Study reveals consumer climate in emerging markets

by Marketing ON 25 January 2012

While Brazilians are big spenders, the Chinese are saving, Indians are study geeks and the Russians are on a downer, brands are looking at exponential growth in emerging markets over the next few years as consumers look to ‘trade up’ in these nations.

In a look at current consumer behaviour in key emerging markets, Credit Suisse and ACNielsen interviewed 14,000 consumers across eight countries. The study found that while consumer confidence was down among this group overall, behaviour varied greatly by country and brands should not take a one size fits all approach when moving into the emerging world.

However, as wealth grows, one thing these markets are expected to have in common is a trading up from unbranded to branded products, a trend that will benefit overseas brands which are seen as pre-eminent and something to aspire to.

The mix of local and international brands varies by category, with local brands still holding sway in dairy and personal products categories, Credit Suisse says.

“As incomes continue to improve international brands offer greater growth potential than their local peers in the discretionary space,” the report says. “However, the growth outlook for local brands should be at least as good as international brands for essential goods and services.”

The report identifies three key opportunities for international brands. One of these is capitalising on the trading up trend, while the others are scope for merger and acquisition in categories where local brands dominate and opportunities to invest in local brands poised for growth.

The 2012 study gives insight into the current climate in eight emerging markets as well as stock recommendations for these countries:

Brazil: The Brazilian consumer stands out as the most optimistic across the survey, with one of the highest rates of income growth among the countries surveyed. Given a consumer that typically spends rather than saveing (barely 7% of income is registered as saved), it remains a market for momentum in discretionary spending (smartphones, technology, personal care). Key stock recommendations: AmBev, Brasil Foods, Natura, Diagnósticos da América,PDG, Multiplus, MercadoLibre, Procter & Gamble, Diageo, Yakult.

China: The outlook for the Chinese consumer is robust though expectations have softened in the last 12 months and optimism is lower than in Brazil and India. The strength of technology spending is a clear bull theme while a prioritisation of healthcare and education also stand out. Key stock recommendations: China Modern Dairy, Belle, 7 Days, BMW, Swatch, Wynn, Tencent.

Egypt: Optimism in Egypt is the lowest in the survey accompanied by low spending levels. The key is finding the stability and means to unlock it. At present, and politics aside, ongoing real declines in income do not provide long term opportunities. No stock recommendations.

India: Indians are confident in their future personal finances and spending in most consumer categories, particularly low ticket. There is an appetite for extra investment in education and technology spending as internet penetration continues to grow from a low base. Key stock recommendations: Educomp, HDFC Bank, Hero, Sun Pharma, Prudential.

Indonesia: The Indonesian consumer displays strong structural growth potential and high optimism. There is considerable potential to unlock under-penetrated markets such as automobiles (cars and motorbikes) and technology. Key stock recommendations: Mitra Adiperkasa, Indofood CBP, XL Axiata, Daihatsu, BATs.

Russia: “The weakest BRIC in the wall,” Russia has the lowest optimism of the group. The simple explanation stems from poor income growth but it seems unlikely that this lid on optimism will be removed easily. The outlook for growth may be better in high ticket items due to the severe income inequality and under-penetration of luxury goods and technology. Key stock recommendations: Magnit, Sberbank, Synergy, Philip Morris, Crown, JTI.

Saudi Arabia: The government’s spending plans and policy announcements have been highly supportive of confidence. Spending outlooks should remain discretionary focused (smartphones, computers, property and cars). Key stock recommendations: Almarai, Etihad Etisalat, Yum! Brands, Nokia, BMW, Apple.

Turkey: Turkish consumers are feeling the squeeze, with week consumer confidence. Food and housing costs are squeezing out discretionary spending and leaving limited funds for saving. With the outlook for real incomes still questionable, this does not look a market for high ticket spending. Key stock recommendations: Efes, Arcelik, Tofas, Reckitt-Benckiser.

