Almost all the major players in package-goods count on Brazil, Russia, India and China as key growth engines. And they're eagerly awaiting expansion by retailers such as Wal-Mart Stores, Carrefour, Tesco and Metro to provide a distribution boost.
Procter & Gamble Co. envisions the BRIC countries delivering on some of the key promises of its 2005 acquisition of Gillette Co. What might get in the way of this ambition are P&G's chief rivals, Unilever and Kimberly-Clark Corp., which have distribution and marketing alliances in those countries.
Among other package-goods marketers, Colgate-Palmolive Co. is aiming to hold on to and build its BRIC positions amid growing competitive pressure. L'Oréal, a relative latecomer, is catching up fast, continuing to post strong double-digit growth several years into its expansion to the developing markets. L'Oréal has made acquisitions, such as the purchase of China's Mininurse skin-care brand, to build its base.
Avon Products, which has used its direct-sales model to build a substantial business in China, Russia and Brazil, looks to defend and grow that business.
Analysts see P&G as the best positioned overall to build business in the BRIC countries. The company "has the ability to fill in 'white space' just by expanding availability of its 10 largest categories in such markets as Brazil, Russia, India, Mexico and China," Morgan Stanley analyst Bill Pecoriello said in a research note last month.
Pillar of purchase
The BRIC countries are one of the key strategic pillars justifying P&G's $57 billion acquisition of Gillette. The two marketers were highly complementary in their business development. P&G got perhaps the industry's earliest start in both China and Russia, where it has the best all-around distribution networks among the multinational package-goods players. Gillette was relatively undeveloped, but it had much stronger businesses than P&G in Brazil and India, where it has 75% and 39% shares, respectively, of the men's shaving markets, according to Morgan Stanley.
The theory is that P&G can piggyback on Gillette's distribution and marketing prowess in those countries, while P&G's strength in China and Russia can boost Gillette's male shaving business there.
Those synergies are among factors that make P&G the best positioned of its competitive set in the BRIC countries, says Ali Dibadj, analyst at Sanford C. Bernstein & Co. But he acknowledges that P&G hasn't delivered on the promise yet.
Because Gillette had a less efficient distribution system than P&G in the BRIC countries, sales have been hampered as P&G destocks excess Gillette inventory, particularly in China. Real evidence of the BRIC synergies in the Gillette deal should start to emerge this year, Mr. Dibadj says.
Morgan Stanley's data raise some questions, however, as to the magnitude of those synergies. Gillette's men's shaving share in India, for example, is 10 points lower than that of P&G's strongest existing category, feminine care, at 49%.
In a December conference with analysts, Chip Bergh, P&G's group president-global personal care, noted that 75% of men in developing markets still use double-edge razors, presenting Gillette with substantial opportunities for trade-up. P&G also operates in hundreds of markets in China and Russia that Gillette has yet to reach.
Besides P&G, almost all players in package-goods see considerable potential in the BRIC countries.
Room to grow
Unilever executives noted in a March conference that while the company gets more of its sales from developing markets -- more than 40% -- than any major competitor, it's still relatively underdeveloped in China and Russia.
One of Unilever's biggest and fastest-growing categories, its $2.5 billion-plus deodorant business, has considerable room to grow in such Asian markets as China and India, where only 7% of people now use deodorants, says Gerardo Rozanski, global VP of the Rexona brand (sold as Degree in the U.S.).
There, just convincing people they have body odor is the challenge, Mr. Rozanski says. Deodorant marketers can make headway by trotting out ads not unlike those found on their 1960s reels.
Kimberly-Clark, too, sees considerable room for growth in BRIC, which makes up two-thirds of the "BRICIT" countries it's focusing on in its developing-market strategy (also including Indonesia and Turkey).
Robert Abernathy, group president-developing and emerging markets for Kimberly-Clark, is one of the few industry executives to have all four of the BRIC countries in his purview.
"They represent more than half the world's population and, in Kimberly-Clark's case, only 5% of our sales," he says. "So people look at the math ... and say, 'Can't we grow faster there?'"
Out of the city
Kimberly-Clark also has room to grow in Russia and China by moving beyond the major urban areas in which it already competes.
The expansion of multinational retailers could help in that regard and, in the end, make advertising more efficient too, by allowing K-C to buy nationally rather than locally.
"As the major retailers expand," Mr. Abernathy says, "we're going to need to be able to expand with them. We need an expansion strategy that allows us to grow rapidly. At that point, national advertising will be good value."
In China, too, Kimberly-Clark still has potential to expand beyond its premium tier in diapers to the middle tier, as it has in other markets.
Household and personal-care categories are among the first small luxuries consumers in BRIC countries adopted, which also means those markets will saturate faster than others. Though many people assume developing markets will keep growing at double-digit rates indefinitely for package-goods players, Mr. Dibadj believes they'll slow to single digits by the end of the decade.
And the BRIC countries could slow faster than others. The populations of three of the four markets -- Brazil, Russia and China -- are growing more slowly than the global average.
Mr. Dibadj also doubts multinationals can grow primarily by taking market share, adding that the jury is still out on how much trade in BRIC countries will favor multinational brands.
"Wal-Mart in Mexico plays up local brands to help establish its local identity," Mr. Dibadj says, adding that Colgate does well there because its 80%-plus share and deep roots have made it seem like a local brand.