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White Paper Series The Healthy Marketing Team Ltd. 18 Clerkenwell Close, London EC1R 0QN, United Kingdom t +44 (0)20 7814 1944 f +44 (0)20 7814 9024 www.healthymarketingteam.com Registered in the United Kingdom Number 5949122 Registered office 38-42 Newport St. Swindon, Wiltshire BRIC Market Innovation Strategies Version: 1.0 Date: March 2011 Authors: Peter Wennström Isabel Secches Rukmini Gupte Editor: Rukmini Gupte © 2011 The Healthy Marketing Team Ltd. All right reserved. For reproduction or extract permission please contact Simon Gray, Director of Operations, Healthy Marketing Team by email in the first instance. [email protected]

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Page 1: White Paper Series - Healthy Marketing Team

White Paper Series

The Healthy Marketing Team Ltd. 18 Clerkenwell Close, London EC1R 0QN, United Kingdom t +44 (0)20 7814 1944 f +44 (0)20 7814 9024 www.healthymarketingteam.com Registered in the United Kingdom Number 5949122 Registered office 38-42 Newport St. Swindon, Wiltshire

BRIC Market Innovation Strategies Version: 1.0 Date: March 2011 Authors: Peter Wennström Isabel Secches

Rukmini Gupte

Editor: Rukmini Gupte © 2011 The Healthy Marketing Team Ltd. All right reserved. For reproduction or extract permission please contact Simon Gray, Director of Operations, Healthy Marketing Team by email in the first instance. [email protected]

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Abstract This paper will attempt to establish the principles that should guide Market Innovation Strategies in the BRIC particularly with respect to Health and Wellness brands in the food and beverage categories. The BRIC countries have already become a significant part of the global economy in hard economic terms such as absolute GDPs and growth rates. But even in terms of the fast changing consumer mind-sets and demands, BRIC presents a tantalizing market prospect for any company or brand with global ambitions. This simple acronym contains within it a mind-boggling variety of humanity – from the Euro-centric Russians to the “happy” Brazilians to the numerous but different languages and cultures within China and India. However, HMT’s global experience has shown that there are some overarching themes that run through the consumer psyche across BRIC particularly when it comes to motivations in Health and Wellness. This paper examines these common themes and shows through proven HMT models how the Health and Wellness categories in F&B can grow in BRIC. It also illustrates the different innovation strategies that work within the BRIC with real examples from the market place. The paper demonstrates that to succeed, innovations in Health and Wellness must reflect the fast changing aspirations of the consumers in the emerging BRIC markets. Branding is key to the innovation process in BRIC because of the enhanced significance of brands as a STANDARD of good quality. However, the role of brands also will follow some unique pathways depending on the stage of market evolution in the particular BRIC market and the exact category in which the brand makes its entry. Finally, all innovations in F&B in BRIC will broadly follow one of two directions:

- Some innovations will follow the Western models of entry and growth particularly when creating an “imported” , new category

- Some others will evolve through mutation of global models and local cultures, particularly in categories that are already established and familiar to the BRIC consumers.

But, whatever the category context, the one Key principle of successful innovation in BRIC has to be “Be prepared to Break All Rules!” To sum up, the BRIC markets offer exciting challenges for brands in the health and wellness category. Given the BRIC’s apparently bewildering diversity and size, it is possible to get distracted. We have therefore outlined in brief our proven models and strategies that can help navigate the BRIC markets. The key to successful innovation in BRIC will lie in listening to the consumer well, empathising with her needs and context and finally in being ready to challenge old paradigms.

