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Bain: APAC CP Companies’ Quest for International Expansion

贝恩公司 · 公众号 · · 2024-09-06 14:58

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Asia-Pacific’s top fast moving consumer goods (FMCG) companies are expanding overseas, and their corresponding revenue contributions are rising faster than domestic earnings, according to a new report by Bain & Company.

For the top 50 Asia-Pacific FMCGs (based on revenue earned in CY2022), overseas revenue growth reached 11% per year over the last 10 years (FY2012/13 to FY2022/23), surpassing domestic revenue growth of 7% annually, driven primarily by the international success of Japanese companies.

Of the 16 Japanese companies that made the top 50 Asia-Pacific FMCG list, five or 31% earned over half their revenues from abroad, while the rest reported between 10% and 50% of revenues from overseas. Similarly, all South Korean FMCG companies in the study earned between 10% and 50% of revenues from international markets. In contrast, although China had the same number of FMCG companies making into the top 50 list as Japan, five or 31% are fully domestic while nine Chinese companies reported making up to 10% of their revenues from overseas.

“The differences in internationalization across markets in FMCG are due to several factors including domestic market maturity, cultural influence on the global stage, expansion timing, government support, and diplomatic relationships,” said David Zehner , head of Bain & Company’s Consumer Products practice for Asia-Pacific.

When it comes to venturing overseas, Bain & Company’s study noted that it is the consumer electronics and appliances sector that is making the biggest waves. All 45 top public Asia-Pacific-headquartered consumer electronics and appliances companies studied by Bain & Company have established international businesses, and 26 or 58% of them earn more than half of their revenues from foreign markets, compared to only seven companies or 14% of FMCGs. Both Japanese and Chinese companies are major contributors to this trend with 12 and 11 consumer electronics and appliances companies, respectively, making over 50% of their revenues from foreign markets.

“The Asia-Pacific-headquartered consumer electronics and appliances companies excel internationally for several reasons, including relatively similar consumer preferences across markets, supportive government policies, and less intense competition due to high manufacturing costs and barriers to entry. However, while their successes are impressive, they may not serve as the best examples for companies in other industries, such as FMCG,” explained Zehner .

Asia-Pacific’s FMCG companies typically follow three geographical expansion pathways - expansion into neighboring Asia-Pacific markets, entry into Europe and North America, and targeting future emerging markets in the Middle East, Latin America, and Africa.

Bain & Company’s study revealed that almost two-thirds of the top Asia-Pacific FMCG companies chose the Asia-Pacific region for their first foray overseas, while a quarter expanded first into Europe and North America. While sales from Asia-Pacific consistently accounted for more than 50% of these FMCG companies’ revenues over the past decade, it is the European and North American markets that have gained importance, with revenue contribution to the top Asia-Pacific FMCGs growing from 32% a decade ago to 40% now. Despite absolute revenue growth in future emerging markets, their relative revenue contribution has decreased, from 12% to 7%.

The report also highlighted three distinct strategies that led to successful overseas expansion, including ‘Build from Core’, ‘Build New Core’, ‘Born for International Markets’.

In ‘Build from Core’, companies leverage on their strong core offerings established in their home market to expand internationally. For example, CJ CheilJedang marketed its food products to the Asian population in the US when it first expanded overseas.

The ‘Build New Core’ strategy is popular among companies that find their core offerings less relevant or competitive in the target market. For example, Shiseido successfully established a new core in fragrance in France in the 1980s through several localization efforts, and acquired several European and American beauty brands post 2000. At the same time, it continued to drive penetration of core brands.

‘Born for International Markets’, the least mature strategy, is undertaken by young companies that have not yet established a strong core in their home markets. These companies create brands or products that address emerging unmet needs in target markets, leveraging manufacturing strengths and digital capabilities in their home countries.

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Bain: APAC CP Companies’ Quest for International Expansion

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