03 Mar 2011 Don’t overlook emerging markets when it comes to innovation
Pulpy may be unfamiliar to us but Coca-Cola’s top-selling fruit drink is all the rage in Shanghai, Jakarta and Mexico City. Introduced in China and rolled out across Asia and Latin America, it is now set for launch in other regions, including eastern Europe.
Pulpy is Coca-Cola’s first international product to be developed in the emerging world and make a significant contribution to group-wide sales. “This is one of the most successful Coca-Cola innovations of the 21st century,” says Joanna Lu, a Coke marketing director.
The success of the drink highlights the growing importance of innovation in emerging markets. Not only do China, India, Brazil and other countries offer companies fast growth prospects; they also generate opportunities for developing new products, services, manufacturing techniques and business processes.
These innovations do not yet involve transformational technological shifts – such inventions remain the preserve of the developed world with its long-established universities and commercial laboratories. But the emerging world is spawning product improvements with commercial implications that are game-changing.
Multinationals that dismiss such innovation as localisation do so at their peril. The advantages competitors gain in emerging markets will be deployed in the rich world too. Christoph Nettesheim of Boston Consulting Group says: “The danger for many is they don’t see the emerging market innovations coming because they are not yet coming direct into their home markets. But they will.”
There is a precedent: in the 1970s, Japanese groups advancing in world markets were often dismissed as low-cost, low-quality copycats. But later they were recognised as innovators, notably in miniaturisation and just-in-time manufacturing. While Japanese companies are now under pressure from revived western groups and new Asian rivals, their innovations are imitated everywhere.
Emerging market innovation is not new. More than 20 years ago, Hindustan Lever, the Indian consumer product affiliate of the Anglo-Dutch Unilever, pioneered mini-sachets to take its soaps to poorer consumers. What is new is the increase in such innovations, the internet-boosted speed with which they capture markets, and the increasing role played in innovation by local companies, notably Chinese, Indian, Brazilian and South African…..