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About The Authors Peter Wennström, earned his reputation as an international brand management consultant working for clients in pharma, dietary supplements and functional foods. He is the founder of The Healthy Marketing Team and is regarded as one of the world’s leading experts in functional foods marketing and is co-author of The Food & Health Marketing Handbook and author of the FourFactors® of Success. Peter’s speciality is to take consumer data and market insights from around the world on food/health issues and provide strategic tools such as the FourFactors® Brand Analysis System also know as “The Healthy marketing Game!” which allows marketing teams to make strategic decisions and accelerate brand innovation and NPD. Peter is a popular speaker and chairman and he has delivered workshops and seminars to companies across the globe. Rukmini Gupte is a brand consultant at Healthy Marketing Team with extensive experience in the developing markets of South Asia. She started her career in the Indian operations of Unilever and spent 14 years there working across food, beverages, home and personal care in sales, consumer insights and the marketing function. As an independent consultant she has worked with leading FMCG companies in India such as GSK, J&J, PepsiCo and HUL. Isabel Secches is also a brand consultant at Healthy Marketing Team and has experience spanning Latin America and Europe. She has started her career in Marketing and Communication for Health & Nutrition Professionals in Brazil, working for F&B clients such as PepsiCo, Sadia, and Marilan, helping them to develop their local Health&Wellness positioning and to gain KOL endorsement. Isabel has also worked closely to the Pharma industry in Brazil. About Healthy Marketing Team Healthy Marketing Team (HMT) are Global Specialists in Positioning Brands for Health. In 2010 we worked in over 25 countries where in every market we focus on helping our client understand What is happening in health and wellness, Why it is Happening and How to make it happen for their brand. HMT use a set of proprietary specialist models and tools – The FourFactors® Brand Analysis System - to analyze Health and Wellness markets and develop winning positioning and concepts to succeed in them. HMT service its clients with Consulting, Training and Inspiration. Our mission is to lead our clients to healthier foods, healthier brands and healthier business.

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Introduction: The Significance of BRIC: the economics and demographics This paper will attempt to establish the principles that should guide Market Innovation Strategies in the BRIC particularly with respect to Health and Wellness brands in the food and beverage categories. Call them BRIC, call them the lead emerging markets, call them what you will but ignore them at your own peril. With 42 % of the world’s population and 1/3 of the land mass, the four countries that make up BRIC are powering themselves to the top of the heap very fast in terms of growths and GDPs. In 2010, China overtook Japan to become the globe’s second largest economy after the US. In $ PPP terms, India is just ahead of Germany. Russia and Brazil have overtaken France and Britain already. Brazil is estimated to become the world’s fifth largest economy by 2025. In short, BRIC countries are increasing their share in the world’s economy, contributing above global-average economic growths and are also poised to reap significant demographic dividends as they are made up of the largest block of youth populations of the world. However, this simple acronym contains within it a mind-boggling variety of humanity – in terms of socio-cultural constructs, purchasing powers, languages, attitudes, access to goods and services et al. Therefore while BRIC presents a tantalizing market prospect for any company or brand with global ambitions, a simplistic, “fit all” solution is unlikely to succeed across the BRIC. It is thus almost a truism to state that in order to succeed anywhere in BRIC, a brand would need to Innovate.

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The dynamic of BRIC: The emerging Consumer It is critical to remind ourselves that the “BRIC consumer” is not a homogenous mass of people with uniform mind sets. Russia is demographically older than the other three while Brazil, China and India have wider and deeper Urban-Rural divides. Traditionally Russia has been closer to developments in Europe than the BIC countries. This affects socio-cultural norms which in turn affect how brands forge relationships with consumers meaning that the consumer psychology in Russia is slightly different from the rest of the BRIC. Therefore it is important for a marketer to remember that while structural similarities across the four economies might shape market developments similarly, brands may need to tailor their innovations in each market to cater to the specific consumer needs there. Our work in all four markets has shown that there are some overarching themes that underpin the consumers’ attitudes to and motivations in health and wellness in the BRIC markets. Most of these markets are poised for rapid growth and change. This impacts the consumer’s mindset in significant ways. The consumer is looking towards the Future and tends to be Optimistic.

“Tomorrow will be better than today with hard work and a little bit of luck.” 1. In a traditional (rural) market tomorrow will be like today and like yesterday and I will live my life in the village like my parents did. Reward will come in heaven! 2. In an emerging market I will follow development in to the city and my parents will invest in my education so that I can make a social career together with the rest of my generation. Reward will come tomorrow! 3. In a developed market I am born with a silver spoon and my life is all about me and my needs. I want reward today! Why should I invest in the

future?

