Let’s look at Proctor & Gamble in a developed country
(say, North America) and in an emerging economy (say, India). The product
offerings in both are almost the same. Both countries have ”Pampers”,
“Gillette”, “Vicks”, “Tide” etc. But the way the products are marketed and sold
are very different. The main difference is in the size of the packaging. The
biggest driver for the size and price per unit is the per capita income in the
country. The per capita income in India is $1,491[1] while that in the US is
$42,693[2]. It is evident from this that
the Indian economy is far more price sensitive than the US economy. Hence, for
an FMCG company to sell large volumes, it is essential to keep per unit price
low in India. The strategy that is employed revolves around the company’s
marketing.
1.
Product:
Both markets have similar products (almost)
2.
Price:
Low per unit cost (India); Larger size units (USA)
3.
Promotion:
NFL (USA), Thank You Mom (worldwide)
4.
Place
(distribution channel): Big stores eg: Target, Giant Eagle (USA), Big stores to
small shops (India)
India is very price sensitive. One of P&G’s luxury
brands launched was “Camay” (luxury soap). There was some debate about
launching the premium brand at a low price. The brand manager decided to price
the product lower than Hindustan UniLever’s(HUL) Lux. The product was
successful. Other developing markets such as Brazil are not as price sensitive
and have different marketing strategies.
Brands such as P&G and UniLever have been in the
business long enough and have the money to make things work. How do their
Indian counterparts fair in comparison?
ITC Limited is one such Indian company that launched its
FMCG business in 2001(non-cigarette). ITC was in the tobacco business from
1910[3]. They had the advantage of a very strong distribution network at
launch. Every town and village in India has had small shops that sell tobacco.
ITC has utilized this network to sell everything from their snack packs to their
incense sticks. This was an advantage that the big players did not possess when
they entered the Indian market.
Another company, CavinKare launched shampoos in sachets and
small bars of soap in the south of India [4]. This proved to be a big hit
especially in the rural areas. P&G and HUL followed and have been
successful. CavinKare also came out with interesting ideas such as exchange
five empty sachets for a full sachet of shampoo. This helped build awareness
and also drove other brands out of small retail stores in rural India [4].
So can big companies ignore India?
A recent article from Business Courier talks about the
number of job cuts at P&G. The company has cut about 6,250 jobs this year.
Another article in the New York Times mentions how P&G’s latest financial
results disappointed Wall Street. With the developed markets growing at a very
low rate, P&G and other FMCG companies can only rely on developing markets.
Their penetration in China has been high. Their other option is to invest in
Africa. Brazil and Russia have some level of penetration, but India with a
population of 1.2 billion and a growing middle class, is an opportunity they should not ignore [5].
ITC has involved rural India through products such as
incense sticks (cottage industry) and e-choupal (an agri-solution for farmers).
This has ensured their penetration into rural India. Will ignoring such
initiatives by global companies such as P&G hurt them in a way that they
are driven of the market? Can MNCs in FMCG survive by making their products
“aspirational” or by just reducing price?
References:
Additional References:
Strategies that Fit Emerging Markets (Tarun Khanna, Krishna
G. Palepu, and Jayant Sinha)
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