International food and beverage manufacturers are no strangers to tailoring products to local markets. The world ‘glocalisation’ became a catch-word in the early 1990s, and fast food giant McDonald’s is just one example of a company adapting its menu to suit local taste preferences.
Within the global economy, however, consumption patterns are now shifting towards local and personalised products to a much greater extent, according to a report published by A.T Kearney, a Chicago-headquartered global management consulting firm.
In order to thrive locally in each market, A.T Kearney says, companies must become locally integrated enterprises.
This means shifting operations and devolving functions to local markets around the world, and “re-engineering” supply chains and production locations into new, decentralised business models, the report says.
“Multi-localism is not a passing fad,” says Paul A. Laudicina, founder and chairman of A.T. Kearney’s Global Business Policy Council and co-author of the report. “All companies must determine how to become locally integrated enterprises in a fundamentally transformed operating environment."
Tailor the flavour
Companies that ignore these changes will find themselves "increasingly uncompetitive in the marketplace".
One company that has been adapting its portfolio to meet local tastes is Coca-Cola in India, which has pushed into fruit-based drinks and away from carbonated drinks there.
"The introduction of various local flavours, including ingredients that are only grown in certain Indian regions, is also part of this effort, reflecting a hyper-local approach that acknowledges significant internal variations within the country," the report says.
Acquire and partner
Acquiring local brands or setting up joint ventures with them is another way companies can give themselves local credibility - and is perhaps the most viable entry strategy in markets where a strong local competitor already exists, A.T Kearney says.
When Anheuser-Busch InBev bought South African Breweries in 2016, it retained the local branding of the beer portfolio while Walmart pierced the South African market by acquiring a majority stake in local player Massmart and keeping the name.
“The challenge for companies is to strike the right balance between the efficiency of scale of global brands and the appeal in local markets derived from investing in smaller brands.”
From a 3-D printed Bulgarian smartphone to Finnish chocolate
Meanwhile, advances in technology are allowing companies to bring manufacturing closer to domestic markets.
Bram de Zwart CEO of 3D Hubs, a company that describes itself as the world's largest network of manufacturing services, told A.T Kearney analysts that currently one of the biggest barriers to uptake of 3-D printing is the perception that it is expensive.
However, if a company factors in the full costs of developing, producing, shipping and delivering goods in global supply chains and then compares it with the cost of 3D printing the same goods locally, the final cost may be “comparable”, said de Zwart.
The CEO cited the example of a smartphone case made in Bulgaria for a Bulgarian customer rather than shipped over from China. Adidas has also started using 3-D printing to make trainers in the US and Germany rather than Asia, and the next step for the sportswear giant is locally printing shoes for consumers after an in-store foot scan – “a fully personalised and locally produced product”, according to the A.T Kearney authors.
Just this week, family-owned Finnish food company Fazer announced it would be offering consumers the opportunity to have a picture of themselves and friends appear on the front packaging of its Kismet chocolate bar.
For the authors, one thing is certain: "All of these examples indicate that business leaders believe these localised consumer preferences are a long-term trend rather than a passing fad."
Populism, sustainability & e-commerce
So, what is causing this global shift now? The reasons underlying these preferences are diverse, write the authors, but there are three core ones.
"First, the growing populist and nationalist sentiments highlighted above are an important driver of this trend in many markets.”
Donald Trump’s election as president of the US sent shockwaves around the world but populist governments in Italy, Hungary and Poland as well as the UK’s Brexit vote and far-right candidate Marine Le Pen reaching the final stages of the French presidential elections show that Europe too is also at the heart of this global backlash.
It is a sentiment that is putting companies “in the political crosshairs”, with significant implications for their brand reputations, the authors add.
Mondelez International, for instance, found itself making headlines during the Trump campaign after it announced its Nabisco brand would relocate a factory from Chicago to Mexico, prompting calls for a boycott.
Meanwhile, European governments have been pushing for country-of-origin labelling on dairy, meat, wheat and tomatoes, a phenomenon that, while seen as a step towards transparency for some, has been dubbed ‘gastronationalism’ by one political scientist.
The second driver is a growing concern among some consumer segments about the environmental footprint of their purchases.
“Products produced locally do not have to be shipped over long distances and therefore require fewer resources to bring to market and produce fewer carbon emissions in the process. According to a 2015 Nielsen study, 66% of global consumers said they would be willing to pay more for sustainable brands—a significant increase from the 50% who said they would do so in 2013. And almost half would pay more to environmentally friendly companies and those with a commitment to social values.”
The third driver of demand for local and personalised products is the rise of e-commerce and 'frictionless commerce', whereby purchases “happen seamlessly without the customer having to make a conscious decision”.
“In a world in which algorithms often decide which product choices a consumer sees, companies need to give consumers a reason to interrupt the increasingly automated purchasing process and actively choose their brand, rather than passively accepting substitutes,” write the authors.