euromonitor emerging markets

Emerging Market Consumers: A comparative study of Latin

America and Asia-Pacific

Euromonitor International

ESOMAR Latin America 2010

Table of Contents

Emerging markets and the global recession

Demographic dynamics

Income inequality and the rise of the middle class

Spending priorities

Consumers in 2010 and beyond

Image for 2010Emerging markets and the global recession

2010: Recovery is driven by emerging markets

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1

6

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2006Q

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20

11

Q1

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Q2

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Q4

% r

eal G

DP

gro

wth

over

pre

vio

us

quart

er, a

nnualiz

ed

2009: 89

2010: 17Number of countries

expected to see

negative real GDP

growth

Emerging economies

World

Advanced economies

Real GDP growth: % growth over previous period, annualised

Source: IMF

Winners and losers

-10.0 -5.0 - 5.0 10.0 15.0

ItalyEU-27

United Kingdom

FranceGermany

Argentina

JapanSouth Africa

Australia

Canada

USASouth Korea

Russia

Turkey

MexicoSaudi Arabia

BrazilIndonesia

India

China

2009 2010

Annual % real GDP growth in G20: 2009-2010

Source: IMF 5

Latin America

Recovery in Latin America is not homogenous across countries. Commodity-exporting countries (Brazil, Chile, Colombia and Peru) are expected to perform better in the region, while commodity importers face a slower recovery.

Real GDP growth in selected markets: 2008-2009, Growth over previous period

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

Argentina 1.2 1.8 1.3 -0.5 0.1 0.1 0.1 na

Brazil 1.8 1.2 1.4 -3.4 -1.0 1.4 1.7 2.0

Chile 1.8 1.9 -1.3 -2 -0.7 -0.3 1.1 na

Colombia -0.4 0.6 0.2 -1.3 0.1 0.8 0.2 na

Mexico 1.2 -0.4 -0.1 -1.9 -6.9 0.3 2.5 2.0

Source: National statistics

Note: Data are seasonally adjusted

Brazil

Brazil’s economy suffered a contraction

in 2009, largely as a result of slowing

global demand for Brazilian exports,

particularly of raw commodities.

Nonetheless, the economy has

rebounded owing to the strong capital

inflows and good policy management

by the government.

The unemployment rate in Brazil

dropped to 6.8% in December 2009

returning to the same level recorded in

December 2008.

Growth of private consumption fell

during 2009, but is supported by low

borrowing costs, tax cuts and

aggressive government spending.

4.74.1

9.9

3.74.5

8.6

0

2

4

6

8

10

12

Real GDP Growth

Inflation Unemployment Rate

2010 2011

Selected macro-economic indicators:

2010-2011

Source: IMF/ILO/National statistics

Mexico

The recession in Mexico ended in Q3

2009. This was a reflection of the

improvement in industry and services

caused by the revival of external and

domestic demand.

Swine flu alone cost the country more

than US$2 billion. The recession in the

USA led to a sharp drop in exports and

remittances and the recovery is

dependent on the strength of the US

manufacturing sector.

Consumer spending fell by 8.0% in

2009 owing to tighter credit, a drop in

wages and remittances. Spending

should begin to rise again in 2010,

increasing by 1.8%.

4.03.5

6.3

4.7

3.0

5.7

0

1

2

3

4

5

6

7

Real GDP Growth

Inflation Unemployment Rate

2010 2011

Selected macro-economic indicators:

2010-2011

Source: IMF/ILO/National statistics

Asia Pacific

Asia recovered from the downturn faster than other regions owing to the highly effective policy responses taken by governments. While deflationary pressures and a strong yen could stifle Japan's recovery, China continues to display a strong recovery backed by robust growth in private demand.

Real GDP growth in selected markets: 2008-2009, Growth over previous period

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

China 10.6 10.1 9.0 6.8 6.1 7.9 9.1 10.7

India 2.0 0.8 2.2 -0.3 1.4 2.5 3.0 na

Indonesia 1.8 1.7 1.5 0.2 1.1 1.3 1.5 1.5

South Korea 1.1 0.4 0.2 -5.1 0.1 2.6 3.2 0.2

Vietnam 7.5 5.7 5.9 5.7 3.1 4.5 5.8 7.4

Source: National statistics

Note: Data are seasonally adjusted. Data for China and Vietnam are year-on-year and are not seasonally adjusted

China

China’s growth continues to remain

buoyant aided by a strong rebound of

exports, robust growth in private

demand and continued increases in

foreign investments.

Domestic spending is driven by the

stimulus package and the relaxation of

restrictions on bank lending.

Concerns about asset price bubbles

still persist. Timely monetary tightening

will not only help sustain growth but

also avoid overheating.

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3.0

4.5

9.7

3.5

4.5

0

2

4

6

8

10

12

Real GDP Growth

Inflation Unemployment Rate

2010 2011

Selected macro-economic indicators:

2010-2011

Source: IMF/ILO/National statistics

Indonesia

Indonesia's economy performed better

than that of many other large Asian

countries in 2009 thanks to its large

domestic market and relatively modest

dependence on exports. The

government has been introducing a

range of more liberal policies to boost

economic activity, investment and

employment.

Unemployment fell to 7.9% at the

end of 2009 – the lowest rate in

nine years.

Good harvests have boosted farm

incomes and commodity exporters

are benefiting from the surge in

China's infrastructure investment.

