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Beyond BRIC - Selling to MIST Countries

By: Greg Seminara,Export Solutions
Topics: Mexico Indonesia South Korea Turkey


Beyond BRIC - Selling to MIST

Who is Jim O'Neill and why may he change your life again in 2016 ? McNeill is the former Goldman Sachs economist credited for coining the term BRIC (Brazil,Russia, India , & China). For 10 years,international  business plans bulged with facts and updates on the slow road to BRIC success. BRIC's 2.7 billion population and humming economic machines warranted the capital investment and CEO focus. Realistically,converting Chinese and Indian consumers to western foods and navigating the treacherous Russian and Brazilian markets proved to be tough hurdles for most food marketers. Mr. McNeill is at it again, creating the label MIST to describe a second group of countries that offer exceptional potential for the next decade. This time, the group may deliver more sales and profits to supermarket  suppliers as three of the MIST markets are adjacent to regions where our industry does well.

Introducing MIST
What do Mexico, Indonesia, South Korea, and Turkey have in common ? All are members of the prestigious G-20 group of the world's top economies. Each country represents more than 1% of global GDP . Growth in this group ranged from 3 to 5  % in 2015 with similar results expected in 2016. Some executives in industrialized South Korean may smirk at being lumped with the relatively poor emerging market of Indonesia.   Indonesia earns membership to the club with 254 million people, the fourth largest population in the world. Mexico and Turkey are good neighbors to the two largest economic  blocs in the world. Liberalized trade terms with the USA and Europe may swing the gateways wide open for these low cost, good quality , production centers.

Mexico

Mexico's population reached 122 million people, plus up to 35 million people of Mexican descent living in the USA. Would you be surprised to learn that Mexico boasts the world's 11th largest economy, bigger than Spain, Canada, or Australia ? Driving Mexico's growth is a dynamic , young population and the benefits of sharing a 1,969 border with the USA. Many USA consumer goods companies have fared well in Mexico, aided by the helping hand of Walmart which accounts for about 55 % of the autoservicio (supermarket) sector. A government war against drug traffickers has dampened short term investment prospects. Still, Mexico appears as an attractive target for growth oriented companies. Building your brand in Mexico also delivers ancillary long term rewards to your USA business. Mexicans living in the USA display fierce loyalty to brands that they remember from their home country.

Indonesia

Indonesia is an archipelago of 17,508 islands straddling the equator. It represents the largest Muslim country in the world with a population of 254 million people. GDP per capita is only $4,200, but  15 % of the population (40 million people) are firmly entrenched in the middle class. The supermarket channel has doubled in size in the last ten years, with 2,000 stores accounting for around 40 % of sales.

Carrefour is the market leader with 82 stores. Modern hypermarkets like Carrefour serve as excellent showcases for international brands. Bali remains an exotic  destination for western tourists. Time for a store check ?

South Korea

South Korea appears as the economic powerhouse of MIST. South Korea boasts a healthy GDP per capita of $30,000, similar to levels enjoyed by Japan, France , or Italy. 49 million people live in South Korea, with 83% of them concentrated in urban areas. Unemployment is 3.3 % , the lowest in the G-20. the European Union enacted a free trade agreement with Korea in 2009. This year,the  USA concluded trade negotiations on an agreement known as Korus that will eliminate duties on about 2/3 USA agricultural exports. Currently, the USA supplies 30 % of South Koreas agricultural imports. Many global brands have achieved good acceptance in Japan due to a thirst for high quality, premium, products. South Korea offers similar potential and their consumers have the spending power to reward our export efforts.

Turkey

Turkey's treasured location bridging Europe and Asia is symbolic of their political and economic aspirations.  GDP per capita is $12,300, below European levels, but ahead of all BRICS (except Russia).  Turkeys application to join the European Union is moving at a snails pace towards acceptance. European concerns about human rights practices and an uninterrupted flow of Turks to Western Europe impede progress. Turkey is patient, envisioning better access to Europe's markets of 700 million people and hopeful for EU handouts similar to those that energized Ireland and Portugal prior to the crisis. Carrefour has around 450 stores in Turkey and Tesco's Kipa unit has 130.  Modern retailers account for only 25 % of the market, leaving plenty of room for consolidation and growth. Turkey aims to double tourism levels,bringing millions of hungry Europeans  to Istanbul and the sparkling beach areas. This will create further demand for international brands.

Distributors Facilitate Market Access

Export Solutions database  offers information on  270 distributors in the four MIST countries. This includes 140 distributors in Mexico,97 in South Korea,75 in Turkey, and 58 distributors from Indonesia. Each country contains 5-10 distributors specialized in handling premium international food, beverage, confectionery and health and personal care brands. It is important to calibrate expectations as MIST distributors represent a mix of local power distributors plus newer organizations with good energy, but fewer financial credentials. In South Korea, it is also common to partner with a strong local manufacturer. Contact Export Solutions for strategies on MIST development.

MIST Outlook
Mexico, Indonesia, South Korea , and Turkey warrant serious consideration. Cost of entry and complexity is far lower than penetrating BRIC giants. Eating habits and practices reflect local tastes, but there is awareness and acceptance of international brands. Spending power is good and sizable middle class populations represent excellent targets. Follow the global retailers is always a reliable strategy. Global brands may leverage  partnerships with Walmart, Costco, Carrefour or Tesco to gain access to MIST countries.