‘Being operationally fit’: LUX on leveraging underlooked areas of cultural advantage

Beliefs like ‘local means cheap’ and ‘West is best’ are no longer valid in today’s competitive landscape, with LUX’s Swarnim Bharadwaj telling WARC Asia Editor Rica Facundo about how to apply cultural relevance across various facets of marketing.

WARC: What are the key forces influencing the competitive landscape for big MNCs like Unilever or LUX, especially with the growth of strong local brands in the region?

Swarnim Bharadwaj: Until about 20 years ago, the competition was largely between various global manufacturers. But there are three factors that have changed this competitive landscape.

The first factor is about production. In the early days, FMCG brands had their own big R&D and factor set-up. But today, brands have access to third-party R&D manufacturing for almost any product in the world. This is happening not only in China but has expanded to other markets such as Southeast Asia and South Asia.

So now if you’re a small brand with a great idea, you can start producing or developing a product at a very small quantity. You don’t need the investment in a big factory R&D centre.

The second factor is about distribution. Big companies always had an advantage in physical distribution. No one else could match the distributors they built in smaller towns, the villages, etc. So back then, a new small brand would have had to start from scratch.

However, with e-commerce, that gap has been bridged. Brands can be on Amazon Alibaba, Lazada or Shopee, and quickly achieve very high reach. You don’t need to build your own distribution, especially in places like China where e-commerce is very advanced. It even has better reach than traditional FMCG companies which, until now, has some of the deepest distributed products in the world. So that second gap of getting a brand’s products to your consumers has also been bridged in favour of newer local competitors.

The third factor is about making people aware of your products and creating that mental availability via advertising and marketing.

Twenty years ago, the media mix was all television, print and radio. Not all brands could afford to be on these channels because you needed a big minimum investment. But now with digital marketing, brands can start very small and target the niche segment that is right for the brand without wasting their advertising dollars.

Given these three forces, what are the benefits to big MNCs like Unilever?

These factors have enabled multinational companies to experiment a lot more. Even though we still have a big factory where the brand could be producing their main product, we can now use third-party manufacturers to experiment with new ranges.

We can also test and learn using e-commerce and don’t have to put our products in every single retail shop. Through e-commerce we can see what products have traction and then extend those to other channels.

Bigger companies also have the ability to fail and recover, whereas for a new company, a big failure might mean the end of the company.

What are some of the old mindsets or behaviors that maybe big MNCs have to let go of to compete in this new competitive landscape?

Back then, there was the belief that all good things come from the West. Markets like Asia were used to taking on and replicating the trends and product styles from the West.

This mindset has really changed in the last five years. Now you are seeing a lot of trends and product innovations emerging out of this region for this region.

The biggest thing that global companies can do is not to simply transfer ideas developed in the West to the East. They must look for relevant insights, product trends and innovations that are relevant.

Can you give an example?

The recent 2023 FIFA Women’s World Cup was a huge cultural force. LUX has various campaigns happening across the world in countries from China to Saudi Arabia but our approach is different. Our campaign in China is all about supporting the Steel Roses, which is the nickname for their football team. Whereas in Saudi Arabia, where the country is still expanding on women’s rights, women’s football is not as widespread and still faces a lot of judgement. So our campaign is all about showing how football is a woman’s game. These are just different nuances on the same event which are very localised and dependent on local realities.

The go-local movement has been gaining traction for a while now. How do you see it coming of age today?

Local used to signify affordability due to lower operational costs of smaller businesses. This advantage stemmed from reduced overheads, access to cost-effective local materials, and favorable agreements with local partners.

Presently, local brands, even within the same category, can adopt a more premium price. If you play in the premium segment, the benefit and insight needs to be a lot sharper because you are trying to convince people to pay a higher amount.

In many cases, local brands can more easily find a deep cultural or a product insight, which is hyper relevant to consumers in that country or region.

