The Latin American consumer offers enormous potential, but no easy answers.
The world is flat -- or at least that’s what conventional wisdom says. But in emerging markets, there is only so much truth in the idea that we have entered the era of a “flat” global marketplace. While consumers in some developing countries may have more spending power than ever before, there also remain important differences between those consumers, and the submarkets they populate.
“It’s very difficult to establish a general rule [regarding consumers in these markets] when you are working with a global company,” according to Augusto Garzon, a Latin America-based Managing Director with Unilever. “The reality is that some consumer preferences are more globalized than others. You can be global in certain brands, or in certain categories. But in some categories -- the way that consumers approach food products, for instance -- preferences are quite [specific].”
The idea that the world actually is not flat was just one of the ideas explored by a panel of experts on Latin American business during “All Eyes on
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It’s a balance that can be especially difficult to strike in
“We think globally, but we execute locally,” added Muniz, who leads BCG’s consumer practice for
As Muniz pointed out, some cultures simply approach cuisine -- and cooking -- in very different ways. While “fast” foods are popular in America and some areas of Western Europe, for instance, Latin Americans are more likely to view the act of cooking -- and cooking slow -- as a loving gesture toward their family and loved ones. The companies that have succeeded in the region, as a result, have taken this tendency into account, delivering food products that feed directly into that cultural peculiarity.
“It’s very important to understand those differences if you’re going to understand your global needs,” he said. “It requires a strong understanding of your local markets.”
A more specific example can be found in bread loaves. Though it might be easy to assume that bread is bread, and that the same loaves delivered to one nation could also be marketed to another country, the reality is that there is great diversity in what certain customer segments even within certain nations demand from their bread. Muniz notes that successful bakeries in
“The consumption patterns are completely different,” he said. “So sometimes, from an R&D perspective and a branding perspective, it simply doesn’t make sense to have ‘one strategy.’ What we’ve seen is that companies need to very clearly define when and where they need to embrace complexity, and also recognize when they can embrace scale and go global.”
FLEXING FINANCIAL MUSCLE
The idea of “scale,” the panel predicted, will likely be especially important going forward. And the reason is quite simple: The population
“We’re seeing a shift of the population from the lower class up to the middle class,” Barbieri said. “In the past six years, about 67 million people in
Muniz noted that in
“You can walk into any store in
The rise of
Such is the draw of this mammoth marketplace that even
“The question for these companies is, ‘How do I attract this unbanked population that is scared to walk into a bank, but may not be scared to walk into a retail location?” Muniz said. “It’s about trying to use different models to [access] this population…. The challenge is how to reach them. These people are not in the urban centers -- a lot of them are far outside of urban centers. The cost of serving them is a lot higher, which is why you have interest rates of 70% and 80%, which seems really outrageous until you see the cost of actually collecting.”
While there is indeed a large, untapped market in
Handrinos, for instance, pointed to the case of Chlie, a nation that is experiencing unprecedented growth and economic expansion. It would seem, on the surface, to be an ideal place to do business. But once one digs a bit deeper, some tricky issues are easily uncovered.
“In Chile, growth is looking good, and general sentiment is high,” Handrinos said. “But at the same time, there is exponential growth in the lack of trust toward corporations and government as well. There is some idea that government is far too lenient on business and perhaps some of the environmental damage going on. I think this is a huge issue.”
Republished with permission from http://www.knowledge.wharton.upenn.edu -- the online research and business analysis journal of the Wharton School of the University of Pennsylvania