A report from Bain & Company reveals that in India, established brands in the fast-moving consumer goods (FMCG) sector still dominate, capturing 65 percent of the market share.
Identifying the ongoing preference of Indians for incumbent brands, the report notes that the prevalence of general trade in the country enables national brands to maintain their dominance. The limited penetration of e-commerce in the nation also aids larger brands.
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The report, named “Resilience Amid Disruption: How Certain Incumbents in the Asia Pacific Region Outmaneuver Insurgents,” examined 23 categories of consumer goods, including beverages, food items, beauty and personal care, and home care, across 11 Asia-Pacific markets from 2018 to 2022.
It employed Euromonitor’s database to monitor the performance of what it defined as “large incumbent brands” – the leading 10 brands based on market share in each category and country as of 2018. The analysis covered performance until 2022, excluding brands that no longer existed by that year. The evaluation gauged the success of large incumbents in each category and country by determining whether their combined market share experienced a shift exceeding 1 percentage point from 2018 to 2022.
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Singapore and China stand out as highly favorable environments for new entrants, thanks to the robust presence of e-commerce and the well-established networks of third-party suppliers.
Unlike the mentioned geographies, the report noted that Malaysia, the Philippines, and India stand out as the most advantageous markets for incumbents. The report attributes this phenomenon to the prevalence of traditional trade, particularly in the Philippines and India, and the comparatively limited reach of e-commerce. Additionally, the report highlights that the intricate channel dynamics in these markets pose a formidable challenge for new entrants.
According to Ravi Swarup, a partner at Bain & Company, domestic incumbent brands in the country have thrived due to their deep understanding of the Indian consumer. He also mentioned that foreign brands, which have adapted to local preferences in the country, have experienced success as well.
“Understanding the consumer and creating a product price proposition that is actually giving disproportionate value to consumers, and winning in the general trade are really important,” Swarup said.
Over the past three quarters, FMCG companies in the country have consistently faced intense competition from regional brands. These companies have noted an influx of regional brands specifically targeting the mass market segment.
The incumbents hold a significant advantage with their robust distribution networks, allowing them to reach and stock products in kirana (mom-and-pop) stores, a strength not easily matched by new brands attempting to enter the category. The report also highlighted that, apart from India, local incumbent brands were demonstrating notable growth momentum in the Philippines and Indonesia.
“However, in India, the Philippines, and Indonesia, while foreign incumbents also lead in market share across most categories, it is the local incumbents that exhibit a stronger ability to gain share in the winning categories,” it said in its report.
Bain & Company noted that the Covid-19 pandemic worked to the advantage of incumbent brands, as consumers leaned towards well-established and familiar names during this period. Additionally, larger companies demonstrated their superior ability to navigate supply-chain disruptions.
The report highlighted that Tata Sampann in India has successfully maintained a compound annual growth rate of around 20 percent over the last five years. This achievement is attributed to the brand’s commitment to meeting consumer demands for top-notch, wholesome, and nutritious basic food items. Pioneering the branded pulses market in India, Tata Sampann has progressively broadened its presence to include categories like spices, poha, and dry fruits.
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