The Asean sea of opportunities

This is creating tremendous new business potential for companies if they can tap into burgeoning consumer demand by applying digitally driven strategies to reach the increasingly connected Asean consumers, especially those in Thailand. 

As the second-largest economy in Asean, supported by strong manufacturing and tourism sectors, Accenture Strategy estimates that Thailand is set to become a $475-billion economy by 2020, with a solid projected compound annual growth rate of 4.3 per cent. Consumer spending in Thailand is also expected to almost double to reach $375 billion in the next five years.

According to Accenture’s latest report, “Asean’s Limited Time Offer: 100 Million New Consumers to Win and a $770 Billion Reason to Move Now”, rising disposable income across Asean will propel an additional 40 million people into higher income tiers by 2017, enabling them to trade up to premium products.

The Asean economy, one of the fastest-growing in the world, is expected to reach $3 trillion by 2020. Accenture Strategy forecasts that over the next five years, 60 million people will become part of the region’s consuming class, with the means to purchase goods beyond subsistence for the first time. 

In Thailand, the consuming class will grow by 9 million to reach 35 million and will generate $273 billion in new money by 2020. Growth in the CPG (consumer packaged goods) sector is also expected to be driven by Thais trading up to premium, luxury, or foreign brands, as well as their desire for healthier lifestyles, improved image (that is, conspicuous consumption), and new experiences through their consumption habits.

The report further notes that the CPG industry’s growth in the region, forecast to increase by 9 per cent annually to $220 billion in 2017, will be enhanced by the formation of the Asean Economic Community, which is scheduled to take effect this year. One of the expected benefits of the AEC is to enhance the region’s appeal as one of the world’s most attractive consumer markets by making it easier for companies to do business across national borders within the region.

“The spectacular growth of the Asean economy represents one of the biggest opportunities on the planet for companies today,” said Nontawat Poomchusri, Accenture country managing director in Thailand. “All that growth, however, means that markets are changing very quickly while digital technologies lift expectations for more tailored and engaging consumer experiences. 

“Companies that hope to compete for new consumers must be bold and move fast if they are to take advantage. The best advice for companies entering or expanding in the region can be summed up in four words – be aggressive, move now.”

 

Distinct challenges 

According to the report, while companies have a singular opportunity to turn millions of Asean consumers into loyal customers over the next few years, these business face distinct challenges, from delivering products across a physically fragmented landscape, to winning the loyalty of rapidly changing consumers.

The region’s highly fragmented market – consisting of big cities with wealthier consumers, newly urbanising areas, diverse cultures and multi-layered distribution networks with minimal reliable market data – makes it very challenging for CPG companies to reach consumers efficiently.

For example, while the region’s Tier 1 cities have networks of retail outlets knitted together by convenience stores, supermarkets and hypermarkets, 5 million “mom and pop” operators handle 75 per cent of the region’s grocery sales. 

In Thailand, more than 800,000 “mom and pop” operators will continue to account for 50 per cent of grocery sales in 2017.

Additionally, Thailand’s heavy dependence on road transport and limited rail development outside the major cities often necessitate the use of several modes of transport to move goods, which creates additional business challenges and greater cost.

The report reveals that Thailand’s highly connected consumers have a growing tendency to switch brands and products – as well as relying on digital technologies for all stages of the purchasing process. According to the survey findings, in Thailand, 73 per cent of consumers use mobile devices to learn about products and services while 66 per cent read online reviews and comments from other consumers before making their purchases. 

Furthermore, in rural and regional locations in Thailand, the mobile phone is the preferred platform for communication, given the lag in fixed-line telecommunications infrastructure. Companies thus need to go beyond traditional media channels to engage consumers and sustain their interest by providing a more personal customer experience.

The findings also indicate that only 47 per cent of Thai consumers are loyal to specific brands, an indicator that half of consumers are potentially up for grabs and vulnerable to switching to competitor products.

“In order to overcome the hurdles to achieving success in maintaining and expanding customer loyalty in the Asean region, companies must take the steps right now that will help them lock in consumer demand, ensure that their products are within easy reach of the markets they serve and build an operating model that balances regional efficiency with local agility and data-driven insight,” said Nontawat. 

“By 2020, we expect that the Asean economy will be the sixth-largest in the world at $3 trillion. With so much at stake, leaders must view the Asean market opportunity as a limited-time offer and do all they can now to secure their standing in the region. 

“Both multinational corporations and local companies will need to invest continually in the right strategies and capabilities to expand their presence and increase consumer engagement. Winning consumer loyalty demands fast execution of a clear plan while having the flexibility to contend with the region’s enormous diversity, fragmented geography, and rapidly changing consumer behaviour.”

To gain insights into new opportunities for CPG companies and to understand better the changing market dynamics and preferences of consumers in the Asean region, Accenture conducted a survey of 1,800 consumers across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam as well as in-depth country research and analysis on market, regulatory, consumer and retails trends, based on data from sources including IHS Global Insights Inc and Euromonitor International.

 

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