Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Global Economics

Marketing in Asia: Lessons from Recessions Past

For consumer goods makers, a downturn is a time to trim costs, consolidate gains, and look for possible acquisitions

Asia's fast-growing emerging markets have been good to multinational consumer-product trailblazers like Coca-Cola (KO), Unilever (UL), Colgate (CL), Danone (DANO.PA), and PepsiCo (PEP) that now earn up to 20% of their total revenues in the region. The rising tide has lifted local players, too, benefiting everyone from Chinese health-food maker Celestial Nutrifoods to Indian personal-care company Godrej to Indonesian chocolate maker Petra.

But now that the global downturn has caught up with them, multinational and local companies alike are feeling the threat of slower growth. They've spent the past weeks revising their rosy forecasts and 2009 plans—and experiencing déjà vu. Those who emerge as winners will be the companies best able to use the lessons they learned in previous troubled times still sharp in their memory: the Asia financial crisis of 1997-98, the Internet bust of 2001-02, and the SARS scare of 2003.

In the 1997-98 crisis, consumption shrank by 7% to 8%. Today, such shrinkage is already happening as consumers hold on to their wallets. Consumer goods companies are beginning to slash prices and aggressively promote their products. Distributors and wholesalers are under cash-flow and margin pressure, forcing them to destock and focus on fast-sellers rather than the strategic products consumer-products players would prefer. Weaker distributors and wholesalers are going out of business. And while commodities prices are coming down, many makers of consumer products have hedged at higher prices and are now facing currency devaluation.

A Chance to Race Ahead

But there's good news. If previous recessions in Asia are anything to go by, consumer goods consumption may be one of the sectors least affected by the downturn. The markets recognize this: Equity indexes for fast moving consumer goods in some parts of Asia are down only half the level of overall market indices, which have been down by as much as 70%. Moreover, downturns represent an opportunity for changes in market leadership. About 24% more firms moved from the back of the pack to the front in the 2001 downturn compared with the subsequent period of economic calm, according to an eight-year study by Bain that analyzed the net profit margins and sales growth of more than 2,500 companies.

For many, the immediate priority is to cut fixed and variable costs. Consumer products companies are now slashing overhead built on assumptions of high growth. That's what Procter & Gamble (PG) did in the 2001-02 global downturn. By streamlining its supply chain, eliminating divisional overlap, consolidating manufacturing operations, reducing capital spending, outsourcing some operations, and divesting brands, the company was able to cut operating costs as a share of sales to 82% in 2003 from 88% in 2001. As a result, the company watched its operating margins increase to 18% in 2003 from 12% in 2001. The cost cutting has put P&G in a strong position to weather the current downturn.

blog comments powered by Disqus