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New consumer brands grab market share in China, South Korea: Bain & Co

Customers shop at a supermarket in Qingzhou city, east China’s Shandong province, Jan. 12, 2024.

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The rise of online shopping, social media and easier access to factories are driving the growth of new consumer brands in some parts of Asia, putting pressure on traditional industry giants.

In recent years, these new consumer brands have been gaining market share in China and South Korea, according to a Bain and Company report released Monday.

“The consumer products company of the future will need to constantly reinvent its brand portfolio,” said David Zehner, head of Bain’s consumer practice.

“If you are able to take advantage of the advantages created by your scale and your current position, and at the same time be agile and responsive to the consumer,” he said, “then there is a chance that you can win, even despite the difficult environment, because “There are many insurgents.”

Bain defines an insurgent brand as a company that generates more than $25 million in annual revenue, has grown more than 10 times the average growth rate for its category over the past five years, and is independent or has been purchased by a large company. in the last 2 years.

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The current ones are leaders in the sector and have a firm position in the market.

For example, sponge brand Scrub Daddy is an insurgent brand, while its competitor Scotch-Brite is an established brand.

The company studied 23 consumer goods categories in 11 Asia-Pacific markets between 2018 and 2022 to find out whether insurgent and established brands were thriving or struggling in the countries surveyed.

China and South Korea stood out as markets where insurgent brands were doing particularly well.

Traditional brands only gained market share in eight of 23 sectors in China: sports, bath and shower, skin care, confectionery, cookies, formula milk, dairy drinking products and juices, according to the Bain report.

In South Korea, traditional brands dominated only four sectors: fragrances, confectionery, diapers and bottled water, the report showed.

Promotion of electronic commerce

China and South Korea’s thriving e-commerce scene has made it easier for insurgents to penetrate these highly competitive sectors, Zehner noted.

Online shopping accounted for 34% of 2022 retail sales in South Korea and 27% of such sales in China, according to the report.

“We see a lot of brand launches in a market like China because it’s easy to reach consumers. It’s become quite difficult as an established brand in those categories because you constantly have all these new competitors,” Zehner told CNBC.

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The country’s “insurgent-friendly” market is also due to the rise of live streaming, he added, referring to a sales practice in which sellers show and talk about products on social media to attract customers.

High e-commerce penetration in Indonesia (26%) and Singapore (13%) also gave a boost to insurgent brands. Incumbents only increased their market share in seven and three sectors, respectively, out of 23 categories in each country, according to the Bain report.

In contrast, emerging brands remain popular in Malaysia, the Philippines and India due to the lower popularity of e-commerce and higher levels of traditional commerce.

All three developing countries recorded e-commerce sales penetration of less than 8% in 2022.

Rapidly changing consumer trends

New consumer preferences, often influenced by social media, are creating demand for brands that can adapt quickly.

In South Korea, Zehner noted that new brands were able to benefit from trends where “people change their entire wardrobe every season because what’s popular has changed so quickly.”

“That happens in clothing. The same thing also happens in other consumer goods,” he said.

Industrial structures are also fragmenting, allowing consumers and small business owners to communicate directly with factories.

“There’s also this ecosystem of third-party providers that allow a brand owner to very quickly outsource any part of their business if necessary,” Zehner said, noting that instead of having to invest a lot up front, startups can find partners to every step.

By product, Bain found that upstart hair and skin care companies were the most popular with consumers, but when it came to candy, they preferred established brands.

It is also unclear how long new brands will be able to survive in such a competitive environment.

“For any of those insurgents, you can become very popular very quickly because of your ability to reach consumers so easily, but then you become a victim of the next trend,” Zehner said.

Traditional brands are still in fashion

Bain’s findings revealed that despite the gains that insurgent brands have made in some markets, traditional brands have maintained or increased their market share in others.

According to the report, there was not a single sector where incumbents lost share across all Asia-Pacific markets, nor a single market where they lost share across all categories.

For example, in the color cosmetics category, established brands won in two markets, lost in seven, and were stable in Singapore and Vietnam.

“There are trends, there are patterns, but there are a lot of nuances and exceptions,” Zehner said.

“If you are an established (brand) and you miss a new consumer trend and someone else catches it and grows the brand very quickly, then you have a choice: you can try to defend your current position, you can try to innovate and find the next consumer trend. consumption or trying to acquire the brand that just grew,” Zehner said.

He added that during the pandemic, customers temporarily returned to brands they knew and trusted, and that had a more secure supply chain.



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