Part I of an interview between Partner Sabit Tapan and Kadir Gunduz, Regional Managing Director Indonesia / Papua New Guinea at Coca-Cola Amatil Indonesia
Career Trajectory and common denominators of emerging markets
SABIT: Good afternoon, Kadir!
KADIR: Good afternoon – although it’s morning here! I’m in Sydney right now, in the middle of my 14-day isolation period.
SABIT: Interesting! Before we go further, I’m curious to know – after a year of Covid, is this your first time in containment or isolation?
KADIR: No, this is my fourth.
SABIT: Unbelievable – it clearly shows what a burden Covid has been on international executive life.
KADIR: That’s true.
SABIT: Indeed. I would love to discuss with you all the Covid-driven business changes from various perspectives, and the ways in which you see business and management changing in the post-pandemic era, but let’s revisit that topic when we meet again. For now, I’d like to look at the way you have built your international career. You must be what, 20-25 years into an expatriate career traveling across countries and continents?
KADIR: 20 years – in fact, this year will be my 21st.
SABIT: In terms of your assignment locations, which countries have you worked in?
KADIR: After leaving Turkey, my home country, my first assignment was in Russia. My second assignment was in Tanzania, East Africa, then the company I work for expanded into Asia and I took over their Asian operations based out of Bangkok, running the regional business including operations in Vietnam, Cambodia, Laos, Nepal, and Sri Lanka. Then I moved to Dubai to run the largest regional beverage company there – we had operations in 14 Gulf countries, plus Lebanon, Iraq and North Africa, and we were indirectly available in over 50 countries. From there, I went to Indonesia for my current assignment, and now I run operations in Papua New Guinea and Indonesia.
SABIT: An impressive list! This creates an opportunity for me to ask you, as an experienced international FMCG executive: how we should evaluate these markets, the ones that are generally known as “emerging markets”? We hear this generic term “emerging markets” often, but with all your experience, how do you define emerging markets?
KADIR: I don’t believe that there is one definition which does justice to the concept. The countries I’ve worked in can all be strictly defined as emerging markets, but there are stark differences between them. For instance, Turkey is considered an emerging market, but it is a developed market from a beverage industry perspective, because of the high per capita consumption. Similarly, the Philippines and Mexico are considered as emerging markets, but per capita Mexico has one of the world’s most developed beverage industries. Therefore, you need to be careful with uses of this term.
That said, these markets obviously share some characteristics. Macro indicators are typically an indicator of a country’s economic prosperity – you would expect to see strong growth in emerging markets, albeit with a heightened risk of volatility. Allowing for some differences, a growing – or “emerging” – middle class is another characteristic of these markets.
From a consumer perspective, you see household income increasing, and an increased allocation of disposable income to discretionary items.
The structure of the retail market is also an indicator. In a typical emerging market, “fragmented trade” still generates a big proportion (at least two-thirds) of overall retail revenue. We can see different levels of consolidation happening in these markets as modern trade emerges, but neighbourhood provision stores, small eateries, roadside cafes, and even informal markets such as pushcarts still take quite a substantial share of the overall retail industry.
So, from my experience, Thailand, Tanzania, Iraq, Indonesia, and Russia are all “emerging markets” and while there are some major differences, these aspects that I have mentioned are probably some of the common denominators which I would use to describe them in this context.
SABIT: Definitely. As an expert in emerging markets, you would be able to easily differentiate one emerging market from another, but from a management and segmentation point of view, in a role of responsibility, how would you further segment and categorise emerging markets? Would you have labels and definitions for them?
KADIR: Of course, there are always opportunities to provide further granularity and perhaps texture. It could be possible to segment further, but I’m not sure how that would work in reality.
For example, we could segment by population, economic growth, disposable income, stability of government, ease of doing business, investment profile, whether there are restrictions on foreign investment, and the level of local industry development, from both a beverage industry perspective and a broader FMCG perspective. If you look at consumer goods in certain emerging markets, you see very highly-developed local industries in personal care, food or beverages. Further segmentation is possible using some of these criteria, but for me it is more meaningful to consider consumer-linked segmentation and trade structure – these can help you to focus on the precise kind of emerging market you are talking about. For instance, when I look at ASEAN countries like Vietnam, Cambodia, Nepal, Sri Lanka, Indonesia, and Papua New Guinea, there are similarities in market fragmentation and consumer income, but quite substantial differences from a local industry development perspective, and from a per capita consumption perspective.
SABIT: Understood – segmentation is not easy. But how about the way in which you work in different companies? I understand you have used what is called the “one system” with different companies, different entities, different shareholders. Have you worked in companies which separated “emerging markets” as a category from other markets?
KADIR: I have worked for franchisees that had multi-country operations. One of them had operations in over 25 countries, another had operations in over 15 countries and my current company has operations in 6 countries. Segmentation in these companies is based on geography, not emerging or developed markets. This makes sense from an ease of management perspective; maybe you could segment developmentally similar countries within a regional portfolio, but I have not generally had that.
For instance, in the joint venture company where I was president and CEO, I segmented those operations from a regional perspective rather than by the level of market development. My present company is the only company in which I have worked where two large countries that are both emerging markets, Papua New Guinea and Indonesia, are put together as one region.
