Newcomers face big test in Thai market

Foreign brands, especially those in fast-moving consumer products, face a big challenge in carving out a market in Thailand and dealing with its sophisticated consumers, marketing experts say.

Hasan Basar, managing director of Bangkok Public Relations, said yesterday that in the FMCG market, the opportunities are probably quite limited since global brands are well represented here. For any new entrant, establishing strong distribution capabilities will be at the top of its to-do list.

"However, we may see even greater regionalisation of management of FMCG companies and Thailand stands to benefit from this as a base country because of the large domestic market combined with the presence of many of their important manufacturing facilities in this country.

"In particular, Thailand will likely serve as a source for management and marketing knowhow during the early stages of market development for countries like Myanmar, Cambodia and Laos," he said.

FMCG companies will ultimately benefit from the "feel-good effect" generated by the impending Asean Economic Community (AEC) and the investment in basic industries from countries like Singapore, which will boost overall prosperity and consumer spending.

"The AEC will also accelerate a process that we are already seeing. With increased prosperity and the maturing of the middle-class consumer in Thailand, I think we will see a leap in preference for Tier 2 brands that represent 'good value' in many sectors, including fashion and apparel.

"The availability of these brands, which combine good design and good quality manufacturing with reasonable prices, will sharply increase in Bangkok and nationwide," he said.

These Tier 2 brands would create additional demand for mall retailing space. And, because of their lower price-points, they would support big retail developers by taking up space in many more locations outside of Bangkok.

Kitti Chambundabongse, chairman of Spa-Hakuhodo, said Thai consumers had changed very rapidly and almost all of the middle class are interconnected with the other side of the world via social networking and the Internet. The level of information and data also rose rapidly.

Thailand still enjoys more disposable income per head and larger domestic consumption than neighbouring countries, which makes the country attractive for foreign FMCG brands. "The major obstacle faced by new entrants is the numbers of brands fighting for market share in Thailand's Red Ocean market. They need to create real innovative products to win the fierce competition," he said.

Engaging consumers will be the key for sustainable success of any brand.

The lower socio-economic status or poor people portion of the population would increase faster than the middle class and prevail. Opportunities then will lie with cheaper or more economical products and staples.

Buppa Lapawattanaphun, a communication arts lecturer at the University of the Thai Chamber of Commerce, said Thai consumers concentrate on detail when buying products. Their purchasing habits are more sophisticated. They try to learn a lot via various media, such as brochures, websites or advice from experts. They are also concerned more about functional benefit than emotional benefit of the goods.

The implementation of the AEC in 2015 will encourage foreign investors to expand into Thailand and individual tourists to make their trips to the country. Also, the adjustment of marketing strategies to fit in with consumer behaviour in specific markets, which have different nationalities, cultures, economies, societies and regulations, is one of the biggest challenges for any business.

"Foreign brands need to be well prepared to challenge the tough competition in the local market as well as the dynamic change of behaviour of Thai consumers. On the tough battlefield, international firms need to find new marketing strategies to ensure their success. One principle successful in one market may not be successful in Thailand due to different business context, market situation and consumer lifestyles," she said.

First, foreign players needed to understand the macro context, such as the market situation, economic factors, politics, laws and regulations, as well as the cultures and norms of society. Next, they really need insight into consumer mindsets, which will be achieved via sophisticated consumer research. Business success should be achieved on the foundation of a good database system, and their success in the international market may not be always a good model for Thailand. Thailand definitely would grow quite rapidly over five to 10 years, driven mainly by the implementation of the AEC, which will open up many market opportunities. For business, the integration of Asean means greater market access under the theme "Single market and product base" with a combined population of 520 million and US$700 billion in GDP.

The move is not just making Asean a more attractive destination for foreign direct investment from around the world, but also a trade negotiation and bargaining power with other economies.