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E-commerce delivers swift route to emerging markets for consumer goods giants

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Ninety five percent of all population growth from now through 2020 is set to come from the developing world, which will add 800 million people to its ranks in the coming years. Additionally, 1.4 billion of the households in these emerging markets will be earning middle-class incomes and therefore wield middle-class spending power. With this in mind it is not surprising that leading consumer packaged goods companies are turning their attention to the wider world as growth in their traditional markets slows. In parallel with this outward push, food and beverage, personal care and household products companies are also focusing on eCommerce and online channels to bolster business in both domestic and new markets.

Speaking at the Consumer Analyst Group of New York in February Kellogg CEO John Bryant was quoted as saying: “The emerging markets will be the defining event of our careers, our time in the food industry.” Bryant’s comments came hot on the heels of Unilever CEO Paul Polman’s assertion that he expects 75% of Unilever’s sales to come from emerging markets by the end of the decade. Polman was speaking at the announcement of the world’s second largest consumer goods manufacturer’s annual results in January.

Both Kellogg and Unilever are perfect examples of consumer packaged goods companies achieving success in these new marketplaces. Unilever already generates 57% of its revenue from emerging markets and is stepping up its investment, especially in Africa, India and Indonesia. Meanwhile Kellogg is adapting its products to local tastes; for example developing unique regional flavors for its Pringles’ brand. These moves were instrumental in growing its snack business, which had doubled in size in the Middle East and has pushed Kellogg into second place in the global snack market after PepsiCo.

Unilever, Kellogg and other CPG brands are still bullish despite a recent slowing in economic growth in less developed countries. According to a recent report from digital analyst firm eMarketer, weak infrastructure and political instability that has held back growth in parts of Asia, Africa and South America is actually providing “a catalyst for innovation and new consumer behaviors.” The growth in consumer goods consumption has, to a significant extent, been fueled by a parallel growth in internet usage, enabling suppliers and consumers alike to circumvent traditional channels and routes to market.

Online and mobile commerce is giving the emerging middle class in these areas a more efficient and streamlined way of accessing consumer products from around the globe. The rapid adoption of digital commerce comes as, according to eMarketer, “a young, mobile-connected middle class has emerged that is beginning to recognize and prefer name brands.”

Google estimates that between now and 2015 there will be 500 million new internet users in emerging markets. Largely driven by the rise of these newly digital savvy consumers and the push of international brands into new markets, eCommerce is expected to grow 20% globally this year. China leads the pack for growth followed closely behind by Indonesia, India, Argentina, Mexico and Brazil. Regionally, the top of the eCommerce heap is Asia-Pacific, expected to outspend the previous leader North America with an estimated spend of $525.2 billion.

It therefore makes sense that the digital channel will play a pivotal role as global CPGs move to consolidate new markets. Clavis has compiled an infographic showing additional evidence of the exponential growth CPG companies can expect from the developing world. Global consumer packaged goods companies who want to succeed in emerging markets will have to make digital channel capabilities a priority.

Simon Glass is a consumer goods expert who has been at the forefront of the industry for more than 20 years. He has worked with industry giants such as Kellogg, Procter & Gamble and Gillette in the U.S., Canada and the U.K.  At Clavis Insight he is focused on eCommerce and helping global CPG companies to maximize sales opportunities through their retail partners’ online stores.