Taller, Stronger, Sharper! This example illustrates how changing consumer aspirations shape marketing innovations in emerging BRIC markets, be it in product development or messaging. The brand message reflects the aspiration of the emerging market consumer. So Horlicks re-positioned itself with the competitive performance message of Taller, Stronger, Sharper for children of 6-14 years from a more generic Family Nourisher proposition.

Market stages - psychology

1. TRADITIONAL 2. EMERGING 3. DEVELOPED

“OLD”

“NEW”

TOMORROW WILL BE LIKE TODAY

TOMORROW WILL BE BETTER!

I DON’T CARE ABOUT TOMORROW…

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Innovation examples in BRIC: “Be prepared to Break All Rules” The following examples illustrate that the underlying principle if any is that the general rule to succeed in BRIC markets is to be prepared to Break All Rules! Companies and brand owners must be willing to challenge preconditioned opinions and shift paradigms. This will in many cases mean challenging Western Category Codes and Norms: Rule #1: Be prepared to reshape brand offers to fit into BRIC consumers’ expectations from the category.

• Coca Cola “dared to dilute” Minute Maid’s juice content and re-formulated the drink to delight the Chinese consumer and thus triggered an entire category of “pulpy” beverages in China

Coca Cola launched Minute Maid across China by end of 2006 and today it has become the company’s first brand from an emerging market to reach the 1billion dollar sales mark. The company applied creative thinking to customise Minute Maid’s formulation in China – they reduced the juice content to 10% to keep the price down but added fruit pulp to offer a distinctive “fruity” mouth feel. The marketplace success was due to this consumer focussed innovation that fulfilled the Chinese consumers’ desire for a “fruity” tasting drink that was not just tasty but also affordable. Rule # 2: Be prepared to innovate and create brand value by leveraging and fitting into established habits and category codes.

• The malted health food drinks in India have leveraged the huge cultural significance of milk as an essential drink for growing children and established their own significant Nutritional Quotient.

Malted “health food drinks” category has seen healthy growths in India in last five years. The growth is not only due to obvious demographics (India has the world’s largest 0-14 year population) but is driven by a “Strivers” mindset that sees parents stretching hard to invest in children’s future. Dominated by a few large Multinational companies like GSK, Cadbury’s and Heinz, the category has innovated to keep step with changing aspirations of the growing urban middle class – from milk substitutes to milk taste enhancers to a nutrition packed milk additive that gives children an edge in performance.

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Therefore, the only general rule is: KNOW THE CONSUMER! LISTEN TO HER! UNDERSTAND HER CONTEXT! BRIC: The Different Stakeholders in Health and Wellness Given that consumer needs and aspirations of consumers in Health and Wellness are becoming more dimensionalised as above, we find it useful to use the Healthy Marketing Team’s Core Stakeholder Model to map the consumers. The basis for this model was originally introduced in the Food & Health Marketing Handbook by Wennström & Mellentin1.

The Healthy Marketing Stakeholder Model is based on the fact that the development of a food category is driven by education. This education is normally driven in three phases where new ideas and innovations are introduced by Technology stakeholders, popularised by Lifestyle stakeholders and commoditised by Mass market stakeholders. The blue line represents the category life cycle. The dotted grey line represents the price/margin as the category moves from left to right. In the past, in BRIC, most food and beverage brands have been playing in the Mass Market. Taste and Affordability have been the key judgment criteria for most consumers in the Mass Market. But as consumer aspirations in Health and Wellness evolve, we see the health and wellness stakeholders develop as above. Technology Stakeholders: Need a health solution These are the ones motivated by Technology and in this context it refers to medical benefits. This group puts functional before food and prompted by a “Need” they seek real health solutions through foods.

1 Published by New Nutrition Business 2003.

MEDICAL EARLY ADOPTERS EARLY MAJORITY LATE MAJORITY LAGGARDSMEDICAL EARLY ADOPTERS EARLY MAJORITY LATE MAJORITY LAGGARDSMEDICAL EARLY ADOPTERS EARLY MAJORITY LATE MAJORITY LAGGARDS

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In the past BRIC consumers sought solutions either through medicines or through traditional remedies. However growing purchasing power and awareness of “science” are going to drive the growth of this segment in BRIC. However brand owners must keep in mind that this segment will grow slower in BRIC than it did in Europe or Japan and will always be fairly limited in size.

