When it comes to emerging markets, huge western brands as diverse as McDonald’s (in the Caribbean) and Tesco (in East Asia) have all sought – and struggled – to gain a foothold in their global expansion. They ultimately handed the “followers’ advantage” to the brands slip-streaming behind them. With Morrisons announcing its move into Thailand along with a bumper sales boom, what are the key lessons it should learn from predecessors?
This is an important question for the UK’s fourth largest supermarket brand to consider. Small and local independent grocery brands have proven remarkably resilient to multinational brand encroachment on their turf with an “incumbent’s advantage”: superior local market knowledge which western brands fail to grasp, despite the resources at their disposal.
Success ultimately hinges on grappling with three important lessons that are learnt from brands that couldn’t make the transition.
Unlike its predecessors, Morrisons is not installing a physical presence in Thailand – rather it is partnering with budget hypermarket Big C whose previous investors were French retail giants Carrefour and Casino.
Patrick Ashe, head of our partner agency in Bangkok, surmises that Morrisons might create a ‘shop in shop’ zone for its collection of own-label products. This would be a smart move as it would keep the Morrisons’ own-label products visible all in one place, rather than sporadically spread out across the store. This is the approach that Tesco has taken with its Taste the Difference range in its Tesco Lotus stores.
When Tesco Lotus introduced new products in the Thai market, it conducted comprehensive product testing in its “Tesco Academy”, changing recipes in response to calls for more spice and stronger flavours to cater to local tastes.
Part of the challenge that Tesco faced was that its mantra, ‘Every little helps’, was ultimately meaningless in Thai. And despite the seemingly wise assumption that Tesco’s colour branding (red, white, blue) would resonate with the Thai because of the flag’s colour, when market research was conducted, Thai consumers showed a distinct preference for the colour green.
Decide what problem you are solving
It is well known that despite Walmart’s position atop the Fortune 500 Companies 2018 list, it struggled to make inroads in certain markets, most notably in East Asia. In South Korea, for example, the behemoth grocery brand tanked because it didn’t fine-tune its shopping experience to the local markets by solving problems market incumbents weren’t catering for.
What, then, will be the problem Morrisons is solving in Thailand? We don’t really know yet, but it’ll need to show flexibility in its existing products range to allow them to meet local tastes and needs.
Increasingly in Thailand we’re seeing a trend of consumers, especially millennials, moving from street food, with some of its health challenges, to the more western concept of ready meals. Any Morrisons own-label brands that can help solve this problem should fare well. Meanwhile upselling ‘Britishness’, widely considered a mark of quality and premium, on pack design might help the retailer’s brands to stand out from market incumbents but it could also alienate Big C’s value-hungry customer.
Don’t believe your own hype
Walmart and Tesco were both huge in their home markets. But when either initially sought to enter other markets, they came a cropper by assuming the power of their brands at home would be enough to carve out success in the East Asian market.
It was foolhardy, and the key lesson was that no brand is truly ‘globally loved’ or indeed ‘globally needed’. So brands need to enter with their eyes and minds open about different market attitudes and values which may be completely different to those of its operating heartlands. But most importantly of all, they must enter humbly and not believe their own hype.
It’s known that grocery brands are struggling to find new markets to grow into. With McKinsey predicting emerging markets will account for $30tn in global consumer spending – or nearly half of global consumption – by 2025, these brands can see a clear opportunity to wedge themselves into a huge opportunity. No doubt we will continue to see brands attempt to expand their growth in emerging markets. If they can learn from their predecessors and put local knowledge first, they stand a good chance of achieving it.
Jasmine Montgomery is CEO and founder of Seven Brands