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Peter WennstromPresident & Expert ConsultantHealthy Marketing Team

9th Annual World Food and Technology and Innovation Forum 2011

Successful innovation strategies in BRIC markets

All content including Wennstrom’s Four Factors®and the FourFactors® Brand Analysis system (The three-stakeholder curve) ©2010 Healthy Marketing TeamReproduction ONLY by written consent fromSimonG@HealthyMarketingTeam.com

Who we are:Global specialists in health and wellness marketing. In 2010 alone supporting our clients on the ground in 25 countries. Helping them to understand:

What is happening?

• HealthFocus Global consumer trends and data

from 34 countries including emerging markets like China,

India, Brazil and Russia in 2004, 2006, 2008, 2010• Food and beverage marketing best practices

Why is it happening?

• Consumer and parental health drivers • Demographic and motivational segments• Market, category and consumer data analysis

How to make it happen for your brands

• Category Direction• Brand Acceleration• Concept development• Creative briefs• Brand identity and design

What we do?

Global specialists in Brand Positioning for Health & Wellness, deliver our expertise in three different ways:

Education and Training

“How to be a winner in the H&W market!” EDUCATION INSPIRATION

CONSULTING

Consulting for clients“Brand Positioning in health and wellness.”

Events, conferences,

seminars, master classes

“From consumer trends to brand

success!”

Brand Positioning in health and wellness:

Brand NewHow to create and launch the right

new idea

Brand DirectionHow to choose “Where to Play” in the

Market

Brand RescueHow to deal with a failing brand

Brand Health CheckHow to critically diagnose how your brand is doing

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The Emerging Markets

A Marketer cannot afford to ignore it!

• Brazil, Russia, China, India

• 42% of world’s population

• 1/3 of the land mass

• 47% of the world’s GDP ( in PPP)

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The Emerging Consumers

An emerging market?!

What does it mean for market drivers and consumer motivation? What will we expect to see?

What is the difference between an emerging and a developed market?

Phsicology of Market Stages

1. TRADITIONAL 2. EMERGING 3. DEVELOPED

“OLD”

“NEW”

TOMORROW WILL BE LIKE TODAY

TOMORROW WILL BE BETTER!

I DON’T CARE ABOUT TOMORROW…

Market stages/psychology

1. TRADITIONAL 2. EMERGING 3. DEVELOPED

“OLD”

“NEW”

TOMORROW WILL BE LIKE TODAY

TOMORROW WILL BE BETTER!

I DON’T CARE ABOUT TOMORROW…

• Most economies in Asia today are poised for growth or growing

• This impacts the consumer’s mindset in significant ways

• The consumer is looking towards the Future and tend to be Optimistic

• “tomorrow will be better than today with hard work and a little bit of luck”

The “ER” Factor

Consumers in Emerging Markets want to compete, to stand out and acknowledge the role of better health as being a critical enabler to better performance

Horlicks India:

For mums and their Kids…

The “ER” Factor

Nutrilite China: For youth…

Spotting the right angleCoca-Cola and Vitamins…Europe vs. Brazil

2007: Coca-Cola launches Diet Coke Plus in the UK… and fails

2010: Coca-Cola launches Coca Light Plus in Brazil during Sao Paulo Fashion Week and explodes sales

Look at me!

One general rule

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One general rule

Be prepared to break all rules!

What is right for our Category?Minute Maid Pulpy - China

Coca Cola China reduced the juice content of Minute Maid to only 10% in ChinaBUT… Added fruit pulp to make the mouth feel fruity

Created not just a huge success but a new segment of “Pulpy” juice based drinks in China.

Learning: Consumers don’t know your category

Be prepared to reshape brand offers to fit into BRIC consumers’ expectations from the category.

Coca Cola “dared to dilute” Minute Maid’s juice content and re-formulated the drink to delight the Chinese consumer and thus triggered an entire category of “pulpy” beverages in China

What is right for our brand and our category? McDonald’s India

No beef or pork on the menu… but…

Their customised menu includes Vegetable burgers, Chicken burgers and the McAloo Tikki Burger – the Potato Burger is a best seller !

McDonalds in India has also introduced Home Delivery system which taps into the Indian Takeaway habit

Thus, McDonalds has innovated to create a new McExperience in India – both in products and delivery systems

Learning: Adapting to local culture

Be prepared to innovate and create brand value by leveraging and fitting into local habits and cultural codes.

