Introduction
As mentioned previously, the research purpose of this dissertation is aimed to uncover the future FMCG market trend in Taiwan. Questions designed based on Porter’s five-force model is used as the framework that allowed the formation of conjecture regarding to the five aspects in the industry. According to the feedbacks and responses drawn from the interviews with three FMCG manufacturers regarding to three different products, a detailed review of competitive trend, consumer trend, distribution trend, product strategy trend, and corporate internal resource allocation trend related to each product are organized in this section. By comparing and contrasting the trends of the three products belong to the FMCG industry, the overall market trend is expected to be found through the differences and similarities.
Hair Care Product
Competitive Trend
As mentioned by the interview respondent, the overall market for hair care product is becoming increasingly competitive over the last five years since the shampoo category is no longer growing, and each manufacturer is striving to sell more of its product. Strong competition leads to permanent price-cut and profit margin erosion. Consumers are the ultimate benefited party since the added cost and lost profit margin are shared between retailer and manufacturer. Along with price-cut, numerous promotional offers take place continuously with the intention to stimulate sales with added benefit for consumers. However, the present price-wars may not help in reviving the slow-moving hair care category. One of the downside of price-war is that it attunes buyers to price bargains rather than value. The buyers look for the price gains only when purchasing hair care products; it is definitely detrimental in the long run. While price dynamics of the saturated shampoo category keep changing, manufacturers are trying to respond by developing different positioning strategy with continuous product re-launch each year to stay away from price-wars.
As mentioned by interview respondent, each shampoo manufacturer has been developing line extensions for product categories they already participate in by adding new ingredient, changing the packaging design, shooting new TV advertising, and launching new campaign. Annual product re-launch not only prevents profit erosion from price-cut, but also delivers new product image and attribute to consumers.
Furthermore, product re-launch is also a safer alternative than launching a brand new product in the same product category due to the following reasons: the new
re-launched product can simply capitalize on the existing brand name, the R&D cost can be reduced, and the re-launched product can use the existing distribution system and shelf space. Although it has become generally more and more challenging to launch successful products due to intensified market competition, it is regarded as an opportunity for constant product development and improvement. Furthermore, it is predicted that the current seven leading brands of the two most competitive manufacturers are going to continue lead the market due to their abundant resource, copious market experience, and strong research and development team.
Consumer Trend
Numerous phenomenons are observed during the last five years in the market of hair care product. Among the observed, the most prominent is the continuous product re-launch of almost every shampoo brand. The whole idea of annual product re-launch serve with a reminder purpose to remind its consumer about the existing brand.
Reminder is essential for brand survival sine the hair care market is very competitive and consumer brand loyalty is very low for this product category; comparing to five years ago, the degree of consumer loyalty has dropped sharply. As mentioned by the interview respondent, a household uses up to six different brands of shampoo in Taiwan annually. Thus it would be extremely difficult to generate consumer’s interest and draw attention to the brand without product re-launching while new products sprout into the market. When asked what were the most important five techniques used to stimulate purchasing decision, the price factor appeared on top of the list. While manufacturers are involved with intensifying price-wars, consumer brand loyalty
care products which are on sale. Other affecting factors are shelf display, targeting the right consumer, packaging, and product attribute such as fragrance. Shelf-display is essential for generating sales because it is where consumers compare products and make purchasing decision; my respondent calls it “war in channels.” Colorful point-of-purchase displays and special fixtures are used to call attention to new products with ceiling signage, posters, and special in-store display.
Targeting the right consumer is also important as consumers are moving towards a more individualistic trend. Instead of sharing a bottle of shampoo for the whole family, consumers now would select the preferred shampoo that suits their style and need the best. Female is main target consumer for the hair care category since 70% purchasing decision happens on female. Packaging is also an essential ingredient in generating sales since it gives the product individuality and helps consumers to identify the product. Packaging reflects the value of the brand and connects the brand image with the product. While making purchase-decision, consumers are affected by product packaging unconsciously; attractive and well-designed packaging not only conveys the message that the brand wants to deliver, but when used appropriately, could generate emotional benefit. Lastly, product attribute is a concern when consumers make purchasing decisions. However, it is important to keep in mind that the product attribute being advertised in advertising campaign is in accordance with the actual product quality and functionality. Inconsistency would result in a gap between product perception and trial experience, which would generate unsatisfied consumers and fatal consumer disloyalty.
Distribution Trend
Hypermarket such as Carrefour have been expending rapidly during the past few years in Taiwan. These stores have frequently attracted a large customer base by the
“everyday low price” strategy. The strategy is to make little profit on each thing it sells, but to sell in large quantity. Under this strategy, manufacturers get the benefit of large and consistent orders; on the other hand, the distribution channel can bargain for low prices from manufactures since a large bulk of products is ordered from the manufacturers. As mentioned by the interview respondent and announced publicly, Carrefour, the most frequent-visited hypermarket in Taiwan, is undergoing an acquisition process with another hypermarket, Tesco. With this acquisition, Carrefour strengthens its position in Taiwan where it will be operating over 40 hypermarkets in 2006. The expending of Carrefour implies that the power of its bargaining power would certainly be increased. Carrefour is already a key distribution channel for almost every FMCG and household products; with this expansion, it is expected that even larger quantity of products would be ordered and sold. As more and more products compete for shelf space, a better price and other concessions such as advertising support and fixtures would be negotiated. Having the most easily-accessed and eye-catching shelf space is essential since numerous hair care products are placed together in store and each of them is striving to draw attention from potential buyers;
having a good spot in store would definitely increase the possibility of being noticed.
