What it means for a consumer-packaged goods (CPG) company to be consumer-centric is changing rapidly—with profound implications. Nowhere is this truer than in Asia-Pacific, with its diverse consumer base, emerging middle class, deep penetration and adoption of mobile technology and digital commerce, and extraordinary pace of innovation.

Traditional economies of scale in research and development (R&D), advertising, production, and sales propelled the CPG industry for many years. The business of a brand owner was relatively simple: focus on a small number of brands, innovate to renovate and extend products within these brands, manufacture and advertise at scale, and operate globally where possible. Consumer insight involved surveys and focus groups, typically generating “usage and attitude” insights about segments of consumers, and occasionally, ethnographic research to more deeply understand how these consumers make use of a certain product. Consumers as individuals were nowhere to be seen.

Insurgent brands have been chipping away at incumbents for more than a decade. Growing availability of contract manufacturing reduces the up-front investment required to launch a brand. Digital media offers new, lower-cost opportunities to engage with consumers. Retailers, sensitive to the desire of a larger, wealthier, better-informed consumer base for a broader set of options, are increasingly willing to list newly created brands. Purpose-led insurgents have been able to address raw consumer needs and draw in like-minded employees, leading to highly relevant activation and ultimately the emergence of communities that reinforce and provide feedback to improve the brand proposition. Our China Shopper Report 2021 found that insurgent brands continue to take share from incumbent brands, with insurgents accounting for only 3% of aggregate market share in 2021 but 40% of value growth.

Meanwhile, retailers collect rich data on shopper behavior and use it to make performance-driven operational decisions in assortment, media mix, pricing, and supply chain, as well as to create new revenue streams. A CPG sales executive presenting traditional usage and attitude research to a sophisticated retailer no longer expects a friendly reception.

A bold new agenda for consumer centricity is emerging in Asia-Pacific: from what consumers say to what they do; from channels to journeys; and from segments to individuals.

1. From what consumers say to what they do: Testing@scale
   
   The traditional approach to brand marketing, in which campaigns are launched and results tracked afterward, is becoming obsolete. Sophisticated marketing teams now operate ongoing iterative programs to continuously test and refine multiple attributes of a campaign in real time.
   
   For example, a fast-moving consumer goods (FMCG) company built a data-driven, rapid test-and-learn approach to improving marketing effectiveness. Within six months, it saw a 20% improvement in marketing effectiveness by running small, focused tests on channel, audience, content, and occasion mix in parallel across brand X country combinations. It established “new testing ways of working” through agile teams and a fit-for-purpose suite of tools that enable design, analysis, insight generation, and scaling.
   
   But the applications of systematic, behavior-based learning extend beyond brand marketing. Take the example of innovation. Most CPGs recognize that simply asking consumers about the products they currently consider, purchase, and use is an extremely risky approach. Many of the most successful disruptive innovations exist only because leaders were willing to ignore such research, focusing instead on the consumer's underlying and often unexpressed needs.
   
   The challenge for would-be innovators is that there is an unlimited supply of anecdotal speculation on the raw needs of consumers, much of which could lead to plausible-sounding concepts for new products or services. Until recently, innovators were forced to rely on instinct. But new tools are emerging that enable behavioral data to inform even the most subjective of decisions. For example, our research shows that brand value can be systematically disaggregated into 30 “elements,” from lower- to higher-order benefits. These elements fall into four categories: functional, emotional, life changing, and social impact. Brands that deliver more elements of value, and higher-order benefits in particular, grow far faster than brands that deliver fewer or more prosaic elements. With tools such as Elements of Value^®, innovators can systematically test brand propositions that deliver more value to consumers.
   
   
2. From channels to journeys: Omnichannel@scale
   
   CPGs traditionally operate their businesses through the lens of channels within markets and shoppers who visit these channels. Brand owners were already being forced to adapt this model to channels that span different markets—consider the multicountry retail buying groups in Europe or the daigou channel that facilitates imports into China—and to retailers that operate multiple channels, such as offline retail and e-commerce.
   
   But today’s consumer interacts with multiple platforms and channels, and each of these channels plays multiple roles, whether for building awareness or interest, for transactions, or for sharing comments. The Meta and Bain & Company report on Southeast Asia’s digital consumers found that four in five digital consumers prefer online channels for product discovery, evaluation, and post-purchase support, while offline channels continue to be critical for transacting. Consumers are often confronted by disconnected brand messages and offers across the platforms and channels with which they interact. The challenge is made more difficult when new channels emerge and scale rapidly in dynamic markets, such as community group buying in China.
   
   Leading suppliers are redefining their go-to-market models as “routes to consumer” that demand greater coordination between traditional silos in sales and marketing. Innovation in China is world leading, with online-to-offline (O2O) commerce accounting for 7% of all FMCGs value and consumer penetration above 50% in 2021. Suppliers are creating consumer experiences that are connected and seamless across the consumer journey, using data and insights gathered in one channel to improve effectiveness in another. For example, a global pet food brand collaborated with Tmall on a test-and-learn program to define and measure specific intervention points across a consumer’s omnichannel purchase journey—including social media, offline retail, and e-commerce—to reignite its growth in China, helping the brand grow 70% year-over-year.
   