The leading global hamburger chain in India have leveraged the huge cultural significance of vegetarianism as an essential factor for growing the business of a culturally well adapted fast food chain.

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Health?: BREAK THE BRIC!

BREAK THE BRIC!

In terms of Innovations in healthy foods and beverages, it is useful to look at health motivations of the BRIC consumers as a whole being members of fast changing economies will shape consumer attitudes to health and nutrition in similar way

However,given the diverse cultural differences within BRIC as well as the very different histories, there will be significant differences between say a European Russia and a South Asian India or between a Brazil and a China!

A Russia food and beverages market may develop a la the West European markets but with a lag whereas China, India and Brazil will see food habits evolve through mutation of strong local cultural norms and globalization influences.

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Innovation in BRIC in Health and WellnessA Strategic Framework

Two routes to market

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Development Model for Health & Wellness Market in Foods

MEDICALMEDICAL

EARLY ADOPTERS EARLY ADOPTERS

EARLY MAJORITYEARLY MAJORITY

LATE MAJORITYLATE MAJORITY

LAGGARDSLAGGARDS

Development of Healthy Foods Market in BRIC The Classical Way

MEDICALMEDICAL

EARLY ADOPTERS EARLY ADOPTERS

EARLY MAJORITYEARLY MAJORITY

LATE MAJORITYLATE MAJORITY

LAGGARDSLAGGARDS

Development of Healthy Foods mraket in BRIC Breaking the Rule!

The Health foods market develop in two ways in BRIC

Classic PathNew “imported” categories such as isotonic hydration (a la Gatorade) will

mostLikely develop in the classic left to right way, from high-value, nichecategories through to the high-volume mass markets.

Commodity PathMost food commodity categories in BRIC such as water, cooking oils, and

milkfollow the innovation cycle from Right to Left.

• Fortification is the trigger to Branding efforts that target the Mass market and shift the structure of the category form Commodity to a Brand.

• As branding becomes the norm, the category then develops through more added-value offers to finally target the Technology stakeholders through niche, high-value brands.

Three roles for the brand

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Technology StakeholdersThe BRIC Perspective

•In the past BRIC consumers sought solutions either through medicines or through traditional remedies.

•However growing purchasing power and awareness of “science” are going to drive the growth of this segment in BRIC.

MEDICALMEDICAL

EARLY ADOPTERS EARLY ADOPTERS

EARLY MAJORITYEARLY MAJORITY

LATE MAJORITYLATE MAJORITY

LAGGARDSLAGGARDS

•InternationalCredentials will be key•Global > Only Local•Disruptions in DeliveryFormats will be key

Lifestyle StakeholdersThe BRIC Perspective

•Rapid economic growths have not only created a large class of affluent consumers in BRIC, it has also empowered these consumers to tap into a shared global vision. This empowering globalization will shape Lifestyle innovations in health and wellness too and drive the growth of this segment in BRIC.

MEDICALMEDICAL

EARLY ADOPTERS EARLY ADOPTERS

EARLY MAJORITYEARLY MAJORITY

LATE MAJORITYLATE MAJORITY

LAGGARDSLAGGARDS

•LS will seeRapid growth in BRIC•LS in BRIC will beEqually motivated byScience AND Nature•Brands here in BRIC willneed significantLook at Me values

Anlene for bone health

Mass Market StakeholdersThe BRIC Perspective

•Mass Market will be driven by the strong DEMOCRATIZATION force in BRIC.

•New Health benefits introduced in the More premium segments will soon be demanded by Mass market Stakeholders.

•Frugal Innovation will be the key to deliver relevant health benefits to MM.

MEDICALMEDICAL

EARLY ADOPTERS EARLY ADOPTERS

EARLY MAJORITYEARLY MAJORITY

LATE MAJORITYLATE MAJORITY

LAGGARDSLAGGARDS

•Better Nutrition is a Health benefit in itself.

•Family Health is a key motivator

•Endorsement from Trusted Authority Sources is important

•Packaging is key to introduce new healthy habits as well as deliver Value for Money

The pride of the nation!

•Britannia fortified biscuits - India

Brands can take 3 Roles in H&W

Brand from abroadInternational brand that leverages its Global Credentials particularly in Science

Glocal BrandGlocal brand that innovates by adapting it’s Global expertise with Local Preferences

National Pride BrandLocal brand that builds on it’s local heritage and positions itself as the National Pride

Role of Brands in BRIC

BRIC markets have traditionally seen more uncertainty that their European/US counterparts.