4.8

6.2

9.4

5.05.4

9.1

0

1

2

3

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5

6

7

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9

10

Real GDP Growth

Inflation Unemployment Rate

2010 2011

Selected macro-economic indicators:

2010-2011

Source: IMF/ILO/National statistics

Demographic dynamics

Demographic dynamics

A tale of two regions

Latin America

Asia-Pacific

Stark differences in major markets

2010

Total population

Median age

% aged 0-14

% aged 65+

Fertility rate

Largest city

China

1.3 billion

38.8 years

16.4%

9.7%

1.8

Shanghai - 12.0 million

Brazil

195 million

28.8 years

25.6%

6.8%

1.8

Sao Paulo – 11.4 million

Source: UN/National statistics

Income inequality and the rise of the middle class

Fundamental differences in income distribution between the two regions

Gini Index

Asia Pacific: 0.413

Latin America: 0.500

Average household income:

Asia Pacific:

US$11,159

Latin America:

US$16,254

Households with an annual income over US$15,000:

Asia-Pacific: 7.3%

Latin America:

33.2%

Source: National statistics

Income inequality in Latin America impacts on the size of the middle class

34%31%

29% 28%27%

24% 24%23% 23%

22% 21%19%

0%

5%

10%

15%

20%

25%

30%

35%

40%

% o

f household

s w

ith a

n incom

e b

etw

een

75%

and 1

25%

of th

e m

edia

n incom

e

Middle class households: 2009

Source: National statistics

It also means the Latin American rich are richer than the Asia-Pacific rich

- 25,000 50,000 75,000 100,000

Vietnam

India

Indonesia

Pakistan

Bolivia

Philippines

Turkmenistan

Thailand

China

Kazakhstan

Azerbaijan

Ecuador

Argentina

Colombia

Peru

Chile

Malaysia

Mexico

South Korea

Taiwan

Brazil

Venezuela

US$ per household

Average disposable income of decile 10 households: 2009

Source: National statistics

With some startling extremes

- 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

Kazakhstan

Pakistan

Azerbaijan

Taiwan

Chile

Indonesia

South Korea

India

Vietnam

Venezuela

Mexico

Turkmenistan

Argentina

Thailand

Bolivia

Philippines

Malaysia

China

Ecuador

Peru

Colombia

Brazil

The ratio of a decile 10 income to a decile 1 income: 2009

Source: National statistics

Spending priorities

Income inequality has a huge impact on spending patterns

-

2,000

4,000

6,000

8,000

10,000

12,000

Latin America Emerging Asia

US

$ p

er

household

Average spending of a decile 5 household: 2009

Necessities Discretionary spending

52%

A middle income household in Latin

America spends 44% more than

the equivalent household in

Emerging Asia

Despite this, the proportion of

budget devoted to necessities is

similar: 49% in Latin America

and 52% in Emerging Asia

49%

Source: National statistics

How does the spending of the rich compare?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China Brazil

% o

f to

tal household

expenditure

Average expenditure of a decile 10 household: 2009

Alcoholic Beverages & Tobacco

Food & Non-Alcoholic Beverages

Miscellaneous Goods & Services

Hotels & Catering

Education

Leisure & Recreation

Communications

Transport

Health Goods & Medical Services

Household Goods & Services

Housing

Clothing & Footwear

Source: National statistics

And the poor?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China Brazil

% o

f to

tal household

expenditure

Average expenditure of a decile 1 household: 2009

Alcoholic Beverages & Tobacco

Food & Non-Alcoholic Beverages

Miscellaneous Goods & Services

Hotels & Catering

Education

Leisure & Recreation

Communications

Transport

Health Goods & Medical Services

Household Goods & Services

Housing

Clothing & Footwear

Source: National statistics

Consumers in 2010 and beyond

Technology & Communications

Emerging markets increasingly plugged in

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

2010 2015 2020

Internet Users

Asia Pacific

Latin America

Staying connected on the go

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

2010 2015 2020

Mobile Phone Subscriptions

Asia Pacific

Latin America

Health & Wellness

Better living through nutrition

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

2009 2014

Health & Wellness China - RMB mn

Better living through nutrition

0

25000

50000

75000

2009 2014

Health & Wellness Brazil - R$ mn

Focus on prevention and dietary gaps

Vitamins and Dietary Supplements

RMB mn

0

10000

20000

30000

40000

50000

60000

70000

80000

China

2009

2014

Vitamins and Dietary Supplements

Rs mn

0

5000

10000

15000

20000

25000

30000

35000

40000

India

2009

2014

Focus on prevention and dietary gaps

Vitamins and Dietary Supplements

R$ mn

0

500

1000

1500

2000

2500

3000

Brazil

2009

2014

Vitamins and Dietary Supplements

Mx$ mn

8200

8400

8600

8800

9000

9200

9400

9600

9800

Mexico

2009

2014

Eco-Awareness

Translating awareness into sales

Competitive pricing

Packaging redesign

Concentrated products

Communicating benefits

Retail evolution

Expansion of chained retailing – Asia Pacific

Asia Pacific Outlets 2009 Outlets 2014

Hypermarkets 4048 6786

Supermarkets 124477 154445

Discounters 1043 1545

Small Grocery Retailers 11349185 11608480

Food/Drink/Tobacco

Specialists 3747283 3803238

Expansion of chained retailing– Latin America

Latin America Outlets 2009 Outlets 2014

Hypermarkets 1770 2129

Supermarkets 9940 11111

Discounters 21636 22554

Small Grocery

Retailers 1592974 1658011

Food/Drink/Tobacco

Specialists 395421 412058

Internet retailing: a new frontier for shoppers

0

200

400

600

800

1000

1200

-100 0 100 200 300 400 500 600

China

India

Argentina

Brazil

Mexico

04-0

9 P

erc

en

tag

e V

alu

e G

row

th

09-14 Percentage Value Growth

Mary.Tabion@Euromonitorintl.com

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