Value for money, local pride, and understanding of local needs are the top reasons why Asians are increasingly opting for local brands over global ones, market research has shown. A surge in nationalism and continuous technological advancement are supporting this phenomenon.
Local brands in Asia are growing rapidly in categories where global brands have historically dominated, including consumer products, foods and beverages and skincare products, all the way to durable goods such as smartphones.
Many multinationals have begun to notice the trend. Umesh Phadke, CEO of the Indonesian unit of L'Oreal, said he had his eyes opened when he visited the first Patanjali Ayurved megastore in India this year.
"The long-term sustainability of the whole enterprise is open to debate. In the short term, this brand will significantly impact all of us multinationals," he wrote on his personal Facebook page in October.
Patanjali Ayurved, started by a yoga guru, is now one of fthe largest fast-moving consumer goods (FMCG) companies in India and the country's biggest advertiser.
According to the Nielsen Global Brand Origin Survey released in April, almost 75% of global respondents, on average, say that a brand's country of origin is as important as or more important than other criteria such as price and quality. More than four in 10 global respondents say brand origin is as important as other purchasing drivers.
In Southeast Asia, 52% said they preferred to purchase local brands over large global brands. Even though consumers in developing markets view global brands positively for quality and innovation, the prevailing outlook is that their costs are still high.
Seventy-two percent of respondents in Asia Pacific say global brands are more expensive than local brands, while sentiment that local brands have a better understanding of consumers' needs and preferences is also highest in developing markets.
The findings were based on responses from more than 30,000 online respondents in 61 countries spanning 40 categories. They also tend to reflect the broader worldwide backlash against globalisation that has also manifested itself in the political world.
According to Nielsen, the main factors for consumers choosing local over global brands are better value for money (50%), national pride (37%), positive previous experience (27%), sale or promotional prices (27%), safer ingredients or processing (26%), and organic or all-natural options (22%).
Nearly 60% say they buy local brands to support local businesses. Developing-market respondents are more likely to say that local brands are more attuned to their personal likes.
Interestingly, national pride takes precedence over price or quality as a purchasing criterion in Asia Pacific, Africa and the Middle East. It is the only selection factor for which there is a notable difference between local and global brands. One-fifth of global respondents say national pride is the most important reason they buy local products. The highest scores in this category were in Africa and the Middle East (25%) and Asia Pacific (24%), compared with 16% in Europe and 10% in North America.
Local products are now preferred by consumers for fresh and packaged foods along with snacks and beverages; respondents in every region prefer local brands for juice, water and milk. But while local brands are gaining rapidly, global brands are still the preferred choice for carbonated soft drinks in every region except Europe.
THE PATANJALI PHENOMENON
One of most remarkable local-brand success stories in recent years has been Patanjali Ayurved in India. Established in 2006 by the yoga guru Baba Ramdev, it offers consumer packaged goods that can be sold quickly and inexpensively. The most common FMCG products are non-durable consumables such as processed food, beverages and over-the-counter drugs.
While Baba Ramdev is the face of the firm in promoting Patanjali to millions of his followers via his yoga camps and TV programmes, the brains behind the company is businessman Acharya Balkrishna, who heads 34 companies and holds 93% of the shares in Patanjali. Baba Ramdev does not own any shares in the company.
Under the leadership of Mr Balkrishna, Patanjali Ayurved has successfully challenged some of the planet's biggest FMCG companies in recent years by snatching market share. Mr Phadke of P&G believes that Patanjali's success has been partly due to the recent rise of worldwide nationalist sentiment.
Patanjali's turnover has gone from US$67 million in 2012 to $740 million last year and Mr Balkrishna, 44, is now on the Hurun India Rich List 2016 as a billionaire with a personal fortune of $3.82 billion.
"The rise of Patanjali is due to similar reasons as the rise of halal cosmetics in Indonesia," Mr Phadke wrote. "These are enterprises tapping into people's newly rediscovered connections with their local traditions and possibly the rise of patriotism."
For instance, most Patanjali products are made in accordance with Ayurveda -- a system of medicine with historical Indian roots that it is based on a belief that health and wellness depend on a balance of mind, body and spirit; it includes the use of herbal compounds and special diets to maintain that balance.
"The fact that product performance is no longer a significant differentiator and pricing is lower in some cases makes consumer choice even easier, especially in times of economic downturn," he added.
"Colgate will be below Patanjali by this year, and in three years, we will overtake Unilever," Baba Ramdev told reporters earlier.
The sales figures bear him out. The company's Dant Kanti toothpaste posted sales of 4.5 billion rupees (US$66.7 million) in 2015-16 and its Kesh Kanti shampoo and hair oil earned 3.5 billion rupees ($51.7 million) in less than a year.
Patanjali Ayurved is now aiming to double its turnover to 100 billion rupees ($1.48 billion) in 2016-17 compared with the previous fiscal year. The revenue target, if achieved, would put Patanjali Ayurved ahead of multinationals such as Nestle, Colgate-Palmolive and P&G in India.
