Vietnam seems to have a knack for resisting US invasions; 25 years
after pulling their troops out of Saigon, the Americans have returned to
the region armed with soap powder, toothpaste and marketing
Again, they have run into formidable resistance.
Last week, soap and personal-care giant Procter & Gamble revealed that
its venture to break into the Vietnam market had recorded losses of
dollars 28m (pounds 17.5m) over two years.
Analysts say that the travails of P&G are fairly typical of those facing
foreign investors in Vietnam, although the company acknowledges that it
had unrealistic expectations of the market.
P&G’s original feasibility study was, it appears, a little too
Not only did the company find itself marketing brands such as Camay,
Pantene Pro V and Head & Shoulders to an extremely poor country where
people generally don’t buy branded soaps, but Alan Hed, director of P&G
Vietnam, said it also discovered that many locals prefer to make their
own shampoo by boiling the native boket plant with lemon.
Unusually for P&G, it only discovered some of these facts about the
market once it was already in it.
Exploring new frontiers
The forces of multinational marketing, such as Coca-Cola, P&G and
Unilever, know they cannot afford to stay out of emerging international
To maintain the growth rates that senior management and shareholders
have come to expect in recent years, they are having to go in search of
the new consumers. They claim that the rewards for such enterprise will
This fever for expansion was underlined by P&G chairman and CEO John
Pepper at the company’s AGM in Cincinnati two weeks ago. Pepper said P&G
could only achieve its aim of doubling sales to dollars 70bn (pounds
44bn) by the middle of the next decade by driving growth in what he
calls ’top development markets’.
’Today, we sell dollars 60 (pounds 36) worth of P&G products for every
man, woman and child in the United States. But in top development
countries - China, Russia and Eastern Europe - we sell less than dollars
4 (pounds 2.40) per person.’
Last year, the company increased its business by 17% in these regions,
but Pepper stressed that there were far greater opportunities ahead.
Indeed, despite early miscalculation and misfortune in Vietnam, P&G
remains confident there is a large FMCG market to be tapped and has
increased its original dollars 14.3m (pounds 8.9m) investment to dollars
37m (pounds 23m). P&G is also seeking permission from the government to
spend a further dollars 60m (pounds 37.5m). The money will go toward
capital infrastructure, business operations and marketing.
P&G’s closest rival, Unilever, is in the same game. Both companies know
that in developed countries they are now battling it out for share of
market, with the margins shifting only slightly up or down. In virgin
territories, they are talking about massive growth potential.
The wealth of nations
In the same week as Pepper’s speech, Niall FitzGerald, chairman of
Unilever, spoke of countries where gross domestic product is increasing
two to three times faster than in the developed world. Alongside Vietnam
and other South-East Asian countries, he includes Poland, India, China,
Mexico, Argentina and Brazil.
’Europe is a mature market,’ said FitzGerald. ’Europe is an
over-regulated market. Europe is full of older people getting older;
grumpy, many of them, embittered in a way that is simply
incomprehensible to the average world citizen who has seen his standard
of living double in the past 15 years.’
The ’glittering prizes’ for Unilever, he stressed, lay well outside the
stagnant markets of North America and Western Europe.
Unilever is clearly putting its marketing money where its mouth is. Last
week, the company bought Brazil’s largest ice-cream manufacturer, Kibon,
from Philip Morris for pounds 573m, making it the market leader in South
Sales of ice-cream in Brazil average 1.2 litres per head each year.
Unilever expects to increase this to the levels seen in other South
American countries, such as Argentina (3.3 litres) or Chile (4.2
litres). As in those countries, it will introduce international
ice-cream brands to Brazil, such as Magnum, Vienetta and Solero.
But Unilever may find, as P&G did, that the road to the Shangri-La of
New-Consumer Land may not always be an easy one.
Unilever’s attempt to launch Impulse body spray in Indonesia several
years ago missed the mark due to the wrong pricing strategy. It has also
found that different washing routines may affect packaging or pricing
policies. For example, shampoo in Indonesia is still most commonly sold
The product development, production and marketing machine that can now
launch a product and have it rolled out across all established markets
within two years, has to have the brakes applied when it comes to the
Pam Robertson, director of strategy for Interbrand, argues that emerging
markets vary not only in habits but in aspirations. She gives the
example of the modest and understated nature of many Asian countries,
where companies who ’overclaim’ products’ attributes can meet with a
Other considerations include religious influences, which may affect
washing habits or attitudes.
Customs and expertise
’The benchmark of taste may also be different,’ says Linda Caller,
international planning director at Ogilvy & Mather. ’For example, if you
are introducing an English chocolate product into a new country, that
product may have a milk quantity which in the new market does not match
the benchmark taste.’
