Exporters and suppliers should also tap “middleweight” cities and regions in the Association of Southeast Asian Nations (Asean) in addition to so-called mega-cities, Nielsen said in a new report.
In its “Rethinking Asean: Dispelling 8 Myths About Consumer Markets” report, Nielsen said that middleweight markets — regions with populations of between 500,000 and five million inhabitants – were exhibiting the fastest consumer demand growth in the Asean Economic Community.
“When most companies and investors think of Asean, they typically think of mega-cities such as Jakarta, Manila and Bangkok. While these mega-cities (which have a population of more than five million) are indeed important consumer markets, they do not dominate consumer demand,” the report said.
“In fact, for many product categories, middleweight regions [with a population between 500,000 and five million]are important markets for consumer demand,” it added.
While Bangkok and Singapore for instance are the two largest markets for facial moisturizers, “less well-known markets such as Nakhon Ratchasima, Chonburi and Rayong (all in Thailand) are also among the top 10 markets in Asean,” the report said.
Across seven of the product categories examined, the fastest growth is likely to happen in either small (500,000 to one million people) or large (one million to five million people) middleweight regions.
Using chocolates as an example, Nielsen said “large middleweight regions will experience the fastest growth rate to 2030.”
Large middleweight regions in Asean currently represent over 50 percent of the top 50 markets for carbonated soft drinks, cigarettes, detergent, diapers and noodles in 2016, it added.
Nielsen traced the fast rise of middleweight cities and regions to three major growth drivers, including cross-border trade and logistics, and the presence of economic clusters such as export processing zones, special economic zones, and business process outsourcing centers.
The third is a growing consumer base because of urbanization and the spillover from congested mega-cities to satellite regions like Bekasi and Tangerang in Indonesia and Cavite and Bulacan in the Philippines.
The report also predicts a vastly different Asean market landscape by 2030, by which time the middleweights are expected to feature prominently.
“Many middleweight regions will increase their ranking among Asean’s top markets by 2030. Targeting these regions today will ensure a seat at the table for the top markets of tomorrow,” the report added.
Noting the incredible diversity of Asean in terms of income, language, culture and religion, the report cited the importance of moving beyond national averages.
“Focus should be placed on establishing granular plans targeting specific customer segments and regions. In some cases, it may make more sense to prioritize middleweight regions above countries,” it said.
Identifying appropriate products for different income points is also crucial. This requires a detailed understanding of “take off” points for different products.
For instance, in the Philippines, small portion-sized products (tingi-tingi)) are particularly popular.
Finally, business model innovation is crucial. Given the diversity of regions in Asean and the fragmented distribution channels, it will be important for companies to think about innovative, low-cost approaches to building market presence.