NAVIGATING

THE FUTURE
OF FMCG
IN ASIA

TREND 1 TREND 2 TREND 3

INFLUENCING ASIAS MOST ANTICIPATING THE MEETING CONSUMERS
VALUABLE SHOPPERS MEANS ECOMMERCE CHANGING EXPECTATIONS
INFLUENCING THEM REVOLUTION OF FMCG BRANDS
THROUGH A SMARTPHONE
 To navigate the future of
FMCG, start in Asia
In the FMCG category, to quote the science fiction writer William Gibson, the future has
arrived its just not very evenly distributed. The trends defining the future of FMCG are
concentrated in the same region that drives most of that categorys growth in the present.
That region is Asia.

Understanding the trends shaping Asian markets is essential for brands looking to grasp
future growth opportunities for FMCG globally. Asia represents a huge current opportunity
due to its large, diverse consumer base and its steady increases in household spending.
However, it also represents a real-time preview of the FMCG trends that will shape all
markets over the next few years. The landscape that marketers must navigate to tap into
Asias growth opportunities today, is very similar to the landscapes they must navigate to
find growth in other markets tomorrow.

That landscape is shaped by three trends that are altering the relationship between
consumers and brands and the journey that shoppers take:

The role of smartphones in the lives of the most valuable shoppers

The transformation of retail driven by eCommerce

Consumers changing expectations of FMCG brands

In this paper, we will explore each of these trends in turn, interrogating their significance for
both FMCG manufacturers and retailers in Asia today.

01
TREND ONE
Influencing Asias most
valuable shoppers means
influencing them through
a smartphone

Mobile digital consumers, those who access the internet predominantly

through their smartphones, matter to FMCG brands in Asia for two very
important reasons. Firstly, they represent the majority of FMCG spending
and they have higher household spending power than those who are not
mobile consumers. Secondly, they offer the opportunity to develop
engagement models that can have a profound influence on their behaviour
as shoppers.

Evidence of superior spending power comes from across Asian markets. In

SE Asia, for example, urban households that use smartphones to access the
web represent 60% of all FMCG spending in the country. They also have a
household spending power 30% higher than non-smartphone users. The
importance of mobile digital consumers isnt limited to cities either. In rural
areas, the consumption power of smartphone users households is 39%
higher than that of non-smartphone users.

SE Asia Digital users contribute higher FMCG spending than

Offline users

48 41

SE Asia 130
59
Urban 52

Population split FMCG $ split Avg. Spend per HH

(Index Online-Offline)

60 52
SE Asia 139
Rarual
4O 48 DIGITAL HH
OFFLINE HH
Population split FMCG $ split Avg. Spend per HH
(Index Online-Offline)
Note: Digital households is defined as households with access to smartphone

Mapping the correlation of smartphones and FMCG spending power needs

to be done slightly differently in China, for the simple reason that
smartphone penetration in the country is more than half the population
and continues to climb fast. To analyse this market, we classified consumers
based on the time they spent online using their smartphones. We found
that higher FMCG spend correlates strongly with more intensive internet use.

02
 Heavy digital users contribute higher to FMCG spending than light digital users

80 77
CHINA 113
KEY+A CITIES
20 23

Population split FMCG $ split Avg. Spend per HH

(Index Online-Offline)

83 78
CHINA 120
OUTSIDE KEY+A HEAVY DIGITAL

17 22 LIGHT DIGITAL

Population split FMCG $ split Avg. Spend per HH

(Index Online-Offline)
Note: Heavy digital HHs consume internet for more than 1 hr per day and light digital HHs consume internet
for less than 15 mins in a day HH ~ 100% digital market like China between heavy and light digital HHs

Mobile digital consumers are the shoppers that FMCG
brands and retailers must influence and they are also
the consumers whom those brands have most
opportunity to influence. The ways that Asian shoppers
use their phones throughout their purchase journeys
create powerful new possibilities for shopper marketing:
through in-store research, through the influence of social
media on purchase decisions, and through the growing
role played by mobile apps.
Asian shoppers use of mobile at the point of sale is
unprecedented. This creates opportunities for influencing
shopper choices that do not exist on the same scale in
any other region. A Kantar Futures report of 2014 found
that 38% of Asian consumers regularly use their
smartphones to research purchases and pricing when
inside a store, bringing new levels of transparency to their
transactions. This presents obvious challenges to retailers
but also provides the opportunity to support and
smoothen the shopper journey. Smartphones are already
used to deliver geo-targeted price promotions. Chat bots
have the potential to deliver new kinds of in-store
customer experiences, removing sources of friction such
as a lack of information or a shortage of available sales
assistants.

