Underscoring the increasing globalisation of business, a substantial portion of the top Asian fast-moving consumer goods (FMCG) enterprises and companies are witnessing a remarkable uptick in their overseas revenue, outpacing their domestic earnings growth by a significant margin.
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The latest report by global consultancy firm Bain & Company reveals that the revenue from international markets for these companies are soaring at a rate 50 percent faster than their earnings from domestic operations.
Asian companies are increasingly looking to international expansion to continue thriving.
Over the past decade, spanning from the fiscal years 2012/13 to 2022/23, the top 50 FMCG companies in the Asia-Pacific region have witnessed a robust annual growth rate of 11 percent in their overseas revenue, eclipsing the more modest 7 percent growth in their domestic earnings.
Japanese companies, in particular, have experienced much success, showcasing a higher propensity to tap into foreign markets. Nearly a third of the premier Japanese corporations surveyed now derive over half of their revenues from overseas.
Nearly all South Korean companies that were surveyed said they earned at least 10 percent of their revenue from foreign markets.
In contrast, companies from regions such as China, India and Southeast Asia are “less internationalised,” according to the study.
While Chinese FMCG companies mirrored the Japanese presence in the top 50 list, 31 percent of Chinese entities primarily operate within domestic boundaries and garner up to 10 percent of revenues from overseas operations.
David Zehner, head of Bain & Company’s Consumer Products practice for Asia-Pacific, attributed these divergences to factors such as market maturity, cultural influences, timing, governmental support, and diplomatic ties.
The Bain & Company report unveiled that a majority of the top Asia-Pacific FMCG enterprises initially set their sights on neighbouring markets within the region for their maiden international foray, with a considerable fraction venturing into Europe and North America subsequently.
While other APAC markets have historically underpinned a substantial portion of these companies’ revenues, the European and North American markets have steadily gained prominence, now accounting for 40 percent of total revenues compared to 32 percent just a decade ago.
Three key strategies have defined the overseas expansion of these companies, says Bain: ‘Build from Core’, ‘Build New Core’, and ‘Born for International Markets’.
These strategies have enabled companies to leverage their core strengths, adapt to new market dynamics, or create offerings tailored to international audiences, driving sustained growth and market penetration in a competitive global landscape.
An example of ‘Build from Core,’ the company initiates its international product offerings by concentrating on a burgeoning niche vertical segment or specific price tier within the broader consumer market.
Asahi Group Holdings’ foray into the European market serves as a prime illustration. Upon its entry into the UK market back in 1996, the company strategically targeted discerning consumers, known as “cognoscenti,” with its premium lager, Asahi Super Dry. Recognizing the limitations of organic growth, Asahi diversified its product portfolio into various beer categories and price tiers through strategic acquisitions post-2016, all the while maintaining a steadfast promotion of Asahi Super Dry.
Shiseido’s entry into the European market is a prime example of ‘Build New Core,’ favoured by companies that perceive their current core offerings as less competitive within the target market, according to Bain.
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Instead of expanding from an established core, these companies opt to invest in new brands or products tailored to the general consumer base. Upon achieving success with these new ventures, they may introduce their core brands from their home country or further diversify their product lines.