Shifting Asian consumer landscape offers new opportunities

Rising incomes and shifting consumption patterns are transforming Asia’s consumer packaged goods (CGP) market, presenting opportunities for companies that are agile and can offer a locally relevant presence, according to new research from McKinsey & Company.

“Shifts and diversification in Asia’s consumer landscape offer new opportunities for consumer packaged goods (CPG) players. Now is the time for these players to redraw Asia’s consumer growth map,” said Global Institute (MGI), the business and economics research arm of McKinsey.

The think tank has found several “angles of growth” that stand out and should be given more attention by CPG companies.

One of these is the shrinking size of Asia’s households, which is leading to the emergence of a robust “singles economy.”

MGI said about 30% of households in advanced Asian economies and more than 15% in China are already single-person ones. The growing number of individuals living alone has led to notable consumption changes, such as more purchases of prepackaged food as well as higher demand for pet food as pet ownership trends among singles. Smaller household size is also changing consumers’ preferred packaging options towards new, smaller formats. In Japan, for instance, the average net weight of several fast-moving consumer goods has decreased, including an 8% decline for butter and as much as a 25% decline for instant coffee, said the report.

Some categories, such as baby diapers, may also decline in some markets as fertility rates decrease and fewer children are in households.

Another angle of growth is the expanding senior population in the region, said MGI. Seniors’ consumption is expected to grow by around 40% over the next decade and expand 1.5 to two times faster than the consumption of the general population. This will prompt the growth of categories such as enriched foods and anti-wrinkle creams.

Moreover, the pandemic has helped to accelerate online consumption by seniors. Thus, CPG companies may need to reconsider the mix of their online and offline outreach channels, MGI said. In China, for example, senior influencers live-stream products and have followings topping millions.

Women’s economic empowerment is also creating new opportunities, with MGI research indicating it could add 30% to Asia’s consumption growth by 2030. “As women join the workforce, new needs may emerge, including new technology to facilitate working from home, professional apparel, new financial solutions to manage their income, and solutions that save time in household management,” McKinsey said.

It said services that save time, such as food and grocery delivery services, are growing in popularity among working women. In Japan, Oisix, which offers a meal kit for preparing dinner rapidly, has experienced robust year-on-year growth since 2018.

Personal care is another category that may gain from greater spending power of women, the research continued.

Working women are also expected to put a premium on convenience, boosting their use of online channels, after-hours convenience stores, and bulk buying, especially of nonperishable goods. McKinsey noted that Tmall in China, one of Alibaba’s e- commerce platforms, said that 80% of the top new brands that emerged in 2020 were focused on the needs of women.

Meanwhile, eco-responsibility is another area seen to drive new demand as more Asian consumers become increasingly eco-conscious. The institute found that 50% of surveyed consumers in Asia changed products or services they buy out of concern about climate change.

The paper advises companies to tap into this rising preference for more sustainable products. It noted that leading Vietnamese milk producer Vinamilk has been investing in an eco-friendly dairy farm, and its efforts in eco-responsibility have helped the company become one of the top fast-moving consumer goods brands in Asia.

McKinsey is also predicting that personalization will further develop and continue crossing physical and digital boundaries. It said surveys showed that Asian consumers appear more willing to share their data compared to their Western counterparts. For companies, this means that personalizing marketing communications and services is becoming an increasingly important competitive differentiator.

“As increasing volumes of consumer data are generated, CPG companies need to develop their digital and analytics skills in order to ensure they have access to the right data and then use the data to drive personalization of marketing, their products, and even product development,” the article said.

Finally, McKinsey said there are rising opportunities for Asian regional brands, which have traditionally struggled to cross borders, to gain a bigger share of the regional market.

While cross-border regional flows are strong in sectors such as automotive and electronics, the same has not been true for the CPG sector. However, between 2015 and 2019, regional players grew faster than the overall market in most categories over the past five years—and twice as fast in categories such as beauty and personal care.

MGI said some of these emerging regional players include beer companies such as ThaiBev of Thailand and San Miguel of the Philippines, which have crossed borders by exporting their products to Australia, China, and Indonesia, potentially suggesting a path ahead for other regional champions. Beauty players such as Kosé and Shiseido in Japan and Amorepacific in South Korea have done the same.

To compete successfully in the next decade of serving Asian consumers, MGI urges companies to rethink how demand for their products and services is likely to evolve, and to look carefully at which new growth angles are relevant to their businesses. Some CPG players may succeed by adjusting their product portfolio to cater to seniors or smaller households or by localizing brands to fit consumer tastes.

Companies are also advised to explore partnerships and ecosystems. “Companies need to decide whether to lead their own ecosystem or participate in an existing one, depending on which role they could fulfill most effectively,” MGI said.

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