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Turbulence in Emerging Markets But Beauty Will Prevail

By: Rob Walker, Euromonitor International
Posted: April 28, 2014, from the May 2014 issue of GCI Magazine.

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What seems clear, however, is that the emerging middle class in Brazil and elsewhere will look to spend more prudently than in recent years—and that means brand owners will have to be clever in their segmentation strategies and innovative in distribution, marketing and production.

Innovation More Important Than Ever

For brand owners thinking of scaling back their emerging market footprint, it is important to keep in mind that the millions of consumers who have been dragged from the margins of poverty into the middle classes are not about to stop buying beauty and personal care products altogether. In Brazil, especially, beauty is as ingrained in consumer culture as samba and soccer—this is visible in low-income and high-income neighborhoods.

While consumers in emerging markets look to spend more prudently, developing unique, engaging products will be paramount. Innovation has always been key to competitive differentiation in the emerging markets, but it has never been more important than it is now.

The planned partnership between Avon and Coty in Brazil is a good example of brands leveraging their strengths to beef up participation in difficult conditions. On the one side, Coty’s premium brands will have a huge new distribution footprint in a market where door-to-door selling is big business. On the other, Avon’s army of direct sellers will feel empowered with a broader range of products—and price points—for their customers.

The Long Game

From an investment perspective, the emerging markets have always been a long play. Indeed, anyone who thought emerging markets were safe havens of growth was destined to get a nasty wake up call. The growth rates we have seen in the last decade were not sustainable, but that does not mean growth has run its course. Far from it, the emerging markets will weather the current period of structural shifts, and brand owners that also weather them will be stronger as a result.

There are plenty of twists and turns ahead, of course. But the emerging markets overall still present myriad opportunities for product development into the medium and long term. The big difference from the past decade, perhaps, is that brand owners will have to chase down growth rather than have it handed to them on a plate.

Rob Walker, senior fast-moving consumer goods analyst, Euromonitor International, can be contacted at rob.walker@research7.euromonitor.com.