Teaming Up with an Unconventional Distribution Partner

• It appears that teaming up with an unconventional distribution partner, such as an industry outsider, to distribute products more effectively and efficiently is being explored.
• For example, Diageo, a multinational alcoholic beverage manufacturer, recently replaced its long-time distribution partner in Chile, wine producer Concha y Toro, with two Coca-Cola bottlers, Coca-Cola Embonor and Coca-Cola Andina. According to Alberto Gavazzi, president of Diageo in Latin America and the Carribean, it is the first time they have entered into such a partnership.
• Gavazzi says they are currently testing said partnership in Chile, and results, so far, are encouraging for both Diageo and Coca-Cola. If results continue to be positive, Gavazzi says it is likely they will take a similar approach in other places.
• While it is common for a global brand expanding into a region to partner with a brand that already has an established distribution network in the region, it is quite unconventional and innovative for a brand to team up with a brand outside its industry. In the case of Diageo, however, partnering with Coca-Cola makes sense as Coca-Cola has a wide and established distribution network, likely broader than that of Concha y Toro, and Coca-Cola, though not an alcoholic beverage manufacturer, is a key player in the beverage industry.
• If Diageo's partnership with Coca-Cola turns out to be a complete success, it is likely that other companies, inside and outside the beverage industry, will follow suit and enter into non-traditional distribution partnerships as well.

Making Distribution More Sustainable

• It appears that using more sustainable sources of energy to power distribution centers and fleets, and make distribution more efficient and environment-friendly, is being explored.
• For example, Ambev, another multinational beverage manufacturer, recently invested $140 million in the construction of 31 solar plants that will supply renewable energy to all of Ambev's 94 distribution facilities in Brazil.
• Ambev also announced the addition of 1,600 Volkswagen electric trucks to the transportation fleet of its logistics operators in Brazil by 2023.
• Given that environmental concerns and evolving consumer preferences are prompting companies to take sustainability more seriously, it is likely that more sustainable distribution practices will emerge. Ambev's recent moves to improve the sustainability of its distribution processes are part of its parent company's goal to have 100% of its operations supplied by renewable energy by 2025. Anheuser Busch InBev is Ambev's parent company.

Personalizing Distribution

• It appears that personalizing distribution through the use of advanced technologies such as artificial intelligence is being explored.
• For example, Mexico-based Coca-Cola FEMSA, the biggest public Coca-Cola bottler in the world, has recently started using Victoria, its "automated learning machine for prescriptive analytics," to enhance the accuracy of demand projections. Victoria is capable of studying different sources and understanding what is taking place in different markets.
• Coca-Cola FEMSA has already seen a 5% improvement in accuracy after using Victoria in Mexico for over six months. It hopes that, with the tool, it will be able to offer personalized attention, higher resource utilization, and improved driver safety to its distributors.
• Coca-Cola's most modern facility in Latin America, which demonstrates Industry 4.0, was recently opened in Rio de Janeiro. The facility was one component of an investment that includes the construction of a modern distribution center. Considering the rise of artificial intelligence and other advanced technologies, it is likely that more and more companies will employ such technologies in distributing their products more effectively and efficiently.

Distributing on a Compact Footprint

• It appears that distributing on a compact footprint, to penetrate dense, urban areas with little or no open space, is being explored.
• For example, Ikea, which is known for its huge warehouses in city outskirts, has started considering stores with smaller footprints. There are indications that Ikea's distribution model is evolving.
• The first indication was Ikea's announcement that it will launch its first store in Paris in the heart of the city, while the second indication was Ikea's announcement that it will open stores in Mexico and is considering sites in Mexico City, Monterrey, and Guadalajara, which are all dense cities with insufficient open space.
• That Ikea itself is rethinking its distribution model and is willing to distribute on more compact footprints to enter emerging markets is a sign that companies planning to enter emerging markets are likely to take into account the available space and be open to more compact store or distribution formats.

Research Strategy

1. Internet of Things (IoT) Technology

•  IoT technology is used to connect consumers with the companies' processes and their products.

• IoT platforms are used to provide consumer behavioral insights in real-time. It helps businesses respond to the needs of its customers and create a better customer experience in the future.

• The ability of IoT to connect data analytics and smart products increases customer engagement.

•  75% of customers expect companies to use new technologies like IoT in order to gain better experience.

• Amazon's physical concept store, the Amazon Go, offers a grab-and-go experience. It has the typical convenience store items like meal kits, snacks, and baked goods.

• The store has IoT sensors connected to a mobile app that scan the customers' unique code before entering.

• The system tracks the items the customer places in their shopping bag and charges their Amazon account, which offers customers the ability to shop faster and skip waiting in line.

• The collected customer data is analyzed and stored for future use.

2. Virtual Engagement

• Virtual engagement is the use of augmented reality (AR) and virtual reality (VR) to make products and services more accessible to customers.

• It offers an immersive, more natural, and connected experience to customers.

• It also offers customers the chance to test and experience products before purchase.

•  82% of companies that have started implementing AR/VR have stated that its benefits have exceeded their expectation.

• Moreover, 70% of users who experience a VR environment said that they intend to increase their use of VR in 2020.

• Alibaba Buy+ has a VR store where shoppers can browse through the company's products before making a purchase.

• They can also browse through each products' detailed information and features in a VR environment.

• Alibaba's Chief Marketing Officer, Chris Tung, said that by using VR, the users can engage in a more meaningful way.

• Alibaba has 552 million active users per month.

