FMCG brands target emerging world

16 January 2013

LONDON: Emerging markets will supply many of the growth opportunities open to FMCG brand owners over the next three years, a new study has suggested.

The white paper, Convergence with Divergence, produced by economic forecaster The Economist Intelligence Unit (EIU) and Mintel, the consumer market experts, suggests GDP in emerging markets will grow between two and five times as fast as the US and UK over the period.

The paper examines consumer spending in five such markets, including China, India, Turkey, Mexico and South Africa, and identifies key FMCG growth segments in each.

"Understanding how emerging markets will develop over the coming years is essential for FMCG companies planning expansion activities," said Jon Copestake, Retail and Consumer Goods Analyst at the EIU.

He added that "underlying priorities have significant effects on purchases made … Understanding these nuances is key".

Peter Ayton, Mintel's Global Consumer Analyst, offered an example of this in laundry detergents, which are set to be a "stand-out item" in China. This is a result of washing machine penetration in rural areas rocketing from 1% of households in 2000 to 16% in 2010, helped by a government scheme that subsidised purchases.

Strong demand for related products, such as cleaners, air fresheners and dishwashing detergents, will see sales in the household products grow by 15% a year for the next four years.

Meanwhile, in India, some of the biggest opportunities are appearing in the food market, where consumers are slowly shifting away from home-cooked food and towards prepared food.

Time-pressed, wealthier Indians are increasingly likely to eat breakfast cereals rather than traditional cooked chapattis. Another area noted by the report is juices, where health-conscious Indian mothers are seeking out vitamin-enriched options.

A factor that may accelerate this shift to prepared food is last year's relaxation of laws on investment by foreign retailers such as supermarkets, a development examined in more detail in a Deloitte study and reported yesterday by Warc. Overall, food spending in India is expected to grow at 13% a year, the report stated.

According to the EIU/Mintel report, Mexico's growing affluence is demonstrated by the rapid expansion of the pet food market, as owners switch from feeding their domestic animals scraps to buying them packaged foods. As a result, companies like Nestlé and Mars have come to dominate this sector.

Elsewhere, the rapid expansion of the middle class in South Africa has altered spending patterns in that country, EIU/Mintel said. Food and drink accounts for the majority of consumer expenditure, but there is a move away from tea to coffee, particularly towards the more expensive fresh coffee brands.

In Turkey, sun cream was identified as a fast growing market, as Turkish consumers take note of health concerns and show a preference for SPF20+ creams.

Data sourced from EIU/Mintel; additional content by Warc staff