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Finding our Next Billion Consumers

By: Greg Seminara, Export Solutions
Topics: Billion Consumers

One Billion consumers reside in stable markets of Europe and North America .
These established countries represent 14 % of the world's population, but account for 70 %
of all retail sales and 90% of the volume for most supermarket brand producers. Growing sales in our current selling universe of one billion people is exceedingly difficult. It requires true innovation ( which may be quickly copied) or costly investments in marketing and trade spending to steal share from your competition. Lackluster 2012 GDP growth rates of 0-2 % are predicted for most established markets.Forward thinking brand owners search for new growth regions to offset mature categories in current markets.

Size of the Prize
Our industry is fortunate that all 7.2 billion of the worlds citizens require food products.
Current reach extends to one billion consumers for most companies. Two billion people live on less than $2 per day, surviving on the basics. This leaves manufacturers with a potential untapped market  of 4.2 billion people that will eat more and live better in the future. This will create new demand for our food, confectionery , household, and personal care products. Emerging Middle Class populations are blossoming everywhere from the legendary BRICS to previously forgotten Sub- Saharan Africa countries.

New Holy Grail
A new Holy Grail of "selling to the next one billion consumers" has been adopted by industry leaders. The next billion effectively doubles the size of the prize for brands. Success with this lofty goal requires marketers to teach consumers new habits and practices or convert consumers from local brands. This represents a case of "Back to the Future" for global brands. We must adjust our sophisticated category management approaches tailored for global retailers  to shift to the fundamentals of penetrating fragmented markets. Plant managers will wince at the request to shift production from Costco sized packages to "pouches, packets, and other pint sized portions" required to gain trial and attractive opening price points.

Rethinking Market Segmentation
Export Solutions segments markets into three groups.
"Established" markets represent evolved markets such as the USA,Western Europe, Canada, and Australia.
"Developing" markets indicate markets such as China,Russia  and Mexico
where many companies do business, but per capita consumption levels are low.
"New Frontiers" reflect countries (Africa) with no existing sales for a brand, or tiny businesses relative to the size of the population (India/Brazil). See article Rethinking Market Segmentation for more detailed analysis.

 

                                  Finding our Next Billion Consumers

 

 

Total
Population

 Potential
Next Billion

China

1.35 billion

225 million

India

 1.2 billion

200 million

Africa

1 Billion

100 million

Latin America

 600 million

150 million

South East Asia

 600 million

100 million

Russia/East Europe

 300 million

115 million

Middle East

 300 million

  75 million

Turkey/Central Asia

 160 million

  35 million

 Total

  5.51 billion

1 billion people



High Potential Regions
China leads the list due to a reported middle class of 175 million people.

India's middle class of 150 million is expected to double in the next five years.
Latin America also looks promising due to strengthening economies in Brazil & Mexico plus proximity to the USA.
Population explosion in Southeast Asia could allow Indonesia to reach 300 million people and the Philippines and Vietnam to each surpass the 100 million population threshold.
Middle East and Russia will remain attractive, as long as the price of oil is $80 per barrel or higher.

Follow the Global Retailers
Brand owners can quickly identify priority countries by following the lead of global retailers.
Leaders such as Walmart, Carrefour, Metro, and Tesco spend millions analyzing market potential. Look at China, where every global retailer has battled for the last 10 years. Retailers are all planting small flags in India, quietly creating infrastructure and "wholesale based" presence in advance of the eventual opening to foreign supermarket operators.
Walmart's blockbuster purchase of Massmart in South Africa represents a transformational event in the history of our industry in Africa.  Walmart's exceptional results in Mexico and Brazil offset stagnant performance from their USA business. Global retailer presence is smaller in Southeast Asia, the Middle East, and Russia. However, my bet is that the giants are watching local supermarket chains sweat to build critical mass before sweeping in to acquire once the initial footprint has been created.

Distributors -Local Experts
Most manufacturers prefer to partner with a distributor versus creating a local subsidiary in "New Frontier" markets. This allows brands to test their way into a market and focus investments on brand building versus infrastructure. Companies instantly benefit from the distributors long standing relationships with local supermarket buyers and can gain valuable "lessons learned" from the distributors other brands. Seek distributors with at least five years experience pioneering other premium, international brands. Export Solutions distributor database covers 93 countries, tracking more than 80 distributors each in China,Brazil, Russia, Mexico and 66 in India.

Next Steps: Management Commitment
Selling to the next Billion consumers requires familiar strategies and tactics.

Brands tap into their learning base of best practices across the globe.
Most companies know how to gain product trial in emerging markets and how to penetrate countries dominated by small shops. The key is to secure senior management commitment to the vision of selling to one billion new consumers. The real investment is in people required to execute the plan. Export Solutions can help !