Multinationals focus on local business development in emerging markets

By Louise Prance

- Last updated on GMT

Related tags: Market analysts euromonitor, Procter & gamble

Major cosmetics giants such as Unilever, Procter and Gamble and
Beiersdorf have all attributed Q1 sales successes in sales to
emerging markets such as Eastern Europe. However companies are now
being advised to think 'local' in their bid to come out on top.

With many global companies becoming increasingly aware of growing consumer-spending power within emerging markets (such as the BRIC countries; Brazil, Russia, India and China), competition is fierce. Gwenael Joseph, company analyst for Euromonitor told CosmeticsDesign-Europe,​ "In Russia, according to official statistics, consumer expenditure is expected to continue growing by seven to eight per cent every year, while average wages are expected to rise by an annual ten to twenty per cent." ​ Market analysts Euromonitor has stated that in order to maintain a strong lead within the emerging markets, multinationals should continue looking for local investments - benefiting from the cultural knowledge and consumer loyalty these brands bring. Joseph said, "Fierce competition in the emerging markets is leading large multinationals to not only launch their existing brands into new markets, but also to acquire successful local brands". ​However, despite domestic players tending to lag behind multinationals 'in terms of advertising flair, and the budgets necessary to secure celebrity endorsements', challenges do come from local brands. Brazil's Natura Cosmeticos overtook Unilever as the market leader in Brazil. However, the multinationals are now beginning to cut the challenge at the source and buy out the local businesses. ​Investments into R&D facilities in these areas have proved to be beneficial moves for companies such as Johnson & Johnson, which has recently opened its first R&D facility in Asia-Pacific in Shanghai. Likewise, L'Oreal has recently increased its investment into its Shanghai research centre - in turn broadening its awareness of the local consumer. "Joint ventures are also used as a route into new markets, enabling a new entrant to benefit from the established distribution networks and local knowledge of a domestic player"​ Joseph said. To this effect, the western company Mercatura of Germany struck up a partnership with Syria's Amrit Medical to start a manufacturing facility to supply the Middle Eastern region.

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