Struggling to Connect With the New Consumer? Try LATTE!

When I was a teenager growing up in India, my friends and I thought it was “cool” to be associated with the largest global brands. We took pride in purchasing, consuming and even flaunting them – these brands were seen as a sign of success among the aspiring middle class.

Those days are gone – and it’s not just me getting old gracefully. Today’s Millennial and Gen Z consumers now see such global brands as too impersonal, too remote, too mass-produced, and not sufficiently conscious of environmental and health concerns.

No surprise then that some of the largest global brands are struggling to connect with younger consumers. A case in point: leading global beverage players who thought they were marketing their brands to youth were dismayed by recent research that revealed that the demographic responding to their ads was aged 45+!

This is not an isolated example nor is the issue merely about poor advertising. Rather, there is a new paradigm for successful consumer innovation at work that is making global brands fundamentally rethink themselves.

This new paradigm can be summed in just one word: LATTE, which stands for “Local, Authentic, Transparent, Traceable and Ethical” – the five attributes that today’s Millennial and Gen Z consumers use as a yardstick for product innovation.

Driving this trend is an abundance of information at consumers’ fingertips – which has made them increasingly aware of what they buy. Allied to this is a near-bottomless demand for speed and convenience; matched by a desire for authentic and ethical products that are embedded in a unique, local context.

Interestingly, as big global brands struggle with LATTE, emerging market players are stealing a march on them.

Chinese heritage

Local brands dominate the confectionary and snack business, holding or growing market share in 18 out of 26 categories. In the juice category, Tian Di No. 1 is winning because its products serve Chinese consumers’ increasing demand for nutritious and healthy drinks. Another new brand, Mushroom is winning by innovating around its local health heritage.

Indian ayurveda

In India, global food brands have been muscled aside by a yoga teacher who founded food and personal care company Patanjali. This has been a runaway success with Indian consumers – with its Ayurvedic products tapping into an increasingly health-conscious marketplace, while also capturing a resurgent pride in Indian traditions. Patanjali has grown ten-fold in the last five years, and with a $750 million revenue base and $30 billion valuation, it is now aiming to topple Nestle and Unilever from the throne of India’s CP sector.

Brazilian beauty

In Brazil, Natura Cosmeticos has built a huge $2.5 billion personal and beauty care empire by focusing on sustainability, ethical sourcing and social responsibility. Natura uses only natural ingredients in its formulas, and has forged strong alliances with indigenous Amazon Basin communities to source herbal raw materials, sustainably harvested from Brazilian flora.

Nigerian skincare

And in Nigeria, House of Tara, founded by Tara Fela-Durotoye is the first homegrown makeup brand in Africa. Its tremendous success – the company started out as a bridal makeup service – is due to an authentic connection the founder has built with African women. It has earned their trust and confidence through high-touch customer service, including makeup schools, and built on this via an impressive multi-channel distribution network.

How to do LATTE

It is abundantly clear that both global and emerging market consumer brands need to embrace LATTE values to drive their innovation programs, but this is easier said than done.

Global players should start thinking about how their R&D and consumer insight programs need to be revamped – for example, through disaggregation of previously centralized hubs, crowd-sourcing of ideas and using social listening and advanced analytics to understand young consumers.

At the same time, companies need to figure out how to redesign supply chains for greater transparency, traceability and more ethical sourcing. Marketing needs to become much more embedded in local cultures around the world to come across as personalized and authentic.

As this new innovation model reshapes their organization, globally centralized players will also need to think about how value creation will shift from regional hubs to local countries and what the tax implications of that might be. They would need to think about the significant talent and culture implications of this trend.

Meanwhile, LATTE presents a great opportunity for emerging market challengers to grow and scale their businesses globally. But they have to be careful not to become anonymous and impersonal global brands themselves as they scale. Key to this is to understand what core values their propositions have which are resonating with Millennials and Gen Z and then replicate these around the world in a locally-relevant and authentic way in each market. This might be a slower and a less efficient path to global scale, but it is one that will win the hearts and minds of the new consumer.