Asia Represents Best Growth Prospects for Retailers and Consumer-Products Companies

For retail and consumer-products companies, most of Asia continues to present growth opportunities, albeit at a slower rate in the short term, according to a new PricewaterhouseCoopers report, "Glimmers Amid the Gloom."

 

“The outlook for the developed world over the next two years is still uncertain and many retailers and consumer-products companies are expected to put renewed emphasis on emerging markets as an engine of future growth,” says  Carrie Yu, global retail and consumer leader at PricewaterhouseCoopers. “Overall, emerging Asia will be the fastest-growing region in 2010-2013, with a big boost from China and India, particularly for grocery and apparel."

 

The report, "Glimmers Amid the Gloom: The Outlook for the Retail and Consumer Products Sector in Emerging Markets," written in co-operation with the Economist Intelligence Unit, discusses the outlook for six retail and consumer-products sub-sectors in emerging markets and finds that Asia remains particularly buoyant despite the global economic downturn. 

 

According to PwC, China is expected to see positive growth of 7% in 2009 in the food, beverages and tobacco sector.  Private-label had been slow to catch on in Asia compared to the US and in Europe, but now retailers worldwide are reporting increases in sales of private-label goods. In India private-label goods now account for 10-12% of the retail market.

 

For apparel retailers, Asia is the most promising growth region. China and India are both expecting double-digit growth in sales. In China the high-end apparel market is dominated by international brands from France, Germany, Italy, Japan, US, UK and South Korea.

 

The study also finds that fast food is proving to be recession-proof in emerging markets. Because the fast-food sector works from a franchise model, expansion into emerging markets has been rapid and comparatively low-risk in financial terms. In Asia, affluent consumers are trading down from fine-dining options, but they and lower-income consumers continue to be able to afford to eat out. Restaurant chains are rapidly increasing their outlets and are keeping costs down to fund this expansion.

PwC says that the fast moving consumer goods (FMCG) sector faces competitive threats from retailers’ private-label goods. FMCG companies face an increasingly competitive environment, as consumers focus more on cost and less on brand name. The trend across Asia and Latin America is for firms to penetrate markets more deeply and reach lower-income consumers such as through smaller packaging sizes rendering products more affordable to rural populations.

 

As for sales of luxury brands, Asia has the brightest outlook by comparison, with 15,300 households estimated to have a net wealth of over US$1m in 2008. By 2015, China is forecast to become the world’s top buyer of luxury goods. India also has huge potential, but regulation is preventing rapid expansion.

 

As for consumer electronics companies, the picture is rosy in Asia where consumers are likely to continue spending on electronics, particularly on TVs and computers.

 

“The global economic picture continues to improve, but there is a chance of a fallback in growth in 2011 in developed markets as the effect of stimulus packages wears off. Yet in China, job creation will continue to fuel private consumption, which means that the economy – and the retail market – will overshoot even the government’s targets. India will not be far behind, though it may prove more vulnerable to global trends,” says Laurel West, Asia director of industry & management research at the Economist Intelligence Unit.

 

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