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The air care sector is in troubled waters, with global sales growing by a sluggish 1% on 2008, according to new data from Euromonitor International. This was the industry’s worst performance in over a decade and highlights the need for a comprehensive strategic rethink.
The big problem for the global air care sector boils down to its overdependence on a handful of developed markets. Specifically, the US and Japan, the two biggest air care consumers, together accounted for 42% of global sales in 2009, according to Euromonitor International, and if you add the UK, France, Spain, Italy, Germany and Canada, you quickly account for around three quarters of worldwide demand.
What is most surprising is that Russia is the only emerging market to generate a retail value in excess of US$100 million. In laundry care, in contrast, there were six emerging markets generating retail sales of over US$1 billion in 2009 and dozens which yielded market values exceeding US$100 million.
Of course, laundry care is by some way the leading home care sector, but even the bleach market, which has a global retail value less than half the size of air care, can boast five emerging markets with a retail value of US$100 million or more.
The overdependence factor has become a much bigger issue for air care as the world’s developed economies struggle to regain their footing from the worst financial crisis since World War II.
And whereas other home care sectors have found relative sanctuary in the resilience of first and second-tier emerging markets, air care has yet to lay down strong enough roots outside the developed world to mitigate the recent meltdown.
To put this emerging market weakness into context, the Asia-Pacific region, excluding Japan, generated air care retail sales of around US$400 million in 2009, which was less than the market value generated by Spain, with a population some 100 times smaller.
And the picture is no less attractive in Eastern Europe and Latin America, where air care retail value summed US$380 million and US$369 million, respectively, last year.
A common, albeit flawed, explanation for the poor performance of air care outside the developed markets is that too many of its products are premium in price but low in necessity.
However, even at a time of widespread consumer belt tightening, this fails to explain why the sector is virtually a misnomer in some of the hottest growth markets in the world.
The first point to consider is that middle-class aspiration in the emerging markets has never been higher, and has translated into burgeoning demand for a wide range of premium and luxury goods.
Take Scotch whisky, which on paper has a high-in-price-low-in-necessity beverage profile. Yet, in 2009, emerging markets accounted for eight out of the category’s top 10 absolute growth stories. Similar premiumisation trends are being seen across the fast moving consumer goods market.
Price is not the real problem for air care, neither is its usefulness as a product. Rather, the more fundamental reason behind its weak penetration in the emerging markets has to do with poor retail visibility and confused consumer perception.
In short, millions of consumers are barely aware of the sector’s existence, while others are simply unclear as to what the products offer as an enhancement to their lifestyle. Lack of exposure and weak perception would be killer blows for any consumer goods product.
The blame for weak air care culture in the emerging markets lies firmly at the door of the companies which manufacture and distribute the brands. There seems little doubt that middle-class demand for air care in emerging market metropolises as diverse as Mexico City, São Paulo, Rio de Janeiro, Mumbai, Shanghai, Beijing, Lagos, Manila, Jakarta and Istanbul should be significantly stronger.
Indeed, the potential usefulness of air care in these sprawling urban markets is arguably much higher than in many key consumption bases of developed countries. By not tapping more effectively into this emerging market potential, air care products are missing out on a major growth opportunity, but also a possible revenue safety net going forward.
Positioning is important in the current climate, and tailored segmentation needs to be in place to make air care affordable to the widest possible consumer base.
But, first and foremost, the industry needs to raise its advertising and promotional investment right across the emerging markets. That should be a slam-dunk strategy for educating and bringing on stream new consumers while also leveraging the aspirational and positive lifestyle credentials of the sector.
Manufacturers also need to put more pressure on the bigger retailers to raise the profile of air care brands. Promotional activity, in particular, has real potential to beef up consumer demand.
Indeed, giving away free samples to consumers who buy more familiar home care brands (and there are plenty of home care portfolio synergies among the leading companies) could prove a smart strategy in product-hungry markets where the middle-class is growing.
Critically, brands need to raise their ubiquity in key first and second-tier emerging markets. With savvy investment, the opportunities for growth are vast.
Conversely, languishing in the false comfort of the developed markets shows lack of ambition. Quite simply, now is the right time to strengthen global positions with inspired product development and a new era of dynamism.