"This is just the beginning. Nestle, Hindustan Unilever and Colgate-Palmolive will be left clueless eventually," Baba Ramdev said.
Unilever's beauty and personal-care markets in India have already slipped more than 5% in the past five years, according to Euromonitor International, while the market overall is forecast to expand by 14% in 2016.
"These ayurvedic product sellers are posing a threat to Indian and global players as the products have gained mass appeal," Sanjiv Bhasin, an executive vice-president at the brokerage India Infoline told Bloomberg.
Meera Ashar, deputy director of the South Asia Research Institute at Australian National University in Canberra, said recently that the popularity of traditional herbal ingredients in modern consumer products coincides with a resurgence of Hindu nationalism.
"People like Baba Ramdev and Sri Sri Ravi Shankar (founder of The Art of Living) have capitalised on these dual desires by claiming to package 'tradition' as a product of modern convenience," she said.
APPLE UNDER ATTACK
In China, one of the most hotly contested battlegrounds in the struggle between local and global brands is the world's largest smartphone market. Consumers are increasingly embracing good-quality, good-value local brands -- and that is bad news for Apple.
The maker of the iPhone has seen its sales of all products in China fall by almost one-third this year. It believes new models will help it bounce back, but some analysts say Chinese consumers are starting to resist the notion that they must spend $650 or more on a new iPhone every two years.
Beneficiaries of the new trend in China include local brands such as OnePlus. A OnePlus 3T smartphone with 64GB of storage starts at $439, compared with $649 for the 32GB entry-level iPhone 7. The OnePlus model has been dubbed one of the best smartphones that money can buy at this price.
The Chinese market leader Huawei, meanwhile, continues to do well among local consumers and is finding more fans abroad as well. It is now third globally in the market, behind Apple and Samsung.
Other Chinese-made smartphones making a big impact include Xiaomi, which was dethroned by Huawei as the hottest Chinese phone last year, along with Oppo and Vivo which are now on the list of top five global vendors. Cost is certainly part of the appeal. The Xiaomi Mi 5 with 32GB of storage retails for $305 while the Oppo A57, which was launched in November with the same memory, is priced at $232.
In India, the fastest-growing smartphone market in the world with unit sales of 27.5 million in this year's second quarter alone, the local mobile phone operating system Indus OS is now the country's second-most popular smartphone platform behind Android.
More than 100 million smartphones are expected to be sold this year in India. But one problem is that more than 80% of the population does not understand English, so an operating system with local-language capabilities is gold.
The Mumbai-based Indus OS has its platform available in 12 Indian languages that cover 90% of India's 1.25-billion population. The developer has simplified predictive typing and translation between regional languages and has an in-house app store with 35,000 applications in various tongues.
The operating system also accepts payment for downloading apps via customers' phone bills, which is much needed in a country where more than half of the population does not have debit or credit cards and only a fraction use e-mail.
Rakesh Deshmukh, co-founder and chief executive of Indus OS, told the BBC that the company wanted to "create a product specifically for the Indian consumer", and it has definitely done it.
NATIONALISTIC REGULATION
It can be argued that the rise of Patanjali Ayurved in India is partly because of the government's newfound fondness for local products.
However, government can also play a different role, as Indonesia is showing with its application of nationalistic regulations that are making it harder for global conglomerates to penetrate the local market. Once again, Apple is feeling the heat.
Many Apple products, including the latest iPhone 7, have yet to enter Asean's largest market although the number of iPhone users in the country has been increasing. The problem is that Apple is struggling to fulfill requirements that phone makers must have 20% local content for 4G handsets sold in the country.
This has allowed South Korea's Samsung to gain a stronger foothold in Indonesia, a country of 255 million people with a fast-growing consumer class, because it has been able to comply with the rule. According to International Data Corporation (IDC), a consumer technology market research firm, more than 30 million handsets are expected to be sold in the country this year.
Apple has been moving quickly to reach an accommodation with Indonesia's Ministry of Telecommunication and Informatics. On Oct 2 they reached an agreement that Apple would undertake research and development in the country while using local resources to build iPhones. Apple also pledged earlier that it would invest $45 million to open app development centres in several Indonesian cities.
Apple has also encountered this problem in other emerging markets including India where the Silicon Valley giant is facing roadblocks in its quest to open stores instead of selling products through third-party retailers. It failed to gain an exemption from an Indian rule stating that foreign single-brand retailers must buy at least 30% of their parts locally if they want to open their own outlets in the country.
To ease the problem, Apple in July signed a lease for 3,500 square metres of office space for its planned Design and Development Accelerator in Bengaluru in bid to meet the government requirements. It has a powerful motivation: iPhone sales in India soared 51% year-on-year in the first three quarters of this fiscal year alone.
Earlier in June, the Indian government relaxed some foreign direct investment regulations by giving a three-year exemption from local sourcing to foreign players in single-brand retail and a five-year relaxation for "state-of-the-art" and "cutting-edge" technology.
Even Indian officials agree that the decision effectively cleared the way for Apple to start opening stores, but as of this month, the company has still not indicated when or if it will do so.