Six years ago I moved to the Middle East after having worked in the FMCG sector in Pakistan for half a decade. Fresh and excited, I was looking forward to possibly the biggest change of my career. During my interview for the position, the discussion touched upon in-store activations conducted in Pakistan and in the Middle East and I put the following question to the GM: “Shouldn’t the idea be to create so much value for the brand that consumers would not even think about in-store price based promotions?” The GM smiled and assured me that he subscribed to the same philosophy and then warned me that the realities on the ground were different.
That was six years ago and times have changed. That particular GM has moved on and I am no longer a brand manager. Two things, however, have not changed. Firstly, Shahid Afridi has still not retired from international cricket and secondly, brands have still not been able to create the kind of value that would make in-store promotion less important.
Here I will try to highlight how the MEA region compares to Pakistan specifically with reference to the FMCG marketing.
A diverse region
The GCC (Gulf Cooperation Council) is a sub-region of the Middle East Africa (MEA) region and comprises Saudi Arabia, UAE, Kuwait, Oman, Qatar and Bahrain – in that order of business importance (some companies include Yemen from a commercial operations viewpoint). For companies not operating in central or southern Africa, the region is referred to as MENA (Middle East North Africa). Some companies include Turkey in the MEA region while others consider it part of the eastern European region. The Levant is part of MEA and includes Lebanon, Jordan, Iraq and Syria.
Product development is the same everywhere
There are always some hits and misses and there are always some brands which will benefit from a first movers’ advantage. Brands like Lipton, Tide and Pepsi have developed their core strength decades ago; the same goes from bands such as Milkpak, Tapal or Moltyfoam in Pakistan. These are heritage brands with tried and tested products. There are always some insight-based innovations, experiments which can work or fail. For example, the Sunsilk shampoo made expressly for women who covered their heads did not create a stir in the GCC market, while Persil Abaya Shampoo became a trendsetter. Toyota Yaris launched a pink car in 2011 which no one remembers today, yet pink laptops are in demand.
A less fragmented trade universe
The trade structure in the Middle East is completely different from Pakistan. Although the channels remain the same (modern trade, middle trade, wholesale and lower trade), the composition and overall universe are different.
According to a Nielsen census in 2009, Pakistan had approximately 247,000 handlers of food based FMCG businesses (about 260,000 if cosmetic and perfume shops are included). Modern trade represented a mere two percent of the total weighted business and less than one percent of the numeric business. Due to the vast geographical spread of lower trade, it is practically impossible for any distribution setup to completely cover all 250,000 outlets, even when it comes to the tobacco and carbonated soft drinks categories. As a result, the wholesale channel becomes important as it serves as a distribution network for the lower trade, offering them credit facilities, which direct distribution companies usually avoid.
In the GCC, the trade structure varies from country to country. In the UAE, modern trade accounts for 75% of the FMCG business, with just two to three percent coming from wholesale. In Saudi Arabia, wholesale accounts for 25 to 30% in the FMCG sector, but varies from category to category. The overall GCC trade universe is about one-third of Pakistan’s, with half the business coming from modern trade – and this 50% chunk comes from under 50 retailers spread across the region and includes Carrefour, Lulu, Panda Othaim and Spinneys. In this scenario when it comes to go-to-market strategies and in-store executions ‘impact’ becomes more important than ‘reach’.
Price promotions decrease the value of FMCGs
By virtue of a high GDP per capita and the influx of highly paid expatriates, consumers in the Middle East dispose of high purchasing power (especially outside Saudi Arabia). Smaller markets like Kuwait, Qatar and the UAE have a high proportion of SEC As (purely as a quantitative definition, the SEC C in the GCC is at par with SEC A in Pakistan) and the consumer price index is on the higher side compared to Pakistan. However, the rate of inflation in Pakistan has been faster than in the GCC, hence, the price index of the two regions is coming closer. In terms of in-store price promotions, the GCC markets go through periodic price wars across different categories and these intensify during peak seasons (pre-Ramazan months and the back-to-school period in August).
Conversely, Pakistani consumers are wary of price discounts, often associating them with quality issues (near expiry or damaged stock). However, with the growth of modern trade in Pakistan, price-off promotions are becoming part of the retailer offering. As the weight of modern trade in Pakistan increases, consumers will become more receptive to price-off promotions, although perhaps not in the next five years.
Extremely fragmented ATL
Media is one of the most complex areas of marketing in the Middle East. Although there are more TV and radio channels in Pakistan, consumer behaviour patterns are easier to understand and the rating system is better compared to the MEA region. In terms of TV, in the Middle East, there are pan-Arab channels and here the biggest networks are MBC (Egypt), OSN (Dubai) and LBC (Lebanon). MBC is the biggest and targets Arabs and non-Arabs through different channels while OSN has a larger expat audience. Then there are the local channels in each country, with their own loyal audiences. Adding to this fragmentation there are sports, news, pan-Asian networks and Turkish channels. Then there is the fact that the rating system is outdated and not regulated. All these channels are watched in the GCC countries and several Levant and North African countries on different time zones, so that primetime in one country does not always coincide with primetime in another. In a scenario such as this, sponsorships are more important than spot placement. As a result a large chunk of media dollars goes to waste, and it is not easy being a media planner in the MEA region.
Radio has its limitations and is a largely ineffective medium for the FMCG sector. Radio listening is limited to cars, particularly taxis. In Saudi Arabia, there are hardly any English stations, which means only Arabic speaking audiences can be targeted. In the UAE there are English and other language stations but audiences are limited and mainly come from the lower SECs.
BTL – Expensive and limited reach
Compared to Pakistan, BTL is an expensive medium for direct consumer interaction. It is also an operational nightmare if extended to a wider geographical area. Imagine a float starting in Karachi and going on to five or six cities in Sindh and then reaching Multan during a span of 20 days. The cost of conducting such an activity in the UAE or Saudi Arabia is seven to eight times higher than what it would cost in Pakistan. Considering the success of mall culture and the strong modern trade in the region, most BTL consumer interaction takes place either in-store or in the malls, but they are costly, have limited reach and there is a lot of clutter in the malls due to limited space.
Digital on the rise
The GCC countries have a strong digital infrastructure. There are approximately 35 million internet users across the GCC, over 20 million Facebook users, of which 88% use social media on a daily basis (in Pakistan the infrastructure and subscription numbers are lower). Due to high speed connectivity and high smartphone penetration, rich media content is the biggest opportunity for marketers, although it has yet to be fully utilised. Ecommerce is on the rise in the GCC, although not necessarily in the FMCG sector. Pakistan is still far behind when it comes to ecommerce and this trend is unlikely to become a mass revolution in the next couple of years or so.
In a nutshell, marketing FMCGs in MEA is a different proposition compared to Pakistan. Although manufacturers are always willing to bring insight based innovations to the region, the execution is more complex and demanding compared to Pakistan. Pakistan is a single country, here we have the six GCC countries, the Levant and Africa, several time zones and an extremely fragmented media. In a situation like this, BTL and price promotions are the avenues any marketer would look in to, however, they come at a high cost and reduced brand value. Digital is one element of the marketing mix which can solve the problem of BTL and price promos; it is cost effective and can be used for brand building. However, this requires talented digital media experts and marketers willing to experiment and create customised content. It is also worth noting that although every company in the region has a digital marketing team, successful campaigns on digital which have delivered KPIs can be counted on fingers of one hand.
Sami Qahar is a Dubai-based Pakistani looking for excuses to write. Aurora gives him a few.