Lifestyle Stakeholders: Want to try a new benefit The people here will be the first to try out new benefits. These consumers will support the concept of functional foods and health-enhancing foods of all types – provided that these are relevant in the context of their lives and support their self-image as Early Adopters. We see this stakeholder segment growing dramatically in all the BRIC markets. Rapid economic growths have not only created a large class of affluent consumers in BRIC, it has also empowered these consumers to tap into a shared global vision. The iPhone, for example, is the preferred badge of all Lifestyle stakeholders in any of the BRIC countries just as it is in London or New York. This empowering globalization will shape Lifestyle innovations in health and wellness too.

PediaSure India

• Abbot markets PediaSure through a concerted communication program targeting paediatricians

• Sells at a significant premium to other milk food drinks

PediaSure India

• Abbot markets PediaSure through a concerted communication program targeting paediatricians

• Sells at a significant premium to other milk food drinks

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Mass market Stakeholders: When the new benefit becomes accessible and affordable. These are the ones who will only be motivated by food benefits and they will wait until functional foods are clearly established in a normal food context. However there is a significant innovation challenge in Mass market Health and Wellness in BRIC: BRIC markets are being shaped by rapid forces of “democratization”. So a benefit of Immunity or Gut health may start out by being available in premium brands , targeting Lifestyle & Technology Stakeholders respectively – however very soon the Mass market consumers will also demand these benefits in an accessible and affordable way.

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This will create opportunities for brand owners in food and beverages to innovate smartly to make tangible health benefits available to the mass market consumers in relevant ways! The closest parallel is the growth of the mobile telephony category in BRIC, particularly China, India and Brazil. Mobile telephony is unique in that it combines Aspiration and Permission for emerging market consumers - not only is a mobile phone a status symbol but it is also seen as an Empowering necessity to advance economically. Hence, Mass Market mobile phones have witnessed explosive growth in these economies while the premium end continues to keep pace with developments in the West. We see a similar opportunity for Health and Wellness food brands in Mass market. While Affordability will continue to be the primary Permission factor, Health will rise in importance as a Motivator along with Taste as the BRIC Mass market consumer realizes that ensuring good health is a critical enabler for him to participate in the overall growth that is happening.

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Finding your way into the BRIC Markets: Be prepared to break the rules! Linked together the three stakeholder groups make up the Healthy Foods Market. In most Western markets, our experience shows that to win in the market place, it is important to develop the market, stakeholder by stakeholder as described below.

Following the Western model of starting in premium: Gatorade in Brazil: The success story of Gatorade in Brazil certainly follows the above model – PepsiCo built the market for Gatorade in Brazil in the classical way. Gatorade first targeted the Early Adopters in the cusp of the Technology and Lifestyle stakeholders with an expert positioning of Sports Performance. But the “N°1 beverage for athletes” is not what built the Gatorade volumes to where they are today. PepsiCo took Gatorade to the Majority in the Mass Market by expanding its benefit story to

11 22 33

1. The Technology stakeholders will help you educate the visionary Lifestyle stakeholders.

2. Satisfy the needs of the Lifestyle stakeholders, the Early Adopters so that they can serve as good references to the pragmatic Mass market stakeholders.

3. Gain the bulk of your revenue by serving the Early Majority of the Mass Market stakeholder, ideally by becoming the market leader and setting the standard.

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1. The Technology stakeholders will help you educate the visionary Lifestyle stakeholders.

2. Satisfy the needs of the Lifestyle stakeholders, the Early Adopters so that they can serve as good references to the pragmatic Mass market stakeholders.

3. Gain the bulk of your revenue by serving the Early Majority of the Mass Market stakeholder, ideally by becoming the market leader and setting the standard.

