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November 24, 2014

Top 3 Challenges in Reaching the Chinese Consumer

An HodgsonAnalyst Insight by An Hodgson - Income and Expenditure Manager

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With decades of economic growth, rising incomes, over 1.3 billion consumers and a surging middle class with an insatiable appetite for Western brands, the allure of the Chinese consumer market – the world’s second largest – is obvious. But, as many consumer goods companies have recognised at their own cost, China is a tough market to enter, compete and survive in, let alone prosper. Yet, in the face of moderating growth and rising costs, the challenges facing international consumer goods businesses in China will not get easier in the long term.

Annual Real GDP Growth and Household Annual Disposable Income Growth in China: 2008-2020

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), World Economic Outlook (WEO)

Note: Data for 2014-2020 are forecasts. 

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Euromonitor to Speak at Hong Kong Toys and Games Fair

Toys & Games Fair logo

Date: January 12-15, 2015

Location: Hong Kong Convention and Exhibition Centre, Hong Kong

Event Description: Organised by the HKTDC and held at the HKCEC, the Hong Kong Toys & Games Fair is the largest toy industry event in Asia. Exhibits include educational toys and games, electronic and radio/remote control toys, festive and party items, outdoor and sports toys, toy packaging, smart-tech toys, plush toys, dolls and video games. The fair also includes a Kidult World featuring hobby goods, vehicles, mechanical toys and action figures.

Utku_TanselSpeaker: Utku Tansel, Head of Toys and Games Research at Euromonitor International

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November 23, 2014

International Business Provides Moderate Positives in Japan Tobacco Interim Results

Shane_MacGuillAnalyst Insight by Shane Mac Guill - Senior Tobacco Analyst

In the context of elevated levels of domestic competition and contractions in some of its major international markets, Japan Tobacco’s results for the quarter and year up to September 2014, released on the 30th of October were broadly positive albeit in so far as significant volume decline can ever be so described. The results clearly indicate the impact of excise increases in Japan, the company’s reliance on Russia and the trend to lower value products in many markets, also referenced by both BAT and Imperial in recent results.

Domestic struggles 

It is testament to the continuing decline in importance to the company of its domestic market that a set of group results, of which a 10% volume decline in Japan formed a part, can still be characterised as positive. An overarching industry contraction in Japan prompted by the April 2014 excise hike and a tough competitive environment in which JT is having to graft for every basis point of share contributed to a 10% sales volume decline between April and September 2014. Difficult pricing meant that the company had to rely on cost reduction to marginally mitigate volume loss to just over 7% operating profit decline.

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A Few Factors Monster May Want to Know When Tackling China – the Thirsty Dragon

Hope.LeeAnalyst Insight by Hope Lee - Beverages Analyst

Monster Beverage Co has certainly tasted the sweetness of distribution support from The Coca-Cola Company (TCCC). Its global market share has climbed significantly since the distribution deal started a few years ago and it is now the biggest threat to Red Bull GmbH. Upon the completion of the deal, Monster and TCCC will be able interplay with their energy drink brands and subbrands in different regions or core markets and make strategic decisions as to how to grow their combined brand portfolio.

Before the new Monster fully grows and forms, Monster’s management started to show its long-awaited ambition to enter China. Euromonitor International data shows that China is an apparently underdeveloped market for the two ambitious partners. Without a solid physical presence in this strong growth region, TCCC/Monster could lose out on playing a part in China’s energy drinks boom. Monster said that, “China is a very long-term strategic goal for us – we want to be there, we want to get there as quickly as we can. There’s a complex regulatory procedure to get through to register.” These words show its eagerness to make an entry and its desperate need for help from TCCC. So let’s have a look at the opportunities and challenges China may present to the new Monster.

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Monster: Marketing Energy Drinks in China – the Soft Aspects

Hope.LeeAnalyst Insight by Hope Lee - Senior Beverages Analyst

Marketing-wise, Monster needs to consider how to position itself and what story to tell to win the young consumers’ hearts. TC Pharmaceutical’s Red Bull held the Red Bull Hip-Hop Challenge and set up the Red Bull Style Hip-Hop Party, which were popular among Hip-Hop and fashion fans. It also launched “Extreme Domino”, showing a variety of extreme sports to create a domino effect, and bringing its audience a rich world of imagination as well as vividly embodying the brand’s “personality”. Shenzhen Eastroc Beverage Co Ltd reported that it splashed out RMB107 million to obtain advertising rights on prime-time CCTV in 2014. Likewise, Monster may be looking for an association with a national sports team, a film star or even a well-known US star for endorsement purposes. Even the Chinese translation of the brand name needs to be distinctive, attractive and easy to remember. So far, Monster’s Hong Kong Chinese website does not seem to have a Chinese version name. As things stand, the energy drinks market is very much a manufacturer-led industry, in which the targeted consumers tend to be influenced by clever and continuous marketing campaigns. Some brand names are acceptable in certain cultures, but may not sound right in others. The direct translation of Monster into Chinese would be “an ugly object” – and Monster is unlikely to want to be associated with this not so favourable meaning.