Furthermore, although it is said by the interview respondent that the private label brands manufactured by retailers do not constitute a threat to those well-known market leading brands, they do compete for shelf spaces in the stores.
drug chain stores such as Watsons. The prosperity of such retailing channel in the urban area indicates the consumer need for convenience. Unlike Carrefour which targets family as its core customers, drug chain stores targets singles in the urban area.
Products sold in this kind of retailing channel are often in smaller volume but higher profit margin than the ones sold from the hypermarket. The third major type of retailing channel is convenience store. According to ACNielsen, there are approximately 8360 convenient stores throughout Taiwan in June 2005; ECCT has also reported that Taipei City has the highest density of convenience stores of 4 stores per kilometer. With its huge number and dense presence, convenience stores such as 7-11, Family Mart, and Hi-Life definitely would be an opportunity that cannot be neglected by manufacturers. One special retailing channel for hair care product is beauty salon;
strategic alliance is developed with beauty salon since it is a close-related industry that has professional image for product representation. Stylists could work as consultants and deliver product information to the consumers; furthermore, salon would be the most appropriate place for trials during new product launch, and feedbacks can be obtained from these professionals for R&D improvement. In conclusion, due to the growing importance and power of distribution channels, manufacturers are started to form channel development teams with the focus to develop channel relationship, hoping to negotiate some kind of strategy that would result in mutual benefit for both parties.
Product Strategy Trend
Product re-launch is a continuous strategy to ensure product improvement and to stay competitive in the industry. When asked what the most important factors were
while sketching a product strategy, the interview respondent said the three priorities would be product attribute, differentiation, and promotional strategy. Product attribute is the most important consideration since it links directly to product differentiation, and these two factors are the key ingredients to the formation of competitive advantages.
Each brand is to be given a specific characteristic that helps to distinguish it from the other competing brands. For instance, product attributes such as anti-dandruff, rich-moisturizing, and damaged hair restoration are focused on the functional side of the product; while other attributes such as the campaign “as gentle to the eyes as water” and the long-lasting fragrance of herbal essence are focused on the emotional side of the product. Being unique and having a distinctive product attribute are indispensable in this very competitive industry since consumer loyalty could be built by this uniqueness and distinctiveness. Furthermore, it could also prevent the product from being tangled in price-wars. However, it has become increasingly challenging to be innovative and special as more and more products are being re-launched with added value and different attributes annually.
Corporate Internal Resource Allocation Trend
One of the corporate internal resource allocation trend mentioned by the interview respondent is the shift from local to regional team. It is a trend taking place in many multinational corporate to enhance internal resource sharing. Instead of dividing its resource to each country, corporate are combining countries into regions and create regional teams instead of local teams to optimize resource efficiency. For instance, cost can be reduced when a TV advertisement is shared between countries in a region; the
information such as market dynamic observed can also be shared in a region. The creation of regional team is resulted under external pressure and internal needs; as the business of a company grows faster and complicated globally, better control and reduced operating cost are needed. Furthermore, as the external environment becomes more and more competitive, corporate has to find ways to eliminate R&D cost and to shorten product launch time. Moreover, the shift from local to regional teams not only enables the company to better align its resources, but also enhances communication and knowledge-sharing between each country. Thus, with the purpose to share, to collaborate and to cooperate, the creation of regional team is necessary for multinational corporate to stay competitive in its industry.
Summary of Hair Care Product Trend
Trend Cause
Competitive Trend
y Intensifying market competition
y Price-war
y Annual product re-launch
y leading brands continue lead the market; big players become bigger
y Continuous product development and improvement for product survival
y Small players would face serious challenge for survival due to less resource and R&D
Consumer Trend
y Decreased consumer loyalty
y Consumer has
abundance of choices y purchasing decision
shifts with price dynamic
y purchasing decision based on self-need
y packaging design is essential to attract consumer’s attention
y The value of society is moving towards individualistic
y Packaging design helps consumers to identify the product and brand image
Distribution Trend
y Rising importance &
increased bargaining power of hypermarket
y In-store promotional activities become critical
y Increased competition for shelf-space
y Emergence of drug store such as Watson
y Rapid expansion of Carrefour
y Purchasing decision affected by in-store promotion
y Increased private brand and new products launched annually
y Rising number of singles and small family in urban area
y Strategic alliance with special retailing
channel such as beauty salon
y Increased promotional strategy inside channel
y The needs for R&D suggestions from professional
y Increased competition between brands
Product Strategy Trend
y Increased focus on product differentiation
y The focus of functional benefit of products
y To optimize internal resource-sharing and to respond to external competition
Source: Organized by this research
Feminine Hygiene Product
Competitive Trend
According to the interview respondent, the feminine hygiene market is definitely becoming more and more competitive in Taiwan. Two major factors responsible for the increased market competition were explained: (1) the increased number of manufacturers participated in this market, and (2) the increasing diversity of the products marketed. Ten years ago, the feminine hygiene market was dominated by only three major brands - Whisper, Kotex, and Modess. However, as the high profit margin has attracted numerous FMCG manufacturers entering this market, the number of major brands has increased from three to six; new market entrants such as Sofy, Laurier, and Carnation have diluted market share and increased market competition.