1. The Technology stakeholders will help you educate the visionary Lifestyle stakeholders.

2. Satisfy the needs of the Lifestyle stakeholders, the Early Adopters so that they can serve as good references to the pragmatic Mass market stakeholders.

3. Gain the bulk of your revenue by serving the Early Majority of the Mass Market stakeholder, ideally by becoming the market leader and setting the standard.

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1. The Technology stakeholders will help you educate the visionary Lifestyle stakeholders.

2. Satisfy the needs of the Lifestyle stakeholders, the Early Adopters so that they can serve as good references to the pragmatic Mass market stakeholders.

3. Gain the bulk of your revenue by serving the Early Majority of the Mass Market stakeholder, ideally by becoming the market leader and setting the standard.

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1. The Technology stakeholders will help you educate the visionary Lifestyle stakeholders.

2. Satisfy the needs of the Lifestyle stakeholders, the Early Adopters so that they can serve as good references to the pragmatic Mass market stakeholders.

3. Gain the bulk of your revenue by serving the Early Majority of the Mass Market stakeholder, ideally by becoming the market leader and setting the standard.

1. The Technology stakeholders will help you educate the visionary Lifestyle stakeholders.

2. Satisfy the needs of the Lifestyle stakeholders, the Early Adopters so that they can serve as good references to the pragmatic Mass market stakeholders.

3. Gain the bulk of your revenue by serving the Early Majority of the Mass Market stakeholder, ideally by becoming the market leader and setting the standard.

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the Best Hydration – a position that would resonate with consumers in a tropical country. Today, Gatorade is among the Top 10 selling beverages in the category. But Remember: To innovate successfully in BRIC, do not be afraid to Break the Rules! Hence, it is not necessary that the Healthy Foods Market in BRIC geographies will always develop this way. The other case study below shows the success of building a branded category from a commodity by following the stakeholders in the opposite direction; start by targeting mass market and then move towards more value-added offers to target the more sophisticated stakeholders.

Following an emerging market model of starting in commodity: Salt in India Pre 1983, the salt category in India was an unbranded commodity. The government created awareness of Iodine Deficiency – a common problem with masses. Tata salt launched iodized salt at mass market prices- soon other brands followed. The category itself shifted from unbranded commodity to a branded one. Given that salt is an item required by all the masses, the volumes were enormous and attracted many companies, both local and multi-national (Unilever launched Annapurna salt). A decade later other brands entered the premium end – Saffola from Marico positioned their offer as heart health friendly salt, Tata launched Tata Salt Lite, a low sodium brand. So the BRANDED SALT CATGEORY in India was developed the other way round- volumes were first created in the Mass Market through packaging and iodization. Only after10-15 years when packaged iodized salt had become the category norm, did brands try to increase value by launching higher margin salt brands with added health benefits.

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Therefore, we see the Health foods market develop in two ways in BRIC: 1. New “imported” categories such as isotonic hydration (a la Gatorade) will most likely develop in

the classic left to right way, from high-value, niche categories through to the high-volume mass markets.

2. However, many food commodity categories in BRIC such as water, cooking oils, and milk will

follow the reverse innovation cycle i.e. from right to left. Fortification is the trigger to Branding efforts that target the Mass market and shift the structure of the category form Commodity to a Brand. As branding becomes the norm, the category then develops through more added-value offers to finally target the Technology stakeholders through niche, high-value brands.

Breaking the rules of Branding? A word on the critical role that branding plays in successful innovation in BRIC and how you a may need to break rules in branding too. A Western marketer expect a brand to be clear in its expertise and has learnt that the best way to position a brand is to make it #1 in a category. So we expect Coca Cola to be a brown fizzy soft drink and Fanta an orange soft drink and we would reject Coca Cola branded water so of course the Coca Cola Company use the brand BonAqua for its mineral water. Why then will you find a PepsiCo branded water in India? Why will you find the Tata brand on cars as well as on food products? The answer is that BRIC markets which have traditionally seen more uncertainty in the quality of foods than their European/US counterparts have a huge need for a guarantee of safety. Contaminated foods are a reality. Brands are powerful guarantors of reassurance and safety. Once a brand earns the trust of consumers, it gains the right to play in multiple categories. In health and wellness particularly brand credentials are a huge asset. Hence, a brand that has succeeded in setting a standard in one category can then innovate by extending the brand equity in multiple categories.