03
 The rapid increase in smartphone penetration across the region is making research possible
during,as well as before shopping 61

53

44
38 40 42

28

GM AVG CHI IND INA THA JAP SKO

Source: Kantar Future: Changing Asia - The Asian Energies 2014

Asia has the largest number of mobile social media users
in the world with engagement levels far above those of
North America and Western Europe. According to
research, Asian shoppers are also significantly more likely
to turn to social media when making purchase decisions*.
Engagement on social platforms therefore represents an
increasingly important opportunity for brands to
influence the shopper journey.
*Kendall Goodrich and Marieke de Mooij in 2013
Instant messaging apps such as WeChat and QQ
represent one of the most important touchpoints through
which social platforms impact purchase behaviour,
especially given the constant use of these platforms
throughout the day. However FMCG brands will also need
to consider the role of eCommerce apps such as Taobao
and payment apps such as Alipay, looking beyond these
platforms active user numbers to identify their reach
amongst FMCG buyers in particular.

In top 4 tier APPs, most active 20:00-22:00 in general, especially for WeChat & QQ. For Taobao &
Alipay exposure, 10:00-11:00 & 12:00-13:00 in relative strength instead.
Time Slot During a Day
WeChat QQ Taobao Alipay QQ Browser (Total Femcare %)

100%

50%

25%

13%

6%

3%
00:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00
- - - - - - - - - - - - - - - - - - -
06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 24:00

Data Source: Kantar Worldpanel APPs usage 16P3 ~ 16P5

04
 Top 30 APPs (Total Buyers, Monthly Reach)
1-10 Apps
90%

53%
37%
24%
19% 17% 15% 14% 12% 11%

WeChat QQ Taobao Alipay QQ Baidu Aiqiyi Tencent Tencent UC

Browser News Browser

11-20 Apps
Weibo Meituan Youku Toutiao Kugou QQ Music Baidu Map VIP Meitu Didi

21-30 Apps
Quanmin
Amap King Meiyan Moji JD Dianping QQ Space Nuomi LeTV Tmall

Data Source: Kantar Worldpanel mobile medias profiler 2016 P7-P9

The smartphone provides FMCG brands with relevant opportunities to influence

the behaviour of Asias most valuable shoppers, at key touchpoints throughout the
purchase journey. Optimising their use of these opportunities will require marketers to
pay close attention to attribution. They must find a way to connect new types of digital
communication to sales, and avoid phantom metrics such as shares, likes or other
engagement metrics that do not correlate with shopper decisions and the bottom line.
This will require new KPIs for a new media landscape, and an ability to distinguish
between the touchpoints that simply deliver shopper attention, and those that influence
shopper behaviour. Automated targeting and programmatic buying will play a growing
role in leveraging these touchpoints effectively.
05
ASIA TREND TWO
Anticipating the eCommerce
revolution
Even in China, the worlds largest and fastest-growing eCommerce market,
online purchases still represent a relatively small proportion of total FMCG sales.
However, in both China and other Asian markets, the penetration of eCommerce
shows signs of reaching a critical tipping point.

From a global perspective, the Kantar Worldpanel eCommerce report predicts

that online FMCG sales will represent 9% of all FMCG sales by 2025, more than
double their share today. However, key indicators suggest that the impact of
eCommerce on FMCG sales in Asia could be more significant and could arrive
significantly faster. FMCG eCommerce in East Asia grew at 38% in 2016, more
than double the rate of eCommerce globally, and over 10 times the 3% growth
delivered by the East Asian FMCG category as a whole.

In East Asia E-commerce shippers control more than 50% of the FMCG market

Market Share-FMCG
Value(%) = Propensity(%) x Loyalty(%)

17 69 25
Korea 13 62 21
5
12 64 19
4

3 10
5 54
Taiwan 4 49 9
4
3 44 8 2016
3

2 2015
4 51 8
China 3 41 7 2014
2 35 6

Source: Kantar Worldpanel MAT Q2 2014, 2015, 2016

06
 Kantar Worldpanel explores the potential of
eCommerce growth by examining both
Propensity and Loyalty. Propensity refers to
the number of people who have bought
FMCG products online, and those peoples
value as FMCG shoppers. Loyalty shows what
proportion of their FMCG purchases these
eCommerce shoppers make online. The
difference between the two represents an
immediate growth opportunity for
eCommerce in FMCG if shoppers who have
bought online are persuaded to do so more
often.

