Success in Distribution Channels and Customer Engagement

Part
01
of three
Part
01

Insights and Trends - Innovations in Distribution Channels

Information on the subject is very limited, but there are a number of articles suggesting a few trends. Based on these few sources, trends around the innovative things large, multinational brands are doing to distribute their products more effectively or efficiently, especially in Latin America, include teaming up with an unconventional distribution partner, making distribution more sustainable, personalizing distribution, and distributing on a compact footprint.

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

Since distribution channel innovation was defined as things companies are doing to distribute their products more effectively/efficiently, we did not limit our research to new distribution channels. As distribution channels have long been categorized into wholesalers, distributors, retailers, and the Internet, and distributing through online stores is hardly an innovation in this time and age, we figured we could include trends around innovative distribution partnerships and innovative practices among distribution channels, as long as they are trends surrounding how companies improve product distribution. We quickly found, however, that trends surrounding these topics, especially those specific to Latin America, are not readily available. Articles and reports directly covering the topic do not seem to be available.

As we could not locate any source in the public domain that readily lists these desired trends, we decided we could identify these trends by looking at what top global brands in Latin America are doing recently to improve their product distribution. Only the top global brands in the world and the top FMCG brands in Latin America appear to be available, so we referred to these lists in identifying the brands to prioritize in our research. Researching brands one by one and using Google Translate as necessary enabled us to find relevant articles, including those published by Just Drinks, LAVCA, Seeking Alpha, Reuters, and Fashion Network. From these articles, we were able to learn what Diageo, Ambev, Coca-Cola, Ikea, Colgate Palmolive, and Grupo Bimbo have been doing lately to distribute their products more efficiently and effectively. Since innovations are of interest, we ruled out news where the brand only opened a new store/distribution facility or streamlined its distribution network.

To find additional information, we looked at the countries that make up Latin America and tried to research each key Latin American country separately. This strategy proved ineffective, however, as it only led us to Spanish or Portuguese versions of the articles we already found. We found one unique article about Coca-Cola, but it touched on distribution only very briefly. There were a number of articles covering how brands such as Samsung, Amazon, and Natura, have opened their largest distribution center in Mexico, but opening a distribution hub or store in a strategic location is hardly innovative. The trends presented above were based on the limited information we have gathered from the articles we mentioned in the previous paragraph.
Part
02
of three
Part
02

Insights and Trends - Innovations in Customer Engagement

Innovative trends that drive customer engagement include internet of things (IoT) technology, virtual engagement, hyper-personalization algorithms, and gamification.

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

Brand/Company Leaning Into This Trend
  • 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.

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.
  • 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.

Brand/Company Leaning Into This Trend
  • Alibaba Buy+ has a VR store where shoppers can browse through the company's products before making a purchase.
  • Alibaba's Chief Marketing Officer, Chris Tung, said that by using VR, the users can engage in a more meaningful way.

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.
  • 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.
Brand/Company Leaning Into This Trend

4. Gamification

  • It helps increase customers' excitement about the product, which leads to higher engagement.
  • 81% of consumers take advantage of the game elements in products.
Brands/Companies Leaning Into This Trend
  • 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:

For this request, we initially searched for industry reports that address trends in innovation in customer engagement that big brands with strong digital media presence are using in the Latin American region. However, most of the trends were mostly focused on digital and e-commerce businesses. An example of that is the report published by Nearshore Americas discussing that the current trends in customer engagement in Latin America are cloud-based AR solutions, robotics process automation solutions, and agile and devops. As such, we decided to focus on global trends in customer engagement and were able to find several reports that detailed the innovations being introduced by big brands. We selected the trends that were consistently mentioned in different credible sources.
Part
03
of three
Part
03

Best Practices - Product Awareness and Adoption

Best practices in product awareness and adoption include use of AI analytics for consumer targeting, social media promotion, influencer marketing, and adopting direct to consumer operational models.

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

Rationale

Example

ADOPTING DIRECT TO CUSTOMER MODEL

Overview

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

RESEARCH STRATEGY

In order to determine best practices in product awareness and adoption in Latin America, your research team engaged in extensive research across news and industry sources such as Reuters and Euro Monitor. Initially, your research team searched for market reports and articles that identified best practices in product awareness and adoption in Latin America. The research strategy provided insights on best practices in product awareness and adoption globally rather than Latin America.
Next, your research team sought specific information on Latin America and utilize the information to identify best practices in product awareness and adoption in Latin America. The research strategy yielded significant insights such as strategies utilized by leading brands in Latin America in building product awareness and adoption in Latin America. We triangulated data for the research topic by using specific insights on Latin American companies with global best practices in product awareness and adoption.
Global best practices in product awareness and adoption were identified through corroboration across multiple credible sources such as Jabian, Wright Obara, and Night Creative. Importantly, your research team defined big brands selling physical products as market leaders in consumer packaged goods. In this regard, we defined market leaders as billion-dollar companies.
Sources
Sources

From Part 01
From Part 02
From Part 03