SINGAPORE: If the Association of Southeast Asian Nations (ASEAN) was treated as a single entity, it would rank as the sixth largest economy in the world, attracting huge foreign direct investment, but a new report argues there are eight myths about the region that need to be dispelled.
Research firm Nielsen and strategic consultants AlphaBeta partnered to produce the Rethinking ASEAN report, an analysis of current and future potential consumer demand, covering 700 cities and regions in seven of the largest ASEAN economies.
Its central theme is that ASEAN middleweight regions with populations of between 500,000 and 5m people are the region's next big growth prospect. This contradicts the commonly held belief that mega-cities like Jakarta, Manila and Bangkok are the region's sole engine for growth.
The first "myth" tackled in the report concerns Indonesia, which is widely regarded as the "only market that matters in ASEAN", on account of the country taking 40% of the region's economic output.
However, the report said the Philippines matters more because it accounts for a larger share of demand in ASEAN's top 50 markets across 10 major consumer products.
The second myth – consumer market growth doesn't vary much within countries – is debunked with the finding that growth rates can be more than seven times larger in some regions than the national average.
For example, country-level demand for detergent in Thailand has grown at a relatively modest 1.2% per annum since 2010, but the Chiang Mai region saw growth of 8.9% per annum over the same period.
Thirdly, the report acknowledges that mega-cities like Jakarta, Manila and Bangkok are important consumer markets, but says they do not dominate consumer demand.
In reality, across many product categories, middleweight regions with populations of between 500,000 and 5m people are important. The Thai regions of Nakhon Ratchasima, Chonburi and Rayong, for example, are among the top 10 markets in ASEAN for facial moisturiser.
It is often assumed that the fastest consumer demand growth is happening in the mega-cities of ASEAN, but that "definitely" will not be the case in the future, the report said in its dismissal of myth number four.
Across seven of the product categories examined, the fastest growth is likely to happen in either small middleweight regions of 500,000 to 1m people or large middleweight regions of 1m to 5m people.
Elsewhere, Nielsen and AlphaBeta dispute the notion that modern distribution channels exist only in the region's mega-cities and that income levels are a reliable gauge of likely consumer demand across product categories.
Turning to the seventh myth – namely, that the major markets in ASEAN won't change much by 2030 – the report says many middleweight regions will increase their ranking among the region's top markets by then.
Finally, the report recommends that brands do not focus on particular countries for sales growth, but should instead realise that many sub-regions will have stronger growth than entire countries.
For example, Ho Chi Minh City is expected to have US$76m more annual demand in 2030 than in 2016 – almost three times higher than the demand growth expected in Thailand, and also higher than Malaysia.
"While ASEAN has been enjoying economic recognition in recent years, businesses tend to view it as a single entity and, surprisingly, little is known about the many cities and regions that make up the archipelago," said Patrick Dodd, Nielsen Growth Markets Group President.
"It's time for companies to look beyond mega-cities to see the growth opportunity hot spots within middleweight regions."
Data sourced from Nielsen, AlphaBeta; additional content by WARC staff