3. Hyper-personalization Algorithm

•  Hyper-personalization is a sophisticated predictive model that helps companies analyze their buyers' previous transactions, preferences, interests, and browsing history in order to allow them to better market their products to them.

• It helps increase customer engagement since customers become more receptive to the brands' message.

•  62% expect companies to adapt their products and services according to the customers' behaviors and actions.

• 49.5% of shoppers agree to have their purchasing behavior tracked if they can benefit from relevant offers as a result.

• Customers who believe that personalized experience are very appealing are considered 10 times more likely to be the brand's most valuable customer.

• Nike's sports fashion store uses hyper-personalization in their marketing through the use of aggregated customer data.

• It has a multi-screen, country-specific content tailored to capture the essence of personalization.

• Nike uses their innovative SNKRS personalized shopping, product personalization NikeID, and their Nike+ loyalty scheme.

4. Gamification

• Gamification is the strategic use of game elements, like prizes, tokens, rewards, prizes, points, to incentivize customers and encourage brand participation.

• It helps increase customers' excitement about the product, which leads to higher engagement.

• Retailers also use gamification to collect useful and valuable data from the customers for future campaigns.

•  81% of consumers take advantage of the game elements in products.

• When brands use gamification, consumers are 1.7 times happier.

• Starbucks uses gamification through its Starbucks Game app.

• It also allows customers to gain "stars" for every $1 spent in their store and offers benefits such as free in-store refills and free birthday rewards.

Research Strategy:

SOCIAL MEDIA

Overview

• For brands seeking to position themselves in the competitive marketplace, social media has emerged as an important tool towards this endeavor. Particularly, brands utilize social media to communicate with customers and collect feedback from customers.

Rationale

• Facebook has 284 million users in Latin America whereas Instagram, a Facebook subsidiary, grew by 18.4% to 125.9 million users in Latin America in 2018. As such, Facebook Latin America users account for 43% of Latin America's population of 650 million.
• Having a social media-based product awareness growth strategy is important for brands considering that 42% of internet users use social media to research brands whereas 24% of internet users discover brands based on comments on social media. Importantly, about 21% of internet users are motivated to purchase products based on likes or good comments found on social media.

Examples

• The Coca Cola company has used social media to build product awareness of Sprite in Argentina. It promoted a video supporting LGBTQ+ movement in Argentina under its social media tag #YouAreNotAlone (#NoEstasSolo) that enhanced consumer awareness of Sprite.

INFLUENCER MARKETING

Overview

• Influencer marketing is increasingly being recognized as a key strategy in building consumer awareness of products. With influencers, brands can build product awareness on offline and online channels.
• Influencers play a powerful role to drive interest in consumer events, competitions, and offers on both offline and online platforms.

Rationale

• Social media is highly popular in Latin America with 43% of its population using Facebook.
• Influencers have grown in Latin America in tandem with the explosive global growth of social media.
• About 36.2% of consumers will try a product after an influencer with over 20 million followers recommends it. Further 20.4% of consumers will make a purchase decision after such influencer mentions.
• Over 44.1% of consumers will try a product after an influencer with over 1 million followers (but less than 20 million followers) recommends it. Further 30.6% of consumers will make a purchase decision after such influencer mentions.
• Around 44.8% of consumers will try a product after an influencer with less than 1 million followers but more than 250,000 followers mention it. Further 28.8% of consumers will make a purchase decision after such influencer mentions.
• About 45.4% of consumers will try a product after an influencer with less than 250,000 followers recommends it. Further 26.9% of consumers will make a purchase decision after such influencer mentions.

Example

• Coca- Cola is a soft drink manufacturer with a $224 billion market capitalization. Coca-Cola Mexico sought to increase consumer engagement and product awareness among Mexico teens through using popular band CD9 as influencers. Under the campaign #TrueFriendship (#VerdaderoAmigo), Coca-Cola was able to build product awareness of its products while generating consumer engagement.

AI ANALYTICS FOR CONSUMER TARGETING

Overview

• Product awareness is all achieving consumer targeting. Consumer product goods brands are leveraging artificial intelligence analytics to build product awareness.

Rationale

• Consumer product goods brands are utilizing AI analytics to identify potential consumers as well as their shopping habits. With this information, consumer product goods brands can focus on specific distribution channels, locations, demographics, and content in building product awareness.

Example

• Diageo is an alcoholic and nonalcoholic drink manufacturer with a market cap of $7 billion. It launched a Whiskey Matcher chat bot that utilized AI to recommended Diageo alcoholic drinks in nine countries including Mexico.

ADOPTING DIRECT TO CUSTOMER MODEL

Overview

• Adopting a direct to customer (D2C) sales and marketing model delivers higher product awareness. Direct to customer model provides brands with higher control over their consumer interaction.

Rationale

• Despite investing in brand and product awareness, companies face lower recognition when they sell their products through retailers among other distribution channels. Direct to customer sales aims to bridge the divide whereby CPG brands directly interact with clients in building product awareness and generating sales.

Example

• Natura operates a direct to customer operational model, which is credited to its accelerated global growth to not only become the leading cosmetic company in Latin America but also the fourth largest globally valuing it at $29 billion. After its acquisition by Natura, Avon cosmetics has adopted Natura's direct to customer operational model to drive product and brand awareness within the Latin America market.
• In competing with Natura, cosmetic companies in Brazil have largely adopted D2C operation models contributing to higher product awareness of cosmetics among male consumers. As such, Brazil's male cosmetics market has achieved explosive growth and is expected to become the largest male cosmetic market in 2021.

RESEARCH STRATEGY