This is the fourth of a series of articles on media, brands, advertising and marketing that looks back on 2016 to look forward to 2017
Next: Disruptions that drove action in 2016
