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Distribution debunked to unlock growth

A localized route-to-market approach is the key to success in emerging markets

OVERVIEW

Expanding into emerging markets is often a priority growth area for multinational consumer goods companies. But to succeed, they can’t go it alone. In fact, they need local help more than ever, particularly from distributors already on the ground. When it comes to distribution, multinationals should look to build an ecosystem of local partners who can help them penetrate these markets at a lower cost and quicker pace. Route-to-market matters more than ever—and “ecosystem” needs to become more than just a buzzword in any large consumer goods company expanding its presence around the world.


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The stakes are high with at least 60 percent of gross domestic growth expected to come from emerging markets in the next five years.

KEY FINDINGS

Multinational consumer goods companies must identify when a direct-to-store model would be most appropriate, and when leveraging local distributors would be more effective.


A balancing act

Local consumer goods players partner twice as much with distributors as multinationals in emerging markets. In doing so, they overcome size limitations and enable flexibility in their assets. By over-relying on a direct-to-store model while under-leveraging local distributors, multinationals are missing out on the 25-35% growth that locals have achieved.



Grow your own

Finding a suitable local distributor can be a challenge. However, some companies are “growing their own distributors” through close partnerships and joint ventures that often result in the distributor expanding into new markets.



Partner like you mean it

The alignment must be done in a way that considers the distributors as part of the company, such as an extended commercial arm of the business. Through such a tight integration, local distributors can provide multinationals with access to previously untapped points of sale and new consumers.


RECOMMENDATIONS

To capture the growth opportunities in emerging markets, multinationals can adopt an Integrated Distributor Engagement Model (IDEM) that integrates their route-to-market strategy with the capabilities of local distributors.

AUTHORS