Vijay Vishwanath

Leader, Global Consumer Products practice

After recently traveling through Asia to meet some of our leading consumer goods clients in the region, I have been reflecting on the surprising convergence of trends in emerging and developed markets and the implications that has for consumer goods companies around the globe.

For decades, emerging market subsidiaries of global consumer goods companies fought long and hard to obtain a place on the corporate agenda. They struggled to explain why their markets were different. There were differences in consumer needs, price points, distribution—the list goes on. The major reason they needed to be heard: Just 10 years ago, emerging markets represented only a fraction of global sales across categories and contributed marginal revenue to global players.

Today we see an astounding change. Global leaders have significantly built their emerging-markets presence in the pursuit of growth, with these markets now contributing upwards of 50% of revenue for some leading players. Even more striking, profitability levels in these regions have also increased and, for many, now surpass performance in developed markets.

As this shift has been happening, we have observed that a few trends, originally from developed markets, are now also rapidly occurring in emerging markets. We are starting to witness high levels of category consolidation, an increase in category "premiumness," the polarization of shopping patterns between loyalist and repertoire behaviors and the increased importance of winning at the points of sale.

What strikes me, as I consider this phenomenon, is that in order to succeed, consumer goods companies must develop a critical capability to maintain simplicity. Among its many benefits, simplicity helps them cut through the visual clutter in stores, swiftly execute at the points of sale and significantly lower costs in the supply chain.

In emerging markets, where traditional trade dominates and shelf space is limited, one of the underpinnings for top homegrown consumer goods companies has been their enviable ability to succeed with only a handful of products in their portfolios. Over the years, they've perfected their approach to selling just those products with the biggest potential. As a result, every element of their business model has remained aligned and simple. That simplicity has helped incumbent companies, such as Petra Foods in Indonesia, outperform even the most aggressive multinational competitors.

Meanwhile, the local incumbents are teaching multinational corporations an invaluable lesson—one that applies not only to how they operate in emerging markets but also in their home markets. In Western Europe, for instance, where growth has been sluggish at best, the very companies that thrive are those that have relentlessly pursued simplicity. The only way to squeeze growth in that environment has been to focus solely and painstakingly on just those products that matter most to consumers and retailers. That focus builds growth, brings down unnecessary costs and reduces organizational complexity.

Welcome to the new world of converging capabilities.