Caller says there can also be a huge initial surge of enthusiasm for a
brand just because it comes from the West. But that is quickly replaced
by a more candid assessment on what benefits the brands offer.
’After a while, people start applying more robust criteria to their
decision-making. This can lead to a false reading of the potential in
the market,’ says Caller.
’Moving into new markets is always a risk,’ says Hans Jorg Renk, deputy
spokesman for Nestle International, perhaps the most experienced FMCG
manufacturer at pushing into new markets. ’Our policy is always to try
to have majority ownership, or at least a 50:50 joint venture, and to
accept there are likely to be difficult periods.’
Nestle is present in around 80 countries. And the regions of Asia,
African and Oceania make up 21.9% of its worldwide sales.
Nestle currently rates China and South-East Asia among its biggest
growth markets, surpassed only by Central and Eastern Europe.
A big factor in this focus is political stability. Nestle pulled out of
Cuba when the political situation made its presence untenable.
For this reason, Western manufacturers tend to be more wary of Africa or
South America, despite the huge potential of these regions.
An unknown quantity
As well as politics, the potential of a new market may be threatened by
’Inflation, exchange rates and the distribution of wealth among the
population are all factors to be considered when assessing a
marketplace,’ says Interbrand’s Robertson.
’For example, while post-apartheid South Africa is an obvious target
market for some businesses, FMCG manufacturers may be put off by the
fact there is still only a small percentage of people who can afford to
buy their products.’
Often, the biggest hurdle to overcome in a new country is gaining access
to an efficient distribution chain; while local partners may reduce
profit levels, local knowledge and contacts can be invaluable.
’Distribution is particularly problematic in Eastern Europe due to the
level of bribery and corruption,’ says Robertson.
Despite all these obstacles, FMCG companies are more determined than
ever to exploit the steady increase in the popularity of Western brands
in emerging markets, as the products continue to be viewed as status
symbols, synonymous with success.
’Ultimately, there are enormous similarities between these markets,’
says David Baker, worldwide director at J Walter Thompson. ’The basic
human requirements are more similar than dissimilar.’
MAKING UP WITH CHINA
- The reunification of Hong Kong with China is expected to have a
positive impact on consumer growth on the mainland. Hong Kong’s
cosmetics and toiletries market is expected to grow by 24% by 2001 to
dollars 10bn (pounds 6.25bn).
- Cosmetics and toiletries sales in China are expected to reach a value
of dollars 8bn (pounds 5bn) by 2001 - up by 121% on this year.
- The closest rival to China’s growth in this market is Eastern Europe,
which grew by 104% between 1992 and 1996.
- The rural market is dominated by spending on basic products such as
toilet soaps, shampoo and toothpaste. Skin-care products are much lower
down the scale than in other Asian countries.
- Spending per head on all cosmetics and toiletries products increased
by 189% between 1992 and 1996, reaching a total of dollars 2.60 (pounds
1.60) in 1996, compared with around dollars 100 (pounds 63) in the
Based on Euromonitor’s report ’The Market for Cosmetics and Toiletries
in China and Hong Kong’.
LOST IN TRANSLATION
- In Taiwan, the translation of the Pepsi slogan ’Come alive with the
Pepsi Generation’ came as ’Pepsi will bring your ancestors back from the
- Ford had to rapidly rename the Pinto in Brazil when it found out the
name was Brazilian slang for ’tiny male genitals’. Nameplates were
subsequently prised off and substituted with Corcel, which means
- Parker Pen marketed a ball-point pen in Mexico with the strap ’It
won’t leak in your pocket and embarrass you’. However, it translated as
’It won’t leak in your pocket and make you pregnant’.
DRINKS IN THE MIDDLE EAST
- The soft drinks market in the Middle East has seen sales soar in
recent years. It was worth over dollars 5.3bn (pounds 3.3bn) in 1996 -
an increase of 56% since 1991, according to Euromonitor figures. Sales
of soft drinks have grown by 8% every year since 1991.
- Euromonitor forecasts that the soft drinks market in the Middle East
will grow by 85.1% between now and 2005 in volume sales.
- Turkey, Egypt and Saudi Arabia are now the largest markets for soft
drink consumption in the Middle East, making up the only markets where
sales exceed one billion litres. Turkey and Egypt have sales of two
- On the basis of drinks per head of the population, Oman, Kuwait,
United Arab Emirates, Saudi Arabia and Israel lead with soft drink
consumption of 70 litres per person. Tunisia, Jordan, Turkey and Egypt
follow with consumption per capita of between 29 and 50 litres.
- Local companies tend to act as licensees for the major international
companies, such as PepsiCo, Coca-Cola and Cadbury Schweppes.
Based on Euromonitor’s report ’Soft Drinks in the Middle East’.