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Are local brands giving MNCs a run for their money?

It seems the local brands are now giving MNCs a run for their money as the competitive landscape shifts and they become a force to be reckoned with.

While traditionally, multinational companies (MNCs) have dominated many markets in Southeast Asia a recent study by Nielsen states otherwise. According to the study this is  empowered by low running costs, well-established networks, an intimate understanding of local needs and tastes, and the ability to move swiftly.

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“The entry of multinational companies (MNCs) into new markets—while presenting advantages for local consumers who gain access to a greater range of products—can be a big challenge for local companies, which are suddenly faced with daunting foreign rivals that have an array of advantages,” Laura McCullough, managing director, client service leader of Nielsen’s growth and emerging markets said.

These advantages include vast financial resources, diverse talent pools, sophisticated technology infrastructures and well-established delivery and operating practice.

“However, in recent years many local companies have not only survived the competition from multinationals, but have outperformed,” she added. According to the Nielsen report, Go Global, the top four factors that have tipped the balance are as follows:

Value for money, national and pride and familiarity engender loyalty for local brands:

Consumer sentiment is a contributing factor to this rebalancing toward Asian players. The Nielsen Global Brand-Origin Survey, which examined whether consumers prefer goods produced by global/multinational brands (defined as those that operate in many markets) or by local players (those operating only in a single market—the respondent’s home country), found country of origin preferences differ by category, but consumer preference has started to favour regional and local brands over global brands.

Even in categories where global brands have historically dominated—such as shampoo,carbonated soft drinks, facial care, facial moisturiser and infant formula—local brands are growing more rapidly, echoed by positive consumer sentiment.

The key factors contributing to consumers’ choice of local versus global brands include valuefor money, a desire to support home-grown brands, and having had a positive experience

- Regional and local brands are growing faster than global players in both modern and traditional trade:

For local players their success has been a slow evolution as their knowledge of the modern trade environment grew particularly in areas such as category.

-Local companies understand nuances of local consumers:

Almost three in five consumers in Southeast Asia believe local brands are most attuned to their personal needs and tastes. Traditionally, local players ruled categories that resonated closely with local nuances such as food and beverages. These categories still drive the greatest growth for local companies today at 17% for beverages and 10% for food.

-Local and regional companies offer price spectrum to match consumer needs:

The emergence of a growing middle class has fanned aspirations for consumers to trade up and enjoy the perceived additional quality and functional benefits of more premium priced.

It used to be that global players’ portfolio had a stronger skew to premium lines and local players had a stronger presence in the value segment. That focus is changing with local and regional offering a more balanced portfolio of brands across all price tiers while global brands are shifting their focus to the higher margin premium end.

“Consumers have never before been as informed, empowered and ready to embrace brands that understand their lifestyle requirements and needs. Companies – be they global, regional or local must ensure their brands deliver on their value proposition and fulfil a critical role in lives of consumers if they are to win the battle of choices,” McCullough added.

(Photo courtesy: Shutterstock)

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