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November 22, 2014

Top 3 Emerging Broadband Markets: Iran, Nigeria and Indonesia

Pavel_MarceuxAnalyst Insight by Pavel Marceux - Technology, Communications and Media

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Euromonitor International has identified the top three most prospective broadband Internet markets among emerging economies worldwide, based on fixed and mobile broadband growth since 2008, size of the Internet user base and prospects going forward. The standout markets are Iran, Nigeria and Indonesia, as these countries are witnessing a rapid connectivity programme that is allowing their large populations to become regular consumers of online services. As rural and underserved areas gain access to modernised broadband connections, these markets provide huge opportunities in the uptake of e-commerce, social media and digital subscription products.

Mobile and Fixed Broadband Subscriptions in Iran, Nigeria and Indonesia: 2014

Source: Euromonitor International from International Telecommunications Union/OECD/national statistics

Note: Figures are forecast

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November 21, 2014

Huge Potential in India’s Yet Uncharted Tea Market

Dana LaMendolaAnalyst Insight by Dana LaMendola - Beverages Analyst

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In India, like other emerging Asia markets where tea consumption is high, there is a lot of focus on the value opportunity from the transition from unpackaged (unbranded) tea to packaged tea products. Indeed, between 2008 and 2013, tea increased by 118% in retail value, reaching US$1.9 billion. Yet, retail volume growth has been less impressive, increasing by 20% in the same period. This discrepancy suggests that to date, the primary shift in the Indian tea market has been towards more value-added packaged tea products, rather than a substantial shift from unpackaged to packaged tea products on the whole. According to industry sources, unpackaged tea still accounts for at least 50% of the overall Indian tea market, indicating a significant opportunity for tea manufacturers.

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November 18, 2014

Vitamins and Dietary Supplements in the Asia Pacific Region: Is the Party Over?

Consumer health analyst Daniel Grimsey presented on vitamins and dietary supplements in the Asia Pacific region for the national conference of Complementary Medicines Australia (CMA) in Sydney on October 30, 2014. Asking the pertinent question “Is the party over?”, Daniel outlined the key growth drivers for vitamins and dietary supplement sales in APAC, identified the star performers within the category and assessed the future direction for the consumer health in the Asia Pacific region. For more information, view the full presentation.

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November 16, 2014

China and India: The Powerhouses of the Asia Pacific Cocoa Market

Helen ReavellAnalyst Insight by Helen Reavell - Contributing Analyst

Asia Pacific is currently the third largest region for cocoa ingredients (liquor, butter and powder) worldwide after Western Europe and North America; however, it is set to become the second largest region, overtaking North America by 2017, with consumption exceeding 688,000 tonnes. Regional sales are dominated by China, which accounted for 40% of volume sales in 2013, while the second largest market is India, with 11% of volume. Both China and India have seen strong growth in the cocoa ingredients in recent years, with China posting an average annual growth rate of 6% and India 16% over 2008-2103. Similarly, forecast rates are also strong at 5% and 11% over 2013-2018. However, this growth is being driven by quite different consumption patterns in these two countries.

Cocoa ingredients in India, more closely matches that of the worldwide market. Cocoa liquor takes the largest share at 43% (37% worldwide), cocoa butter 29% (33%) and cocoa powder 27% (30%). Meanwhile, China is quite different, with cocoa liquor only accounting for 23% of total cocoa volumes, cocoa butter 17%, but cocoa powder reaching 60%.

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November 15, 2014

Charging Ahead: China to Become the Largest EV Market in the World

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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In my recent piece, China’s EV Push Could Reap Rewards in Europe, I alluded to the “growing campaign in China to promote electric vehicles.” I thought I’d elaborate on the numerous government initiatives in effect and also on consumer attitudes, ultimately explaining why China is on track to become the largest EV market in the world, possibly already in 2015.

Government Initiatives

One of the Chinese government’s initiatives to combat rising pollution is the introduction of brand-average fuel economy targets of 6.9l per 100km from 2015 and 5l per 100km from 2020. According to a comment piece by Yang Jian in Automotive News China, manufacturers that assemble vehicles in China “can easily reach their target of 6.9 liters next year by diversifying their product mix with more small vehicles, electric cars and plug-in hybrids.” In addition to these fuel economy targets, there are also central government and city-specific subsidies in place which can amount to discounts of up to CNY100,000 CNY (approximately US$16,000). Another boost to the fortunes of electric vehicles will come from the restrictions imposed on the number of cars that can be registered in certain cities (currently six cities to be precise but many more are expected to follow suit), from which electric vehicles are exempt. Finally, the latest initiative is that “China, the world's biggest carbon emitter, is mandating that at least 30 per cent of new government vehicles be powered by alternative energy sources by 2016 in the government's latest move to combat pollution” according to a Bloomberg article on October 24. To put this into perspective, government vehicles are commonly reported as accounting for 20% of vehicle sales in China.

Continue reading "Charging Ahead: China to Become the Largest EV Market in the World" »

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Recent Posts

Top 3 Challenges in Reaching the Chinese Consumer

Euromonitor to Speak at Hong Kong Toys and Games Fair

International Business Provides Moderate Positives in Japan Tobacco Interim Results

A Few Factors Monster May Want to Know When Tackling China – the Thirsty Dragon

Monster: Marketing Energy Drinks in China – the Soft Aspects

Top 3 Emerging Broadband Markets: Iran, Nigeria and Indonesia

Huge Potential in India’s Yet Uncharted Tea Market

Vitamins and Dietary Supplements in the Asia Pacific Region: Is the Party Over?

China and India: The Powerhouses of the Asia Pacific Cocoa Market

Charging Ahead: China to Become the Largest EV Market in the World