Booming middle class helps Indonesia escape GFC

by Marketing ON 2 December 2011

GFC? What GFC? Looking at the rate of growth in Indonesia, it seems as though the country was safely booming in its own bubble. According to research released by Nielsen yesterday, Indonesia has surged past global predictions and reached US$3000 per capita income at the start of 2011, a decade earlier than expected.

According to Nielsen, Indonesia’s middle class has been driving this rapid growth, and is now standing at the third largest in the world. They make up 48% of the Indonesian population, and account for 44% of all FMCG spending in the country.

Over the last five-year period, the middle class of the country have put much focus on improving the comfort of their lives, with ownership of rice cookers doubling (from 30% to 64%) and possession of a DVD player growing from just 6% in 2006 to over 39% today.

“Middle class households have focused their spending on items that improve their quality of life. That encompasses a whole range of consumer goods such as home electronics and appliances to health and beauty products. They tend to like to combine the convenience and fresh offerings from traditional retail channels such as wet markets with the price-savings and expansive product offerings of the modern trade,” says Catherine Eddy, managing director, consumer, at Nielsen Indonesia.

Nielsen released the following trends about this influential group of consumers:

- value for money is key for nearly all (97%) middle class shoppers

- 88% want to experiment with brands

- 53% shop in a modern trade outlet at least twice a month, and

- 90% look for stores with ‘attractive and interesting promotions’.

While the middle class are big viewers of television (96% watch TV every day), the most interesting trend in media consumption is the surge in mobile ownership. 71% of the middle class own a mobile phone, and half of them are using it to access the internet. More than 35% already possess a smart phone. 94% of them are also connected to social networks, with 89% owning a Facebook account.

“Penetration is already high, and purchase intent for smartphones is also strong. These devices are fast becoming the primary platform for a variety of activities, such as watching video, accessing the Internet and connecting to social networks. This is a key area for marketers and content providers to focus their efforts, provided they know what consumers are looking for,” says Irawati Pratignyo, managing director, media at Nielsen Indonesia.

Nielsen provides some key insights on how business owners can reach the middle class consumer:

- kids are playing a role in modern shopping: 95% say that they ‘hardly ever refuse’ the invitation from their kids to go to the minimarket

- convenience is key: today’s middle class consumers are pressed for time, with the demands of work and family life. Products that make life a bit easier are clear winners

- appeal to the fact that they are smart shoppers: they know how much items cost and where they are located in the store. Create a welcoming environment, promote value for money and win their loyalty

- Connect with them: they are increasingly online, and they discuss brands and products there. Engage with them on social networks, and

- Be relevant: tailor marketing – especially online and mobile campaigns – to them. Appeal to their need-states.

Social media across Asia-Pacific

by Marketing ON 9 April 2010

comScore has released its latest report on social media across Asia-Pacific (excluding China).

The report found that Australia ranks a nail-biting second to the Philippines for social media penetration. In the Philippines 90% of the web population visited a social networking site during February, the figure for Australia was 89.6% and 88.6% for third place, Indonesia.

Engagement across the region followed a similar pattern, with the average Philippines user spending 5.5 hours monthly on social networking sites, Indonesians 5.4 hours, and Australians and Malaysians 3.8 hours.

Averages for the measured period across Asia-Pacific indicate 2.5 hours are spent per month on social media and an individual will visit the category 15 times monthly. 50.8% of the total online population in the region visited a social networking site during the period. Facebook was the most popular, with a total of 240.3 million visitors.

“While social networking continues to be one of the most popular and fastest growing web activities in the world, its dynamics in the Asia-Pacific region exhibit significantly more individual market differentiation than in other global regions,” said Will Hodgman, comScore executive vice president for Asia Pacific. “In some markets, such as the Philippines, Australia and Indonesia, social networking is one of the most popular web activities reaching nearly 90 percent of the entire Internet population, while other markets report less PC-based social networking penetration, which can often be attributed to the high propensity to engage in social networking via mobile devices in these markets.”