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The examples above demonstrate how brands expand from its core territory of trust into adjacent categories. Sometimes the logic is in the general beverage category as with Minute Maid in China or with the benefit as with Activia in Brazil but sometimes the logic is condensed down to trust as with the Tata brand in India which spans numerous categories across many industries. To explain this we must appreciate that based on our previous understanding of market entry strategies, brands can take three basic roles in BRIC markets: Brands can take three roles in BRIC 1. Brand from abroad - See Pediasure Example An international brand that leverages its Global Credentials particularly in Science 2. Glocal Brand – See Minute Maid Example Glocal brand that innovates by adapting its Global expertise with Local Preferences 3. National Pride Brand – Britannia and Tata example Local brand that builds on its local heritage and positions itself as the National Pride

BRIC: Five Innovation Strategies Wennström and Mellentin2 have identified five innovation strategies that are effective in creating both brand and consumer value in food and health. These strategies have varying degrees of Innovation Quotient and Market Disruption ability and hence any or all of them can help brands succeed in BRIC markets.

2 The Food and Health Marketing Handbook

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1. Leveraging hidden nutritional assets 2. New category creation 3. New segment creation 4. Category substitution 5. The functional foods make-over

Strategy 1: Leveraging Hidden Nutritional Assets Leveraging nutritional assets is the strategy of marketing the intrinsic healthiness that nutrition science have uncovered in everyday foods and beverages- thus selling the intrinsic nutritional advantages of foods and beverages without any need for new ingredients and formulations. Though this innovation strategy was pioneered and popularised in the US, it has huge relevance for the BRIC markets. This strategy enhances the relevance of foods and beverages that consumers are already familiar with by highlighting the “natural goodness” within them – thereby reassuring emerging market consumers about their familiar choices. The global recession affected Russia the most among the BRIC countries. While this affected the launch of new functional food categories, one category of foods and beverages saw a “healthy” growth and this could be attributed to the fact that these foods and beverages highlighted their intrinsic “pure, natural “ credentials aggressively: Traditional Russian products gain in health and wellness categories

- Many of the products originate from what are perceived as “ecologically pure” territories such as Altai, Baikal, Bashkiria and Krasnodarskiy.

- Naturally healthy products such as honey, nuts, dairy from these regions are gaining in popularity because of the overall trend towards “pure, natural” products without any artificial additives

Strategy 2: New Category Creation This is the innovation strategy that creates an entirely new category of foods or drinks. It depends on creating a new type of consumption occasion – the product identifies and meets or creates a new consumer need that no one has addressed before. Gatorade is a very good example of a brand that followed this strategy in Brazil in creating a New Beverage Category. The success of Gatorade in Brazil points to the need of a brand to be flexible and adaptive to the emerging market needs. Gatorade entered the market in the classical way: creating a new category of sports drinks with promise of superior performance targeting the Early Adopters in The technology/ Lifestyle cusp. But since this segment was niche and not likely to attract the Early Majority in the mass market stakeholders PepsiCo then extended Gatorade’s appeal to the latter by creating a new segment in beverages with the proposition of Superior Hydration. This example shows that there is a huge opportunity to create new categories in the emerging BRIC markets by targeting different needs of the different stakeholders in a relevant way.