Consider Indonesian hijab beauty brands in the FMCG sector. These premium skincare labels resonate due to their sharp insight that there is a huge consumer base which appreciates cosmetics developed for hijab wearers. In this scenario, the emphasis shifts from cost to value, allowing local brands to command a premium, rivaling global counterparts.

Beyond advertising, how does the need for cultural relevance translate into other aspects of marketing?

In India, bar soap is the dominant format, while in Thailand, liquids prevail. For liquid soap users, scent matters because they are most likely also using other products like body lotion, skin creams, etc. and are part of a slightly higher income bracket.

Conversely, brands can’t just communicate the fragrance benefit to bar soap users. You have to promise better skincare and moisturisation because these lower-income consumers are not using body lotion, skin creams, etc.

LUX focuses on different benefits in different markets depending on what the consumers of that market need. It’s not a one-size-fits-all approach.

The gist is that we can’t translate things from the West and just copy/paste them onto the East. You must be aware of local nuances, whether they are cultural, usage of the product or operational realities.

Can you elaborate on how brands need to be “operationally fit” to leverage culture more effectively?

The argument that marketers tend to make is that local brands have cultural advantage because they originate from that country. For example, “I’m an Indonesian or Chinese brand, therefore I understand hijab wearers and Chinese traditional medicine better”.

But an underlooked area is whether the brand is operationally fit to operate in that market and culture. In several instances, local brands can win because they have the operational edge. We saw that in how Uber exited most Asian markets despite being a first mover. In Indonesia, Grab was not the first ride-hailing company in the country, but it was the first one to forge partnerships with groups of taxi drivers. Scale is very important because in the beginning the brand is always losing money, but it needs to get to a certain size to become profitable.

Another example is Indonesian bank BCA, which won Kantar’s most valuable Southeast Asian brand. They hit upon an operational insight that consumers would rather text than go to the bank or do phone calls.

These operational insights are sometimes borne by understanding the cultural behaviour, such as the case of BCA. Or in the case of Grab, it was the willingness to go down to the last mile and recruit drivers and expand operations. And in both cases, it generated a huge advantage over other competitors.

How have you seen the lack of cultural insight or understanding make an impact on the bottom line?

In Japan, bathrooms and apartments are small. Therefore, if you want to be a shower gel brand relevant for Japan, the bottle needs to be a particular shape and size. It needs to be stable because the product is probably lying on a small shelf with lots of other products and it cannot be large because there’s no space. This is opposite to the usual tactic in other markets where the perception is that the bigger you buy, the better value you get.

There are also lots of little nuances to take care of. You could have the best brand, the best marketing, best ingredients and claims. But if you didn’t realise what is needed for Japan and put it in the wrong bottle, it’s going to fail because no one will buy it.

Local brands are obviously more aware of these kinds of nuances. As global brands, we also have to do enough research to not make that mistake. A simple thing like the shape of a bottle could wipe out all the product research or advertising you’ve done. So it’s also about not making those critical mistakes.

What advice can you give to brands to manage this complex landscape and better unlock their cultural advantage?

Global brand marketers tend to become too precious about too many things. Being inflexible across 100 parameters would be the wrong approach. Conversely, a willingness to change everything without any parameters is also wrong.

LUX uses a process which is called distinctive brand assets or DBAs, which are non-negotiables. A simple example is not changing the brand logo or colours across various countries because it’s what makes up the brand essence.

The second part of the process requires flexibility. Let’s take some of the most rigid brands in the world such as high fashion brands.

Now, the reality is that these brands can’t ignore China’s huge consumer market. But in China, even adults love cute stuff and cartoons, and buy toy figurines. Now you see the brands adding more cute elements to the design or marketing because that is what makes business and consumer sense.

This is what is changing. Brands are doing partnerships they would have never considered previously. The essence is to never lose your DBA – it’s your personality. Keep your distinctive assets the same but have enough flexibility to be humble and say this is my consumer and this is what my consumer wants.