Asia's fast growing emerging markets such as India and China have been good to multinational consumer goods trailblazers such as Coca-Cola Co. Unilever NV Colgate-Palmolive Co. and PepsiCo Inc. that now earn up to 20% of their total revenues from the region. The rising tide has lifted local firms, too, benefiting everyone from Chinese health food maker Celestial NutriFoods Ltd to Indian personal care products firm Godrej Consumer Products Ltd. But now that the global downturn has caught up with them, multinational and local firms alike are feeling the threat of slower growth. Across Asia, consumer products firms have been revising their rosy 2009 plans—and experiencing déjà vu. Those who emerge winners will be the firms best able to use the lessons learnt in previous troubled times: the Asian financial crisis of 1997–98, the Internet bust of 2001–02, and the SARS scare of 2003.

In the 1997–98 crisis, consumption shrank 7–8%. Today, such shrinkage is already happening across Asia. In India, consumer products firms were buffeted by rising commodity prices in the first half of 2008 and were quick to raise prices to maintain margins or counter margin compression. While the industry as a whole has not experienced any significant slowdown, it has witnessed increasingly thrifty customers moving to lower price products over the past six months to balance household budgets. At the back end, they are tightening credit terms for distributors and looking for more efficiencies in the supply chain.

But there's good news amid the strengthening headwinds. If previous Asian recessions are anything to go by, consumer goods may be one of the least affected sectors. The markets recognize this: Equity indices for fast moving consumer goods in some parts of Asia are down far less than overall market indices, which have fallen as much as 70%. Moreover, downturns represent an opportunity for changes in market leadership. About 24% more firms moved from the back of the pack to the front in the 2001 downturn compared with the subsequent period of economic calm, according to an eight-year study by Bain & Co. that analysed the net profit margins and sales growth of at least 2,500 companies.

For Indian consumer goods firms, happy tidings are coming from the countryside. The average per capita income in rural areas has risen on the back of strong farm output over the past four years, expanding the purchasing power of people in villages and semi-urban towns. The resultant growth in spending-fuelled by a government rural employment guarantee scheme, higher crop prices and a multi-billion-dollar loan waiver for farmers-has boosted the sales of colour TV sets, cellphones, soaps and shampoos. It has also offset the drop in sales in urban areas as the general slowdown deepens.

Consumer products companies that aim to be ahead of the pack when the economy picks up will have to find ways to tap-and further expand—this burgeoning rural demand. However, the immediate priority for many is to cut fixed and variable costs. They are now slashing overheads built on assumptions of high growth. That's what Procter and Gamble Co. (P&G) did in 2001–02: streamline its supply chain, eliminate divisional overlap, reduce capital spending, outsource some operations and divest brands. It cut operating costs as a share of sales to 82% in 2003 from 88% in 2001, and its operating margins increased to 18% in 2003 from 12% in 2001. The cost cutting has put P&G in a strong position to weather the current downturn. Earnings grew 9% in the first quarter of fiscal 2009, and the company has significantly outperformed both the Standard and Poor's 500 and the Dow Jones Industrial Average.

One big opportunity for many firms is to take advantage of some commodities that are now down by as much as 50% from their peaks. But firms need to act quickly. Global food maker Nestlé SA is already ahead of the game. It revised recipes, replacing high-price commodities with cheaper ones while using the changes to refresh products. It also saved by buying directly from farmers, investing in machinery that ensured bottles were filled precisely and exiting from the less profitable business of making basic wholesale products such as tomato puree. The firm increased its global profit margin to 14% in 2007 from 13% in 2006.

In addition to reducing costs, top performers in previous troubled periods were quick to refocus offerings and adjust price and promotion—to catch the down traders, stimulate demand and weed out unprofitable products. Winning firms also took a hard look at key channel partners to strengthen their route to market. Reviewing its distribution and sales strategy helped accelerate the turnaround of a multinational tobacco firm in Asia following the Asian crisis.

Finally, in a downturn, consumer goods firms can invest to leapfrog competition.

Downturns bring many merger and acquisition (M&A) opportunities. In the four years prior to the Asian crisis, only three M&A deals took place among consumer goods firms in China, India and South-East Asia. That number ballooned to 43 in the subsequent four years, including company-defining deals such as Groupe Danone's acquisition of mineral water business Robust in China. Indian firms such as Godrej and Marico Ltd are similarly on the lookout for acquisitions in Asia and Africa. At home, Dabur India Ltd's recent acquisition of a majority stake in Fem Care Pharma Ltd underlines how some Indian consumer product firms are actively looking to capitalize on turbulence to strengthen their market positions.

Vivek Gambhir is a partner of Bain & Co. based in New Delhi and heads the firm's India consumer products practice. Mike Booker, a Bain & Co. partner based in Singapore, heads Bain's Asia-Pacific consumer products practice.