THE Philippines is among the top three most favorable markets for established consumer brands as traditional trade dominates the retail space, according to a report by Bain & Co.
In a report, the consultancy firm said Malaysia, India, and the Philippines were the top three most favorable markets for incumbent consumer product brands. Meanwhile, South Korea, Singapore, and China were most favorable for rising consumer brands.
“The trend could be linked to the channel dynamics across markets. For example, the thriving e-commerce sector and well-established networks of third-party suppliers are making countries like South Korea particularly conducive for emerging consumer brands’ growth,” said Jichul Kang, head of Bain’s consumer products practice in South Korea, in a statement.
“On the other hand, the dominance of traditional trade and relatively low penetration of e-commerce make countries like the Philippines more favorable markets for established brands,” Mr. Kang added.
In the Philippines, incumbent brands got a bigger market share in eight out of 23 consumer product goods (CPG) categories which are spirits, wine, bath and shower, oral care, confectionery, edible oils, laundry care, and bottled water.
Meanwhile, incumbent brands in the Philippines only lost in seven categories which are color cosmetics, fragrances, hair care, skincare, pet food, sweet biscuits, and drinking milk products, which Bain said still indicates incumbent brands’ dominance.
Market share of the remaining eight categories studied by Bain was stable or had little to no change as “the complex channel dynamics” in the Philippine market makes it challenging for new entrants to come in.
The report studied incumbent brands’ market share in 23 CPG categories from 2018 to 2022.
Traditional trade still dominates the retail market in the Philippines. Bain said traditional trade accounted for around 53% of the retail value across the 23 categories it studied in the Philippines, while retail e-commerce sales penetration is seen at 2%.
“This significant share underscores the importance of robust route-to-market capability for brands aiming to succeed in the market. Such a landscape presents a formidable barrier to entry for new competitors,” Bain said.
Category wise, the beauty and personal care sector was where insurgent brands performed better, as new entrants beat incumbents in four out of six categories in the Philippines.
In contrast, established brands continued to have a bigger share in the alcoholic and non-alcoholic beverage, food, and home care sectors.
Meanwhile, Bain said that local incumbent brands in the Philippines showed stronger ability to gain share in winning categories despite foreign incumbents leading in market share across most categories.
“The success of these local brands can be attributed to their extensive distribution networks in rural areas and lower-tier cities, where they effectively leverage traditional trade channels,” Bain said.
To gain even better footing in the market, Bain said that incumbent companies must look for more effective strategies in managing their brands.
“While market, category characteristics, and macro situations contribute to incumbents’ success to some extent, what matters most is how they manage their categories and brands,” it said.
“Successful incumbent companies are adept at incorporating the most effective strategies from insurgent competitors while leveraging their inherent strengths,” it added.
Bain noted incumbent companies should innovate by looking at emerging trends.
“Our study challenges the notion that insurgent brands universally disrupt incumbents. Many incumbents have successfully maintained or grown their market share amid tight competition,” said David Zehner, head of Bain’s Asia-Pacific consumer products practice.
“The successful incumbents thrived by blending their incumbent strengths and insurgent tactics, allowing them to counter threats and strengthen their market position effectively,” Mr. Zehner added. — Justine Irish D. Tabile
