WHEN times get tough, branded products are the first things to go. British consumers know there is little difference between Fairy and a supermarket’s own-label washing up liquid.
The trend is more pronounced among younger consumers, who will protect luxuries such as their iPhone and designer clothes by buying staples from the supermarket economy ranges. That’s bad news for fast-moving consumer goods (FMCG) companies such as Reckitt Benckiser and Unilever.
Hence the search for growth in emerging markets, where the name of a product still matters. The middle classes in places like Brazil and India like to differentiate themselves by buying aspirational brands; if the product has some link to the “old world”, even better. India counts Proctor & Gamble’s Head & Shoulders as its favourite shampoo and Surf and Ariel among its most-loved detergents. It is the second largest market for GlaxoSmith-Kline’s bedtime drink Horlicks.
Reckitt’s decision to overhaul its international structure is a tacit admission that it has failed to capitalise on fast growing developing markets, which accounted for less than a quarter (24 per cent) of its revenues in 2011. Conversely, fellow FMCG giant Unilever generated 54 per cent of its sales in emerging markets last year.
The emerging markets push is undoubtedly the right strategy, although it has come far too late. Not only does Reckitt have to compete with other Western FMCGs, but domestic rivals are also growing in stature. It has a lot of catching up to do. david.crow@cityam.com
