FMCG companies in Southeast Asia are entering a new phase of competition, where local and multinational companies need to supplement their core advantages with local innovation, suggests market researcher Nielsen in a new report evaluating product and brand strategies in Malaysia, Indonesia, the Philippines and Thailand.

Traditionally, domestic and international brands operating in these growth economies have competed on two fronts, sometimes for different audiences.

MNCs, initially selecting suitable brands to launch from their global portfolios, have devoted much of their energies getting these products in-store.

It is has been hard but rewarding work keeping up with a dynamic retail landscape, expanding in line with economic growth.

Leading local firms meanwhile, with strong distribution networks in place and able to move fast on new opportunities as they arise, tended to focus their efforts on building out their own product lines, often outpacing the growth of MNC brands in the process.

Competitive shift

Now the industry is in transition, Nielsen notes, as local and international companies alike work out how to appeal to shoppers with evolving needs and tastes, who are increasingly spoilt for choice in-store.

“Individual companies are increasingly reviewing how to adjust to win, as growth is harder to achieve through fundamentals alone,” analysts wrote in Nielsen’s latest edition of its Breakthrough Innovation series, its first to look at Southeast Asia.

By Nielsen’s criteria – which judges innovation on how well a brand with a new value proposition drives sales for the first two years after launch – less than 2% of 2,500 FMCG product debuts in Malaysia, Indonesia, the Philippines and Thailand, or 35 in total, made the grade.

Of these, 19 came from local firms, and 16 from MNCs.

“Fierce competition, and varied approaches to innovation between local contenders and global giants, will elevate the FMCG industry to the next wave of growth, with consumers being the key beneficiaries,” noted Nielsen’s regional head of innovation analytics, Tobias Puehse, in a press release announcing the new report.