How to reach emerging market consumers with new ... - Roland Berger

Study 7
Socio-demographic change IS DRIVING
consumer power
In publication 1, we saw how population growth – at extraordinary
levels almost everywhere except Europe – will profoundly shape
tomorrow's global economy. According to forecasts, between 2012
and 2030, some 1.2 billion of the world's 1.3 billion new citizens
will be born in emerging or developing countries. That's equivalent
to 95% of all births.
What does this mean for specific regions between 2012 and
2030? A predicted 600 million people in Asia, 500 million in Africa
and about 90 million in Latin America and the Caribbean will be
added to the local population. Europe will be tiny by comparison,
with only 1 million new people, representing 0.1% of the new
global population.
Emerging markets will be extremely young in terms of
demographics. In 2030, 40% of the population will be under 25,
compared to just 26% in developed nations. This fact will have a
profound influence on consumption patterns.
The number of young people in emerging markets who enjoy a
better education will also increase. In the period up to 2020,
private expenditure on education in emerging markets is set to
grow nearly 7% per annum, reaching a level of USD 143 billion.
Take China, for instance. Chinese society places a strong em phasis
on education. The 2009 Pisa world education rankings put China
in first place in all three educational categories: reading comprehension,
mathematics and science. Many other develo ping
countries, India and Brazil in particular, are also set to see
an increasing number of university graduates. Since 2006, the
number of students in China and India has grown by over 7% a
year. China now produces half a million new engineers each year –
while engineering skills shortages in Germany are leading to
an estimated annual economic loss of USD 2.3 billion for German
business.
Young people with better education and skills also have a greater
chance of employment. Over the last 25 years, the number of
people living in poverty in emerging and developing countries has
fallen by half. Education has played a major role in this
development, improving lives on the ground.
f1 Every minute, fifty households in developing countries join the
middle class. By 2030, an estimated 66% of the world's middle
class will live in Asia, compared to just 21% in Europe and the
United States. Indeed, China's burgeoning middle class is already
bigger than the entire American population. As for the rich, the
number of millionaires in China surpassed that in America some
time ago. Other countries – not least Indonesia, India, Pakistan
and Nigeria, along with other African nations – are also seeing an
expanding middle class with money to spend. These upwardly
mobile sectors of society share a common wish: to create for their
children and grandchildren a world of affluence, political stability
and opportunities.
f2
f3
Disposable incomes are also on the rise. By 2020, many emerging
countries will see more than 80% of their population with annual
disposable incomes in excess of USD 10,000. More than 25% of
households in Saudi Arabia, Turkey, Argentina, Iran, Russia and
Malaysia will command incomes above USD 50,000 a year.
Changing spending patterns
Total consumer spending in the developing world will nearly
double over the next eight years, from USD 14 to 22 trillion. Per
capita consumer expenditure is forecast to reach USD 3,319 a year
in 2020. This growth will be largely driven by improved education
and rising incomes. In particular, BRIC countries will see consumer
spending grow from USD 7 to 11 trillion, Mercosur countries from
USD 2 to 3 trillion, and in the Middle East and North Africa from USD
1 to 2 trillion. Per capita consumer expenditure is forecast to grow
at least 3% annually in each region by 2020. Mercosur will see
the highest per capita spending with USD 10,112, followed by the
BRIC countries with USD 3,619 and the Middle East and North
Africa with USD 3,615.
Traditional consumer goods segments such as fashion, leisure and
communications are likely to enjoy per capita growth of about 30%
by 2020 in emerging and developing countries. European fashion
chains such as Zara are already a familiar sight in major cities
across India, Indonesia, the Philippines, Saudi Arabia, Thailand and
South Africa. Per capita clothing expenditure is forecast to reach
USD 183 a year in 2020, or a total of USD 1.2 trillion – including
USD 800 billion in our Focus 20 countries alone. 2 Russia, Brazil and
Turkey will be home to consumers spending the most on fashion.
China, India and Vietnam will see a sharp increase – more than 8%