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Making Everyone Feel A Little Bit Middle Class

Business, China, Company Strategy, Economics, India, Innnovation, Polyolefins
By John Richardson on 25-Oct-2010

Far more choices now…


Source of picture: www.mhhe.com/business



By John Richardson

THE nature of demand growth in emerging markets is a subject the blog has paid some attention to over the last few weeks.

Taking advantage of this growth will require the ability to innovate in order to tap into the huge opportunities presented by the hundreds of millions of people entering the consumer economy.

This innovation will have to be accompanied by a ferocious attention to cost-efficiency, as many of these millions are earning very low incomes. It takes imagination and flexibility to turn the wants of the rural and urban poor into needs.

In a fascinating conversation with a business development manager with a leading polyolefins company late last week, the blog gained a further glimpse into how these challenges and opportunities are being worked.

The subject was again India and in this case how the polyolefins industry is working with consumer-products manufacturers.

In his own words:

As a manufacturer of consumer goods, you need to get strategy right – creating a need through marketing for luxuries and then packaging and pricing those luxuries in such a way that the poor can afford to indulge themselves.

“And so everything from shampoo to whisky, soft drinks and biscuits are offered in small pouches that can contain single or a couple of portions.

“For just 1-2 Rupees a time a domestic helper can afford to buy the kind of shampoo that a Bollywood actress uses – because it is sold in a small pouch. And so at the weekend she can indulge herself, making herself feel good and just a little bit middle-class.

“These single-serving pouches are made of linear-low density poylethylene (LLDPE) and Low-density PE (LDPE) film with LPDE extrusion grade used for the external cover of the packaging – usually multi-layer along with aluminium.

“For single-serve whisky pouches high-density PE (HDPE) is used for its rigidity – you want it to stand up on the shelf.

“Chewing tobacco pouches, again made from LLDPE and LDPE, are also being sold for just a couple of Rupees a time. This was an example of good market intelligence – somebody on the ground in a sales and marketing team that saw an opportunity to supply a big, untapped market.

“It is also the middle classes who are buying single-serve portions of food – for example, curry sauce for a quick and easy meal in the big new supermarkets. Organised retailing has had a huge impact on plastics demand.”

“The challenge for chemicals companies is providing polymers that are cheap-enough for these very low-end finished goods, while still being able to invest in the innovation necessary to satisfy these markets.

“And so it’s a case of working with the converters to produce, for example, the right quality of sachets needed for the single-serve pouches.

“It’s also, as I said, about good market intelligence – about having the right kind of sales and marketing teams on the ground that can keep abreast of changing consumer preferences, or what the consumer-products manufacturers and retailers are doing to create new consumer preferences.

“A problem with the chemicals industry in general is that it is often managed by scientists who make it the main boards and not the sales and marketing people – and so innovations are inside out rather than outside in, when a lot of the most-profitable changes can come from what I’ve just described above.”

Fascinating stuff – and again it shows how the old top-down approach to measuring supply and demand has become a very blunt tool of measurement.