How Yum! Foods Built Their Brands In Emerging Markets

At a recent Leisure & Hospitality Breakfast series hosted at Claridges Hotel, Niren Chaudhary presented to a senior audience on “How to build brands in emerging economies” – a fascinating presentation based on a hugely successful turnaround and growth story when Niren was President of India for Yum! Foods.

The presentation received outstanding feedback from the Chairmen, CEOs, COOs/ MDs, HR Directors and CMOs in the audience, so I wanted to share the essence of that presentation here.

 

Macro Growth Trends In Emerging Markets

 

By 2030 the core 15 emerging markets including China, India, Russia, and Brazil/LATAM will have a predicted combined GDP of $42 trillion, more than all the G7 economies combined. Moreover, 85% of the world’s working population will be concentrated in these economies, accompanied by huge projected growth of their middle-class populations with increased disposable income.

These emerging economies are not immune to challenges in the short-term such as infrastructure in India, recession in Brazil, slowing domestic demand in China, and general themes of corruption and cronyism. Despite this however, the long-term macro-economic winds are likely to continue blowing in their favour, shifting the economic gravity away from the established markets in the West.

 

India Offers Significant Growth Opportunities

 

India is predicted to become the world’s largest consumer market by 2030. It will also be the world’s youngest large country – with a median population age of 27 (compared to 38 in China, early 40s in the USA & UK and late 40s in Japan). With India adding 200 million people to the urbanised work-force over the next 15 years (10 times the amount of the USA), India is already the world’s second largest English-speaking economy and the world’s largest democracy. With 650million people aged under 30 – more than the combined numbers of the EU and the USA – they also have the world’s second largest internet population (behind China).

 

The Challenge With India Is Its Diverse Population

 

With 26 languages and 16 different dialects in India alone though, there are a large number of regional variations to consider, with people looking, acting, speaking and consuming differently from region to region. So, while there was a need to create youthful, aspirational brands, it’s also extremely challenging to create a one-size-fits-all homogenous brand. So how do you market to somewhere so diverse? Initially, you look for the similarities and not the differences – find what is common, what unites.

 

Finding The Common Ground

 

Examples of how international organisations have adapted their products to the Indian market include how LG had adapted the dimensions of their fridge/freezers to have smaller freezer spaces and larger fridge compartments to appeal to a largely vegetarian population.

LG also developed voice-activated washing machines with a range of local languages to help counter high rates of illiteracy amongst the large domestic-help population. Unilever achieved tremendous growth of their shampoo category primarily through sales of single-use shampoo sachets, which on one level made the product more financially accessible to a wider population but also helped counter the limited use of space in bathrooms.

 

The Fortune At The Bottom Of The Pyramid

 

Niren went on to talk about “the fortune at the bottom of the pyramid” where value is critical and described the Indian concept of “good-enough value”, revolving around the mentality of “don’t give me what I don’t need, just give me good enough value”. An example of how mobile phone manufacturers managed to deliver a “no-frills” handset costing just $10, opening the floodgates to India’s 850 million mobile phone customers.

Niren oversaw significant growth for their Pizza Hut brand by recognising that in India, pizza is seen as a quick snack (a slice) as opposed to a full meal occasion. Niren and his team reversed engineered the product, setting an affordable price-point and then worked backwards from there to create the product. Out of this came the $1 Pizza, a game-changer for them and a catalyst for growth.

 

How Integrating With Local Communities Unlocked Lasting Growth

 

There is a need for international businesses to “have purpose” over and above making a profit. To connect on a local level and be seen as a global brand but with a local heart, many of the successful international organisations have also delivered a strong social agenda – giving something back to the people, the country, and doing things the right way for the long-term.

For instance with KFC in India, Niren took the business from 100 stores to over 900, by embracing a policy of inclusion and looking to act as a force for good. In a country deemed to have limited career opportunities for women, they created all-women employee restaurants. They also actively encouraged those with hearing and speech disabilities into the workplace, while simultaneously helping the rest of their employees to learn sign language. They have now opened 20 stores employing only those with a disability.

 

The Implications For Business Leaders

 

To achieve sustained growth in emerging markets, the usual Western rules do not apply. Niren talked about the need to have a “learning mind-set”, as there was often no blueprint to follow. Therefore, a lot of what you had learnt you needed to then unlearn. Given the pace of change in these markets, the strategies and tactics that apply now will not be relevant in another ten years, so there is a constant need to be flexible, adaptable and open to new ideas.

Competing successfully in emerging markets is never easy and resilience is key. You have to wholeheartedly commit and not give up at the first sign of trouble, while acting with integrity and having an obsession and determination is what ultimately delivers positive change.

The prize is there for organisations that can spot the opportunities inherent in these challenges, and they are the ones most likely to win.

 

About The Author

 

Partner, Leisure, Hospitality & Travel Sector
Tim Clouting focuses on executive and board appointments across a variety of functions within Travel, Leisure and Hospitality. He has an outstanding track record developed over nearly 20 years. His dedication and deep expertise has earned him an exceptional reputation with both clients and candidates alike.
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