BY Sarah Boumphrey
Euromonitor’s Markets of the Future reports identify Bangladesh, Cambodia, Laos, Myanmar and Sri Lanka as the region’s next generation of consumer markets. Although consumers in these countries have limited purchasing power, growth is strong and rapid urbanisation, poverty reduction, economic growth and the establishment of modern retailing formats are supporting sales of a wide range of consumer goods. Many big-name brands are well established in specific categories, whilst local brands continue to dominate elsewhere.
Size versus speed
Bangladesh’s consumer market is by far the largest of the five countries – bigger than the other four combined. With consumer expenditure of US$139 billion in 2014, Bangladesh is a similar size to Finland. Bangladesh is probably best known for its ready-to-wear garment export sector but its scale and economic prospects mean it has the potential to be a vibrant consumer market in its own right. With per capita spending of only US$880 in 2014, low purchasing power means it is not an easy market for multinationals, but with the country’s most sizeable consumer product categories – packaged food and apparel – achieving sales of US$9,826 million and US$3,354 million respectively in 2013, it offers opportunities for those with the right products and services.
Laos is the fastest-growing of the five markets, with consumer spending in the country set to triple between 2015 and 2030. This rate of growth is far higher than in more established emerging markets such as Indonesia and the Philippines. The market overall is small – around the size of Macedonia -but its dynamism makes it an interesting prospect for many – including Unilever and Mondelez International who are already major players in the beauty and personal care and confectionery categories respectively.
Real Growth of Consumer Expenditure in Selected Asian Economies: 2015-2030
Source: Euromonitor International from national statistics/Eurostat/UN/OECD
Note: Data are forecast
The fast-growing populations in these markets drive economic and consumer market growth. Four of the five are urbanising at a faster rate than the average for emerging and developing Asia – the exception being Myanmar. Bangladesh is expected to add 1.6 million urban inhabitants per year between 2015 and 2030 – equivalent in size to the US city of Philadelphia in each year. These urban consumers are driving growth for western brands, for instance in packaged food where the demand for convenience and quality is being met by companies such as Nestlé, Mondelez International and Del Monte. Through overseas travel, more middle class Bangladeshis have been exposed to Western brands, and with consumers’ expectations growing alongside their incomes, this is also increasing opportunities for consumer goods companies.
Growth in Sales of Selected Consumer Products in Bangladesh: 2014-2018
Source: Euromonitor International from trade sources
Note: Data are in current terms
These markets are also young. With the exception of Sri Lanka, the age profile is much younger than in emerging and developing Asia as a whole. With a median age of 21.7 years in 2014, Laos has the youngest demographic profile, with 34.7% of the population under 14 in that same year. Accordingly the birth rate is high – this means that there were more babies born in Laos last year than there were in the Netherlands – a country two and a half times its size. Nevertheless, just US$0.27 per capita was spent on baby and child-specific beauty and personal care products, and US$2.07 on baby food in 2013. There are currently no domestic producers in either category, leaving the former dominated by Osotspa and Johnson & Johnson and the latter by Nestlé and Danone. Osotspa, a Thai company, has been able to gain a first-mover advantage. Its Babi Mild brand had a 35% share of the baby and child-specific beauty and personal care market in 2013.
Between 2009 and 2014, 18.9 million babies were born in Bangladesh. But the baby food market was worth just US$55 million in 2014, and the baby and child-specific beauty and personal care segment just US$10.9 million. This compares with US$1,237 million and US$45.8 million respectively in Vietnam, a country with a similar total consumer expenditure base and half as many babies born in the same period. With foreign companies benefiting from perceptions of higher quality and safety standards, Nestlé dominates the baby food market with its Cerelac and Lactogen brands accounting for 51.0% of the market in 2013.
Selected Markets for Baby and Child-specific Beauty and Personal Care and Baby Food and Birth Rates: 2013
Source: Euromonitor International from UN/national statistics/trade sources
Innovation is the key to success
Operating successfully in small, fast-growing markets is not without challenges, but it can be a profitable strategy. Although individual spending power is limited, taken as a whole, these markets can be sizeable or have the potential to be so. To be successful, companies must understand the trade-off poor consumers make between price and quality. As well as producing quality goods at a low price, companies usually face distribution difficulties (particularly to remote areas), challenges around building brand awareness or even category awareness (with word of mouth a crucial form of communication) and also problems with infrastructure.
Business models must be rethought – strategies cannot be simply imported from advanced economies, or even necessarily from other emerging markets – if companies are to create goods and services that consumers in these countries both want and can afford. Companies often combine CSR policies with commercial strategies to good effect. Witness Grameen Uniqlo in Bangladesh, whose business plan is based on all parts of the business taking place in Bangladesh – from sourcing raw materials, to production, to logistics and sales. Profits are then ploughed back into the business, but Uniqlo is learning a huge amount of valuable information about the market as well as achieving CSR targets.
ThiArticle has been published in Euromonitor website http://blog.euromonitor.com/2015/04/consumers-in-asias-markets-of-the-future.html