Deep Local Innovation

Deep Local InnovationReconstructing your product for emerging markets takes knowledge.  You have to discover what you can leverage in your product and what you have to give up to connect to consumers in widely different regions of the world.  Oreo cookie’s stalled success in Asia provides an interesting example. Kraft struggled for years trying to put U.S. Oreos into emerging markets. They finally got it right by matching local tastes, and the business is now taking off like a rocket. Oreo’s sales were up almost 25% last year, with half of the brand’s $2 billion in sales coming from emerging markets.

Deep Local Innovation

One lesson to take away from the Oreo story is the need to be nimble in the creation of a product pipeline.  Chinese consumers found U.S. Oreo’s to be too sweet and Indian consumers found the cookie to be too bitter.  Significant flavor work was undertaken to produce locally appealing Oreo flavors such as green tea for China, banana and peanut for Argentina, orange and blueberry for Indonesia and mango for India.  The cookie formats were changed where necessary such as the traditional cream-filled wafers they sell in China to match consumer preferences.  In India, the Cadbury name was added to Oreo’s to capitalize on the chocolate brand’s awareness and wide distribution in that market (Kraft acquired Cadbury in 2010).

Another brand to watch in emerging markets is Dunkin’ Donuts, which kicked off its business in India last week with its first store in the heart of New Delhi. The brand’s bright orange and pink signage pops out dramatically against the neutral tones of the Delhi street.  Doughnuts are not a familiar food to most Indians so the stores are called Dunkin’ Donuts & More to reflect a wider range of food being served, such as ciabatta sandwiches and croissants.  But just like Oreo’s, Dunkin’ Donuts is catering to the Indian palate by serving novel mango doughnuts and spicy sandwiches.

Deep Local Innovation

Dunkin’s timing also beats Starbucks into the Indian market by three months.  The café market in India is expected to grow to $600 million over the next five years so a strong early position in India is worth millions.  However, pricing will be one of the barriers for many international brands entering the Indian cafe market.  The price for a cup of Joe at Dunkin’ Donuts in the U.S. is modest relative to Starbucks, but in India their price of 70 rupees per cup is considered expensive for many Indians.  Another market barrier is local infrastructure, so both companies have partnered with Indian firms to enter the market successfully. Starbucks is working with Tata Global Beverages and Dunkin’ Donuts is active with FoodWorks to leverage their local distribution and supply chain.

The growth potential in emerging markets is seductive, and for companies who commit the manpower and resources on the ground, there is much gold in those hills.  But, it requires thinking local, not global to meet the multi-faceted demands of these consumers.  Global expansion is is not for the timid; the prize goes to the nimble and talented.

image credit: peaceloveprofits & progressonnetwork & shabbyblogs

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Donna Sturgess is the President and Co-founder of Buyology Inc and former Global Head of Innovation for GlaxoSmithKline. Her latest book is Eyeballs Out: How To Step Into Another World, Discover New Ideas, and Make Your Business Thrive.

This entry was posted in Competitions, Culture & Values, Customers, Product Innovation, marketing and tagged , , , , , . Bookmark the permalink.

4 Responses to Deep Local Innovation

  1. Neil Hopkins says:

    Hi Donna

    Totally agree with you. Global strategies are one thing, local tactics are another (you might be interested in this piece I wrote on Community Network Marketing – http://interacter.wordpress.com/2011/02/24/community-network-marketing-%E2%80%93-making-the-global-hyperlocal/ ).

    Trying to lever something that isn’t culturally relevant into a new market just isn’t going to work. Even in cultures which use a lot of references from other ones (Japan, for example, using so much English on their products), there’s a deep culture source code there which can’t be ignored.

    It’s going to be fascinating to see how emerging markets are capitalised on by big brands, and I sense there will be a lot of learning opportunities forthcoming!

    Neil

  2. Donna Sturgess says:

    Neil,

    Thanks for your comments and I will check out the link you attached. Big companies continue to learn slowly on the ground in underdeveloped markets resulting in high lost opportunity costs. I am interested if you or others have success stories in underdeveloped markets that you can share

    Donna

  3. Pingback: Articles of Interest 6/1/2012 « National Creativity Network

  4. Pingback: Be Nimble! | Ideas At Work

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