Propensity data for China, Korea and Taiwan

shows how eCommerce has already captured
a broad base of FMCG shoppers. Close to
half of all shoppers in these markets have
bought from the category online and these
shoppers have higher than average FMCG
spend. This data suggests that eCommerces
relatively low share of total FMCG spending in
these markets so far (17% in Korea but only
5% in Taiwan and 6% in China) results from
fewer return shoppers. Those in Korea who
have bought online have only made one in
four FMCG purchases this way on average; in
Taiwan and China, this drops to 10% and 8%
of their FMCG purchases respectively. As
those new to buying online start to use
eCommerce more regularly, this share of
their spending could quickly increase.

The immediate growth potential for FMCG

eCommerce in all three of these markets is
therefore strong. Those who have bought
FMCG online have indicated a willingness and
ability to overcome the potential barriers to
buying this way. If eCommerce platforms and
FMCG brands can develop propositions and
incentives to increase online shopper
frequency and return rate, we are likely to see
rapid growth in onlines total share of FMCG
spending.

What impact is the growth of eCommerce in

these markets likely to have on the FMCG
retail landscape? To understand this, we need
to distinguish between two different types of
eCommerce growth. Our analysis shows the
54% of the growth in eCommerce is organic.
It results from transactions taking place that
could only have happened online because
niche products would not otherwise have
been available to shoppers. The other 46% of
eCommerce growth results from shoppers
making a conscious decision to buy
something online, rather than going to a
shop to do so. This is often because online
shopping is either more convenient or more
affordable.

07
 Digital Shoppers are deeply affecting the Retail Structure

Source of Growth Source of Shifting Interaction Index

Value
Total Value Hypermarkets 22% Hypermarkets 100 Shares
Growth 100%
Supermarkets 19% Supermarkets 70 Hyper 22%
Added to 15%
Korea Repertoire
GT GT Super 27%
9% 150
Retained Buyers 30% GT 6%
CVS 4% CVS 100
Shifting 54% Others Others
CVS 4%
46% 112
Others 41%

Value
Total Value Hypermarkets 36% Hypermarkets 124 Shares
Growth 100%
China Supermarkets 17% Supermarkets 61 Hyper 29%
Added to 9%
Repertoire GT GT Super 28%
8% 133
Retained Buyers 43% GT 6%
CVS 1% CVS -50
Shifting 48% Others Others
CVS 2%
40% 114
Others 35%

Source: Kantar Worldpanel MAT Q2 2015 vs 2016

Transactions do not shift online from other channels at an even rate and the impact on the existing retail
landscape varies from market to market. In both China and Korea, the biggest impact in terms of lost sales affects
supermarkets and hypermarkets, however smaller shops are also affected.

54%
Switching from
other channels
thanks to e-
commerces
Organic growth on competitiveness:
the back of new/ AFFORDABILITY &
niche brand CONVENIENCE
availability, new
shopping

46%
occasions,
etc.:
EXCLUSIVITY

+38%
AVE. GROWTH OF E-COMMERCE

The organic growth of eCommerce has a broad impact on the brand landscape that goes beyond how shoppers
choose to shop. A platform such as Alibaba, which connects buyers and sellers in new ways, is also a brand-
building opportunity. In lowering the cost of entry to the market, it produces a far more competitive FMCG
landscape filled with challenger brands that are built within the eCommerce environment.

As the logistics, customer service and mobile payment mechanisms of eCommerce platforms improve, they help
to overcome the constraints of poor infrastructure and limited product availability. As a result, they enable
economic growth in countries and regions where it was simply not possible before. In China, eCommerce in
general is playing a highly influential role in the move from manufacturing and investment-led growth to a
consumption-driven economy. This influence will only increase as online increases the FMCG brand choices
available to consumers.

To negotiate the transition to eCommerce in Asia, brands and retailers must act decisively, anticipate the different
reasons for shoppers buying online, and provide compelling eCommerce propositions that enable them to protect
and grow market share. They must be aware, not only of the impetus for shoppers buying familiar FMCG brands
online but also the impact of eCommerce platforms in lowering barriers to entry, and increasing competition in
the FMCG space.
08
 Making
shoppers
wellbeing
a priority

New communications platforms and the disruptive impact of

eCommerce are not the only forces defining the FMCG
category in Asia. Just as significant are the evolving attitudes

TREND THREE and expectations of shoppers towards the brands they buy.
Superior value is not always enough. Consumers are actively
seeking FMCG brands that align with their values and reflect
their deeper motivations and needs.