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Another successful way to create new segments within a category in BRIC markets is to innovate in distribution channels, creating a new “place” for consumers is often an effective way to create new categories. Comvita is a brand of manuka honey which is said to have anti-microbial properties. New Zealand based company Comvita targeted Hong Kong and then mainland China through its own- branded stores and created a new super-premium segment of health supplements. Comvita honey is today one of the fastest growing natural wellness supplements in China and its own branded stores reinforce it’s imagery of “specialness” and also help maintain the premium margins. Strategy 3: New Segment Creation This strategy focuses on bringing a new health benefit into an existing category so that a new health proposition is created along with a new segment within the category. This innovation strategy has enormous potential to unlock brand value in the large foods and beverages markets in the emerging BRIC markets particularly because this strategy does not demand that consumers change their entrenched food and beverage habits dramatically. Becel in Russia is a good example of Unilever pre-empting other specialist cholesterol lowering brands by appropriating heart health benefits in the Becel brand, thereby creating a heart health spread segment in the spreads category. In India, heart health friendly cooking oils like Unilever’s Flora and ITC’s Sundrop leveraged the credentials of “sunflower” as a healthy ingredient and have shown the way of successfully creating new segment in the large cooking oils category. A similar process is observed in Brazil, where the cooking oil category has been segmented by brands like Liza.

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The large dairy market in India where there is huge significance of various forms of dairy like milk, yogurt, drinking yogurt etc has already witnessed new segments being created through packaging innovations like UHT milk in tetra packs and is ripe for opportunities in creating new segments through relevant and credible health benefit propositions. The thumb rule that brands must remember when trying to create a new segment in a category is to understand the category essence in that market and appreciate consumer beliefs and myths relating to the category. It is difficult to create a new segment offering a health benefit in a category if the new benefit promise is completely at odds with the category beliefs and expectations in that market. Strategy 4: Category Substitution Category substitution allows brands to innovate by offering the health benefits of an established category in another (possibly competing) category and in a more convenient and/or healthy product format. This then allows the brand to attract users of the other category to itself.

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Strategy 5: The Functional Foods Me Too This is perhaps the weakest Innovation strategy in a Western market where late-comers to a market follow a me-too strategy to the early entrants – the brand offers the same benefits as the true innovators but differentiates by offering a lower price. But again given the market structure in most BRIC countries, this strategy too can unlock huge volumes by catering to the large Bottom of the Pyramid consumer segments. Democratization of Health Benefits As mentioned before, a huge societal force sweeping across most BRIC markets is that of “democratization”. While higher order health propositions may be launched targeting the more affluent consumers in these markets, it is not long before the more relevant of these will be demanded by the Strugglers at the Bottom of the Pyramid too and hence these offers will start to trickle down. The challenge then is for marketers to address these consumers by offering them the same health propositions as the early entrants but to do so at a lower price thereby creating a New Value Paradigm. So the early entrants do the job of educating the consumers about the health benefit and demonstrate the relevance. The innovation task for the challenger brand is to capitalise on that market creation effort and reap the benefits by launching a more Value for Money branded offer. Unlike in the developed markets therefore the success of this strategy does not rest only on lower price but on creating a new Value proposition. The Economist called this “Frugal Innovation” and indeed this innovation strategy depends on innovating in every element of the brand mix - formulations, packaging, distribution et al. The packaged water category in India is one where we see this strategy in action. A large number of local companies have entered the market and are offering the benefit of “clean, drinking water” even to the poorest consumers in polyester sachets/pouches that are lower in price than the conventional 1l PET bottles and serve as hygienic, safe thirst quenchers.

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CONCLUSION: BE PREPARED TO BREAK ALL RULES The BRIC markets offer exciting challenges for brands in the health and wellness category. Given the BRIC’s apparently bewildering diversity and size, it is possible to get distracted. We have therefore outlined in brief our proven models and strategies that can help navigate the BRIC markets. The key to successful innovation in BRIC will lie in listening to the consumer well, empathising with her needs and context and finally in being ready to challenge old paradigms.

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Summary: Three Innovation Rules: Rule #1: Be prepared to rethink category norms and reshape brand offers to fit into BRIC consumers’ expectations from the category. Rule # 2: Be prepared to innovate and create brand value by leveraging and fitting into established habits and category codes. Rule # 3: Be prepared to constantly innovate to keep step with changing aspirations of the growing urban middle class. Two basic market entry strategies: #1. Follow the Western model of starting in premium: Gatorade in Brazil: #2. Follow the emerging market model of starting in commodity: Salt in India. Three alternative roles for your brand: #1. Brand from abroad - See Pediasure Example #2. Glocal Brand – See Minute Maid Example #3. National Pride Brand – Tata example