Hence, brands are powerful guarantors of reassurance and safety.

Once a brand earns the trust of consumers, it gains the Right to Play in multiple categories.

Particularly in health and wellness, brand credentials are a huge asset. Hence, a brand that has succeeded in setting a STANDARD in one category can then innovate by extending the brand equity in multiple categories.

CHINA INDIA BRAZIL

Five innovation strategies

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Five Key Innovation Strategies

Five Innovation strategies with varying Innovation quotients & Market disruption ability:

1.Leveraging hidden nutritional assets

2.New category creation

3.New segment creation

4.Category substitution

5.The functional foods make-over

[1] The Food and Health Marketing Handbook

New Category Creation - BRIC

Create an entirely new category of food or drinks.

It satisfies an unmet consumer need.

It is primarily based on a new type of consumption situation.

Create A New Category By Innovating In Distribution Channel

Comvita is a brand of manuka honey which is said to have anti-microbial properties.

New Zealand based company Comvita targeted Hong Kong and then mainland China through its own-branded stores and created a new super-premium segment of health supplements.

Comvita honey is today one of the fastest growing natural wellness supplements in China and its own branded stores reinforce it’s imagery of “specialness” and also help maintain the premium margins.

Create A New Category By Innovating In Distribution Channel

Comvita is a brand of manuka honey which is said to have anti-microbial properties.

New Zealand based company Comvita targeted Hong Kong and then mainland China through its own-branded stores and created a new super-premium segment of health supplements.

Comvita honey is today one of the fastest growing natural wellness supplements in China and its own branded stores reinforce it’s imagery of “specialness” and also help maintain the premium margins.

Whole Category Substitution-BRIC

Offer the health benefits of another (possibly competing) category in a more healthy and/or convenient format.

Thus, attract consumers to the new category at the expense of the category whose benefit has been taken by it.

• Kellogg’s India launched a small flexible pack of Chocos in India

• They chose a celebrity endorser to promote the brand-pack as a fun , healthy snack

• Aggressively merchandising it with other snack foods, Kellogg’s targeted this at Mums as a healthy substitute to crisps and as a healthy mini-bite for children’s lunch boxes too.

• It was an unique attempt to substitute a range of snacks by positioning Chocos as Fun and Tasty alternative to unhealthy snacks.

• Kellogg’s India launched a small flexible pack of Chocos in India

• They chose a celebrity endorser to promote the brand-pack as a fun , healthy snack

• Aggressively merchandising it with other snack foods, Kellogg’s targeted this at Mums as a healthy substitute to crisps and as a healthy mini-bite for children’s lunch boxes too.

• It was an unique attempt to substitute a range of snacks by positioning Chocos as Fun and Tasty alternative to unhealthy snacks.

Functional Foods Makeover - BRIC

A “Me Too” strategy where the later players offer the same benefits as the Early Entrants.In the West therefore the only differentiator in this strategy is Lower Price

However

In BRIC, given the huge Mass Market opportunity as well as the Bottom of the Pyramid opportunity, this Innovation Strategy can pay rich dividends.The challenge is to create Better Value price is only one factor.Accessible Health in the Consumer’s Hands is the key deliverable of this strategy hence pack innovations, formulation innovations, innovative education are all equally critical.

• The packaged water category in India is one where we see this strategy in action.

• A large number of local companies shave entered the market and are offering the benefit of “clean, drinking water” even to the poorest consumers in polyester sachets/pouches that are lower in price than the conventional 1l PET bottles and serve as hygienic, safe thirst quenchers.

• The packaged water category in India is one where we see this strategy in action.

• A large number of local companies shave entered the market and are offering the benefit of “clean, drinking water” even to the poorest consumers in polyester sachets/pouches that are lower in price than the conventional 1l PET bottles and serve as hygienic, safe thirst quenchers.

The rule for Market Innovation in BRIC countries: Be prepared to break all rules:

Be prepared to reshape brand offers to fit into BRIC consumers’ expectations from the category.

Be prepared to innovate and create brand value by leveraging and fitting into local habits and cultural codes.

Be prepared to innovate your brand to keep step with the changing aspirations of the growing urban middle class

Be prepared to enter the market in a classic Western way starting in premium or the other way around.

Be prepared to rethink your innovation strategies.

Thank you

More information: Peter Wennström Peter@HealthyMarketingTeam.com