   
3. From segments to individuals: Personalization@scale
   
   As digital media and commerce grow and retailers compile ever-richer data on their shoppers, CPGs can understand consumers as individuals, not just as market research-defined segments. The ability to see and affect the behavior of individual consumers unlocks insights that can fundamentally reshape strategy. For example, by measuring and managing consumer lifetime value (CLTV) and consumer acquisition cost (CAC), direct-to-consumer (D2C) businesses are often able to profitably invest much more in consumer acquisition than those that consider each transaction as independent and disconnected.
   
   Many brand owners are investing in capabilities to analyze shopper-level data they purchase from third parties. Others are beginning to collect first-party data, using opt-in campaigns to build databases of individual consumer demographics and behavior.
   
   For example, a large snack food player in India improved the effectiveness of its digital marketing spend by two times by collecting, enriching, and activating 25 million first-party consumer data records. It leveraged powerful value exchanges around scale consumer themes to acquire consumer data, enriched this data by driving traffic to owned media platforms, then created large look-alike audience segments and customized content for these audiences to improve engagement and purchase rates.
   
   But the benefits extend beyond the immediate impact on media effectiveness. First-party data can help reach and engage with special audiences, scale D2C commerce, and strengthen and expedite consumer-insight-led innovation. A large South Korean beauty products supplier with a traditionally face-to-face sales channel is redesigning and digitizing the entire O2O consumer journey, with digital customer acquisition; personalized digital diagnostic tools; digital content-based selling; and new tools for transacting, including live commerce and group selling. The digital transformation of the consumer journey is driving a 20 percentage point improvement in sales relative to control groups without the new approaches.

Large CPGs face a challenge of ambidexterity. They must continue to operate traditional business models, grounded in mass brand reach and broad physical availability, while simultaneously building new consumer-centric capabilities at scale. These capabilities can be new sources of competitive advantage, enabling large CPGs not only to defend their incumbent brands against insurgents but to thrive and grow. The implications for CPG business models are profound and include:

Ecosystems of consumer centricity. The ability of blockbuster brands to capture new growth will continue to be challenged, and CPGs are continuously reinventing their portfolios—pivoting legacy brands, innovating new brands to capture latent pockets of demand, and regularly investing in or acquiring new brands while divesting others.

Successful CPGs regard portfolio management and repeatable growth routines as a core capability. This includes maintaining a whole-of-market view of consumer behavior that extends beyond traditional category definitions; building an ability to rapidly innovate, invest, acquire, or divest brands; and developing consistent toolkits to launch, grow, and manage brands that can be tailored to the dynamics of individual markets and categories.

But real consumer centricity implies more than a broader brand portfolio. Leading CPGs are partnering with and sometimes investing in businesses that enable them to deliver integrated, consumer-centric experiences that extend beyond the products themselves. For example, an Oceania-based food company is collaborating with D2C businesses that offer individualized nutrition solutions, bringing its scale and R&D capabilities while relying on the D2C insurgents for personalization, digital marketing, and first-party data capabilities.

Consumer-driven supply chains. Leading CPGs are breaking traditional silos, creating opportunities for demand-side functions to collaborate and inform supply-side decisions. Supply networks are being redesigned to enable greater localization of products for individual markets while also boosting resilience. Individual SKUs are being modified to preserve and enhance attributes that drive value for consumers while stripping away costs that do not. Suppliers are experimenting with agile manufacturing that enables personalization.

Technology that enables scalability, simplicity, and rapid adaptation. With increased requirements for data collection, curation, and governance; new digital capabilities for experimentation, personalization, and omnichannel management; and the need to manage a larger and more fluid portfolio of brands, the future of consumer centricity will be increasingly technology and data enabled.

Our research shows the fastest-growing CPGs invest more in technology than growth laggards, but more important than the absolute amount of investment is where these investments are focused. High-growth CPGs tend to have scalable core technology platforms that are relatively inexpensive to maintain, which allows them to differentially invest in applications that create consumer- and channel-focused capabilities that enable top-line growth and can be replaced quickly to match the current best-in-class.

New operating models to enable agility. The way in which CPGs organize themselves is evolving rapidly. New skills are required: digital and performance marketing, product management at the intersection of brand and technology, and advanced analytics, to name a few. Moreover, consumer centricity demands an ability to work cross-functionally and take calculated risks to systematically and rapidly test and pivot new solutions, skills which come naturally to most insurgent businesses. Successful CPGs are borrowing from and adapting agile methodologies to enable faster, more successful innovation across all areas of their businesses.

Asia-Pacific consumers are famously diverse, and their needs and behavior are changing all the time. The ability of CPGs to build capabilities and new business models to serve them effectively—while continuing to operate, invest in, and innovate traditional scale-driven businesses—will be one of the defining challenges for the industry over the next decade.