SABIT: Understood. In terms of your 20 years of international experience, if you were given the responsibility to manage all the countries that you’ve managed to date, and if you were given a free hand to reorganise them, would you categorise them by geography because of physical proximity, or would you categorise them by segment according to their development level, trade structures, consumer behaviour, or any other criteria?
KADIR: With such a large portfolio, I would obviously stay regional, but within the regions I would try to differentiate them by level of development. For that, I would look at trade structure and per capita, because both of these factors have a substantial upstream impact on your route-to-market design, your logistics, your supply chain all the way. So that’s how I would structure and manage them, to create synergies.
“Your experiences in emerging markets bring a different perspective to the table in so-called “developed markets” – so I would be very careful about segregating countries.”
SABIT: Very interesting! Clearly, further segmentation is required. Do you think this recognition is coming? Will such awareness will be reflected in business organisations over the next 10-20 years, or will geographic proximities continue to define the way in which regions are separated?
KADIR: I don’t see a clear segregation of developing or emerging countries, but rather a subtle reflection of that thinking into the country structures. The experiences that we have and learn from in so-called “emerging markets” are not exclusive to them.
I believe in “cross-pollination” of talent and ideas between emerging and developed markets. You need an active exchange between countries with different levels of development, otherwise you create a sort of tunnel vision. Your experiences in emerging markets bring a different perspective to the table in so-called “developed markets” – so I would be very careful about segregating countries or creating substantial divisions between them, but at operational levels I would definitely carry out segmentation.
Why is this? Because when the trade has developed differently in different segments, different approaches are required. One example: in Indonesia we reach over 2,000,000 customers directly and indirectly. Of those 2,000,000 customers, we service 500,000 directly, compared to 20,000 in New Zealand – so obviously our route-to-market design, channel segmentation, segmented execution, supply chain, upstream and downstream requires a substantially different approach in these two markets, right?!
SABIT: Yes, indeed! So, you’ve touched on the fact that it is important to allow cross-pollination of people so that they can learn how to work in both emerging and developed markets, and carry their experience from one to another. But when you describe the countries that you’ve worked for – from Dubai to Indonesia, from Thailand to Russia, from managing Iraq to Papua New Guinea, from Lagos to Vietnam – were you handpicked to manage these geographies as an emerging market expert?
KADIR: I don’t know if I was handpicked, but my experience played a role in being considered for these roles. As did my track record of delivering results in those markets – after all, it’s not only where you work, but what you have done there. So, I guess that what I have done in those markets was relevant to those operations, and that is why I was given those roles.
SABIT: Yes, and you have stated that you would prefer to see talent moving back and forth between countries with different levels of development. Did your organisation have groups of talent which were focused on emerging or developed markets, or did it rotate them on a coordinated schedule, as you have described?
“We built training academies for each of our functions to develop technical knowledge, and developed a leadership framework and programmes to further develop our leaders, all with modules tailor-made to meet our local needs, i.e. the needs of the emerging market.”
KADIR: I think there was a rotation, but for example, Indonesia was on the receiving end, and would typically get a lot of international assignees from HQ in Australia rotating through – but no Indonesian talent was ever exported.
In fact, our first step was to localise several expat roles. When I arrived, there were 24 expats, but now there are only six, and all of the former expat roles have been localised. We embarked on a huge capability development drive, building a substantial platform to step-change the capabilities of the team. We built training academies for each of our functions to develop technical knowledge, and developed a leadership framework and programmes to further develop our leaders, all with modules tailor-made to meet our local needs, i.e. the needs of the emerging market. On top of that, we leveraged group-wide programmes and implemented mentoring programmes to further develop the leadership skills of top talent – not necessarily for emerging markets, but for the group as a whole.
Since then, we have started exporting talent out of Indonesia. We have three Indonesian employees that we developed who are now at HQ in Sydney, and a few in Papua New Guinea. In fact, for the first time in the history of this company, we have an Indonesian Group Director, our Group CIO. We are extremely proud of her.
So, these transfers are now being done in a much more structured way.
SABIT: We are familiar with International Development Programs (IDPs) where you take somebody from an emerging market and send them to work at a more developed market to see what lies ahead in the way that consumers behave and trade is organised, but have you experienced the opposite? Have you sent people from HQ or regional head offices into emerging markets to allow them to gain this experience in emerging markets, to be able to take responsibility in a broader region which includes both emerging and developed markets?
KADIR: Yes. Six or seven years ago, we handpicked a few junior to mid-management people with relevant experience from the Group, with the specific task of upgrading our position structure in Indonesia, so that we could develop them and in turn get them to develop local talent which would replace them. That worked beautifully. We did it in finance, in supply chain, and in the project management offices, and these individuals are now back in the Group or the Australian business, in higher positions than they left. It was a very specific program that we embarked on, and it worked well for these individuals, as well as for the Indonesian operation as a whole.
SABIT: Kadir, thank you very much for sharing your experience leading and managing in these diverse markets – this should help to clarify many conflicting concepts.
END OF PART I