Meeting consumers Humanising brand experiences

changing The FMCG brands prospering in Asia tend to be those that

succeed in showing a human side and demonstrating an

expectations interest in consumers as individuals. As we identified in our 2015

Asia Brand Power study, which analysed the characteristics of

of FMCG brands successful local brands, this humanisation could take different
forms. It could come through building a brand around real-life
customer stories, for example, or through prioritising genuine
two-way interaction on social media and other channels. It can
also come through demonstrating a commitment to collective
responsibility to improving lives in the community and the
country as a whole. Our tracking shows that brands that
succeed in humanising their approach are significantly more
likely to enjoy steady growth.
09
 Personally consider to be a sign of success or accomplishment
Being physically fit and in good health Having a lot of money
82
72
67
58 61
55
52
48
42 43
35 34
24
18

GM AVG JPN SKO IND INA THA CHI

Source: Kantar Future: Changing Asia - The Asian Energies 2014

More and more, I find I am looking for ways to simplify my life

(Standarized)
2011 2012 2013
80 78
69 69 70 68 66
68 68 68
62 62 64 62 64 62
55

0 0 0 0
GM AVG JPN SKO IND INA THA CHI
Source: Kantar Future: Changing Asia - The Asian Energies 2014

Making shoppers wellbeing a priority

The Carbon Map identifies Asia as the region with the highest risk of people dying,
being injured or being made homeless due to climate change. As awareness of
the threats has grown, shoppers increasingly demand firm evidence of
sustainability from the brands that they buy. Research from Kantar Futures shows
that sustainability is a key consideration in purchase decisions for all Asian
markets.

Personally consider to be a sign of success or accomplishment

Purchased at least one product /service in the past 6 months from a company committed to making a positive
social/environmental impact
Willing to pay extra for products/services that come from companies committed to positive social/environmental impact

76 79
73 71
68
66 65
61 57
52 55
49 48 48

Making shoppers wellbeing a priority
Health is the new wealth in the eyes of many
Asian consumers and wellbeing is more likely
to be seen as a sign of status than being rich.
In a study by Kantar Futures, more Asians
identified being physically fit and in good
health as a sign of success than chose being
wealthy. A growing proportion are seeking
ways to achieve such wellbeing by simplifying
their lives and reducing stress and this
provides an opportunity for FMCG brands to
make a tangible contribution. After the
Indonesian cosmetics brand Wardah launched
a range of halal products, designed so that
women could use beauty products without
compromising their core beliefs, it saw its
market share grow from 20% in 2015 to 27% in
2016.
60 COUNTRY PHI VNM THA INA MYS SIN
AVG
Source: Kantar Future: Changing Asia - The Asian Energies 2014
The key to riding the FMCG wave is reading it
The three trends that we have identified in this paper do not enable marketers to
predict perfectly the future of the FMCG category, either in Asian markets or
elsewhere. Their precise impact will vary according to the different market
conditions that they encounter: the nature of established FMCG channels, the
brand landscape, the types of eCommerce platforms that emerge and the levels
of smartphone penetration, to name but some.
However, across Asia and in many markets beyond Asia, it is these three trends
that will drive the FMCG category forward. For marketers, the key to riding this
wave will be understanding the forces that drive it. Analysing how these trends
play out in each market will enable them to do so.

10
ABOUT US
For more information, please contact About Kantar Worldpanel

Marcy Kou
Kantar Worldpanel is the global expert in
CEO, Kantar Worldpanel, Asia
shoppers behaviour.
Marcy.Kou@KantarWorldpanel.com

Jason Yu Through continuous monitoring, advanced

Managing Director, analytics and tailored solutions, Kantar
Kantar Worldpanel China & Taiwan Worldpanel inspires successful decisions by
jason.yu@ctrchina.cn brand owners, retailers, market analysts and

Hernan Sanchez 60 years experience, a team of 3,500, and

Head of Expert Solutions, services covering 60 countries directly or through
Kantar Worldpanel Asia
partners, Kantar Worldpanel turns purchase
Hernan.Sanchez@kantarworldpanel.com
behaviour into competitive advantage in markets
as diverse as FMCG, impulse products, fashion,
baby, telecommunications and entertainment,
www.kantarworldpanel.com among many others.

tracking the purchase of more than 500,000

shoppers in key countries spanning three
continents. All of the data is correct as of June
2016 and annual increases are the 12 months
leading up to this date.

on a continuous basis. This means we can

understand online dynamics and its impacts

drive revenue by showcasing best-in-class

performance from a brand or retailer
perspective from around the world.
www.kantarworldpanel.com