Trade wars and political issues are making many western CPG entrepreneurs apprehensive about doing business in Asia. Relax, Asian CPG growth will still be stellar in the next decade. If we analyze the facts, all the political noise disappears. The most important factor for CPG companies entering Asia is to have the right market entry strategies, and to understand that this is a big undertaking.
Consumer Packaged Goods (CPG) companies rely mostly on the middle class to drive growth. Asia is poised to have half of the global middle class in the next decade, providing the strongest growth engine for emerging CPG brands.
Entering Asia can be complex for inexperienced western companies. It is important to understand each country's culture, and in some cases, multiple cultures within the same countries. For example, each Chinese province, and even cities, can differ greatly in many aspects. The buying habits of tier 3 cities will differ greatly from a tier 1 city such as Shanghai.
When I hear someone proclaiming to be a China expert, I cringe a little, because it is virtually impossible to be an expert in all of China. The country is so diverse, that it would take more than a lifetime to truly connect with all cultures within. In my opinion, the best "China expert" is the one that proclaims not to be an expert, but to understand all the diversity and find ways to work with it.
For CPG brands, this diversity leads to the requirement of having very tailored initiatives to enter specific regions. In the past, traditional CPG companies used the same strategies, business models, and marketing approaches in the whole of Asia - failing miserably in most cases.
CPG companies entering Asia need a business hub, that simplifies doing business, that offers low cost logistics, and that is strategically located. Those parameters leave two main options for Asian Headquarters: Hong Kong and Singapore. At Outroll, we have a strong preference for Hong Kong, as it provides the best entry opportunity for mainland China.
Direct to consumer brands can benefit greatly from a single Asian distribution hub. Trade wars can affect cross border trade, so having the right partners in each major market can provide more resiliency and a competitive advantage.
For companies that can afford, entering Asia directly can provide a great return on investment. For companies that are not able to invest millions of dollars, the Asian market is still accessible by partnering with Outroll Ventures. Our partnerships enable businesses from a wide range of industries, to set up shop, establish distribution channels, market and promote the brand, and take advantage of our extensive know-how.