This change is regarded as a threat to the leading brands since the market is now diluted and it requires extensive R&D and innovative product attribute that bring consumers added functional benefits to stay competitive in the market. Furthermore, the emergence of private-brand sanitary pads has further increased market competition as most private-brands are sold at lower prices to induce brand switching and product trial. Consumers who are price-oriented and those with low brand-loyalty might consider brand-switching. As the result of intensifying competition, manufacturers start to adopt various promotional strategies on top of TV advertisements; the purpose of frequent promotional activities is to increase product trial and to stimulate sales.
The most commonly used promotional techniques are price-cut, free giveaways, and in-store fixtures. As mentioned by the interview respondent, price-cut has become more of a permanent promotional technique than a temporarily one since the
intensifying market competition has created price-erosion. Consumers are looking for not only lower price, but also free giveaways during their purchasing decision process.
Giveaways are often attached with each package of sanitary pads in two ways – on pack and in pack. As manufacturers are gradually adding emotional values to their products, free giveaways such as jewelry box, fragrances, bath and body care, and soft animals are attached with the package to develop a linkage between the image of sanitary pads with cleanness, comfort, sweetness, and beauty. When walking around retailing channels such as Carrefour, one would notice beautifully packed boxes of sanitary pads with free giveaways in the feminine hygiene section; those boxes look more like gifts, instead of sanitary pads.
Other than price-cut and free giveaways, manufacturers are setting up in-store fixtures to generate attention and to encourage purchasing at each shopping destination, especially at hypermarket. Banners, 3-D stands, DM, and actual-sample are presented at the product shelf to generate consumer’s attention and to grab the last chance of product promotion. This promotional technique is essential since stores are the location where consumers compare products and make final purchasing decisions. At last, it is predicted by the interview respondent that the smaller manufacturers in the feminine hygiene market would gradually disappear under the intense market competition. After 10 years, only the big players with abundant internal resource and external market experience would survive since the feminine hygiene market is reaching to the mature stage; those who fail to be innovative, overlook the importance of continuous product improvement, or lack of internal resource and R&D support would eventually loose their product competitive advantage and disappear from the market.
Consumer Trend
There are a few changes when we compare consumer preference from 10 years ago with now. The consumer preference shift from “thick” to “thin” to “ultra-thin”
sanitary pads was observed during the last 10 years. One of the biggest concerns for female during their menstrual period is the problem of “leaking,” thus the thickness of pads becomes important. Most consumers preferred thick sanitary pads since it provided stronger sense of security during menstrual period. However, as increased number of woman participating in the work-force, a lighter and thinner design is desired to maximize the comfort and allow for free movement. Furthermore, the function of “leakage-prevention” is no longer enough to satisfy consumers; with advanced technology and rapid market competition, manufacturers strive to make continuous improvement to develop better products with numerous added functional values such as wings, top-dry sheet, ultra absorbent material, and ultra-long design for night uses. Consumers now are looking for different functions according to different time and location; for instance, during night time when consumers are more concerned about leaking problem, overnight guard pads with longer design would be the best choice, during day time when comfort is the priority, ultra slim pad with wings would be selected to allow for maximum comfort and to allow ventilation.
According to the interview respondent, the most important four factors that are used to generate consumer’s attention and to stimulate purchasing decision are price, package design, promotion, and word-of-mouth. Consumer brand loyalty is often affected by price dynamic; brand-switching is likely to take place if a brand with similar functions desired by the consumer is on sale. This is also the result of intensifying market competition and the market entrant of private brands. The second
factor is package design; sanitary pads are transforming from pure functional products to emotional value-added products. Package design not only provides special characteristics to products, but also effectively attracts its target consumers. For instance, Kotex has launched a new product line of sanitary pads, targeting young ladies with its soft-color external package design. Furthermore, images such as stars and four-leave clover have been imprinted on the internal package to represent night-used and daytime-used sanitary pads. This eye-catching package design has not only created a younger image for Kotex, but also successfully opened a new consumer
factor is package design; sanitary pads are transforming from pure functional products to emotional value-added products. Package design not only provides special characteristics to products, but also effectively attracts its target consumers. For instance, Kotex has launched a new product line of sanitary pads, targeting young ladies with its soft-color external package design. Furthermore, images such as stars and four-leave clover have been imprinted on the internal package to represent night-used and daytime-used sanitary pads. This eye-catching package design has not only created a younger image for Kotex, but also successfully opened a new consumer