END OF EASY-MONEY ERA FOR MNC BRANDS
Rising stars such as Indonesia’s Luwak instant coffee and China’s Pechoin moisturisers spell trouble for global titans
NESTLE SA is losing buzz to an Indonesian coffee brand famous for brewing civet-cat feces and L’Oreal SA is losing face to a Chinese skincare brand favoured by President Xi Jinping’s wife.
Asia traditionally was considered easy money for Western multinational corporations (MNCs), with beverage makers, cigarette brands and fast-food giants capitalising on rising incomes and weak local competitors.
A survey by China Market Research Group in 2011 showed 85 per cent of Chinese consumers preferring foreign brands.
Those days are over. That preference dropped by half last year, and it goes beyond China — brands of Indian toothpaste, Vietnamese laundry detergent and Japanese flavoured water are picking up market share with lower prices and by catering to local tastes.
Rising stars such as Indonesia’s Luwak instant coffee and China’s Pechoin moisturisers spell trouble for global titans at a time when Asia Pacific’s economic growth is projected to outpace the world’s through 2019.
“Multinationals underestimated local competition,” said Shaun Rein, managing director for China Market Research Group.
“Local players have moved very fast on emerging trends that multinationals have missed, like healthy and e-commerce.”
As coffee becomes more popular in tea-loving Asia, capturing that demand is crucial.
Instant coffee by Indonesia’s PT Javaprima Abadi — better known for selling beans excreted by civet cats — more than doubled its market share across Asia Pacific between 2012 and last year while Nestle’s Nescafe stagnated, according to research firm Euromonitor.
Nestle shares fell last year for the first time since 2011.
In Indonesia’s US$1.3 billion (RM5.3 billion) instant-coffee market, the disparity is more pronounced.
During that period, Javaprima gained about 12 per centage points for a 33 per cent share, while Nestle lost 1.4 percentage points to 16 per cent.
Javaprima was capitalising on local trends, such as demand by women and new coffee drinkers for a smooth and creamy brew, said director Agus Susanto.
“I like the taste of Luwak better than Nescafe, which isn’t as flavourful,” said Dian Octora, a homemaker in Bandung, West Java. “Nescafe also makes my heart beat much faster.”
Then there’s the price. A 540g pack of Nescafe White Coffee sells for 65,000 rupiah (RM19.8) on Indonesia’s Tokopedia e-commerce site, while 450g of Luwak’s White Koffie are 23,000 rupiah.
“Local players have improved product quality and packaging, and have picked up on local digital tools a lot faster,” said Nielsen executive director Regan Leggett.
A Nielsen study said local brands in Asia and Latin America outsold global brands.
Nestle’s revenue from Asia, Oceania and Africa fell two per cent between 2014 and last year to 14.5 billion francs (RM60.9 billion) — a period that included a recall of Maggi instant noodles in India.
To capture more Asian consumers, the company introduced ready-to-drink cold coffees in the region, opened branded cafes at Chinese universities and formulated a Cafe Viet lineup.
“Coffee is getting more popular in Asia, and consumers are asking for more choice,” said Wan Ling Martello, who runs Nestle’s Asia, Oceania and Africa region. “That opens the door for more competition and we welcome that.”
Nestle’s not the only global brand that’s starting to smell the coffee.
In a China skincare market that’s set to grow 25 per cent to US$34 billion in sales by 2021, the up-and-comer is a domestic maker of creams and whiteners gifted by China’s first lady Peng Liyuan during a visit to Tanzania in 2013.
Pechoin, owned by closely held Shanghai Pehchaolin Daily Chemical Co, saw its market share jump fivefold between 2012 and last year, according to Euromonitor. The parent company had revenue of about US$1 billion last year.
The newfound popularity came partly at the expense of the L’Oreal Paris label, which lost more than a fifth of its market share in the same period.
Pechoin, founded in 1931, focuses on herbal products and claims to be one of China’s first cosmetics brands. It uses Asian pop singers Jay Chou and Karen Mok as brand ambassadors, and it sponsored the movie “Eternal Love” based on a popular Chinese television series.
On the WeChat messaging app, Pechoin ran a marketing campaign featuring a woman hiding a gun in her traditional qipao dress as she strolled through the Shanghai of the early 1900s, chronicling the city’s history.
That walk ends with her shooting a dark-clad figure surrounded by melting clocks because “my mission is to fight against time”. She then introduces Pechoin’s skincare products.
“Culture is the deep moat of the brand,” said Pechoin’s general manager Yaoyang Miao.
“We want to make products that focus on Chinese people.”
To be sure, Asia remains a significant growth area for Western brands.
The Nescafe Dolce Gusto’s portioned-coffee system was popular in Japan and South Korea, and it’s gaining a bigger following in Southeast Asia, said Martello.
L’Oreal remained the No. 1 beauty group in China and the nation’s increasing demand for luxury cosmetics boded well for its premium positioning, said the company.
Paris-based L’Oreal also has boosted efforts to tailor products for Asia. In 2014, it bought Magic, a Chinese brand known for skincare masks, a popular local beauty ritual.
The company also introduced a liquid foundation that uses a cushion applicator popularised in South Korea, and it’s competing with Amorepacific Corp for the Muslim cosmetics business in Southeast Asia.
Still, local is best to some. Qing Liu, a 47-year-old engineer in Zhengzhou, said she had been using Pechoin for more than a decade because she trusted the brand’s ingredients.
“Pechoin is cheaper and safer than other brands,” she said.
“I don’t know what kind of things have been added to the global brands’ products, so I’m not sure whether it’s good or safe for my skin.”
Local players have improved product quality and packaging, and have picked up on local digital tools a lot faster.
REGAN LEGGETT
Nielsen executive director