To Invest In The Rise Of The Emerging Market Consumer Start By Looking In Their Fridge

TASSOS STASSOPOULOS, THE ALLIANCE BERNSTEIN BLOG 

It’s not easy for investors to grasp the dynamics of consumer spending in diverse emerging markets. We think the best way is to look inside the refrigerators of people across the developing world.
Refrigerators are more than just iceboxes. Their contents speak volumes about their owners. And their proliferation signals a country’s economic progression. So the fridge and its contents can serve as a guide for investors seeking to tap emerging consumer spending, which is projected to grow eightfold to US$63 trillion by 2030, according to our forecasts, based on OECD data.

Devices Are Deceiving

Emerging consumers defy simple classifications. Some analysts look at income, assets or people per room as a framework. In our view, these indicators are flawed. For example, a Living Standard Measure counts the number of certain items in a home to determine a household’s socioeconomic status. So a person with a laptop, TV, mobile phone and stereo could be classified as rich. Yet in our field research, we’ve met people in countries like Ghana whose ramshackle homes are full of electronic devices but who are quite obviously poor.

Kitchens offer a more honest reflection. Behind the fridge door is an abundance of information that can help us understand who emerging consumers are and how they’re likely to spend money in the future. We’ve analyzed the contents of 70 refrigerators in rural and urban homes that we visited across 12 developing countries from Chile to China. While it may not be a statistical sample, the initial patterns we’ve seen suggest that the inside of a fridge mirrors the status of a home.

Food for Thought

In working-class homes, the fridge is used mainly for efficiency items (Display). It includes basic foods such as eggs, fruits and vegetables and some pre-cooked food. Middle-class fridges stock more indulgences, from alcoholic beverages to chocolate and cheese. And for affluent households, health is a primary concern. So expect to find foods like low-fat Yoghurt or 100% fruit juices.

Why is this important? Because once we understand how people’s tastes change as their income levels increase, we can also figure out how to invest in the consumer evolution as the refrigeration revolution sweeps through a market.

The display below shows penetration of refrigerators in different countries as income levels increase, from 1980 through 2013. In developed markets, more than 99% of households have a fridge. Brazil isn’t far behind. In China, about 86% of homes had a fridge. But in India, by contrast, only about 27% of households were able to chill their food. This is likely to increase rapidly as annual per capita incomes reach US$3,000, which seems to be the tipping point for rapid adoption of refrigeration.

refrigeration revolution The AllianceBernstein Blog

Indulgences in China

Our research suggests that China is in the indulgence phase. So companies that make products like beer, butter and chocolates should benefit from rising incomes. Indian families are still buying fridges, then filling them with efficiency items like milk, yogurt and ready-made sauces. Brazil has already shifted toward health mode, which should see higher-end food producers draw more spending.

Of course, specific investing conclusions differ in every country. Market environments and company fundamentals must also be studied to identify successful portfolio candidates. But by starting with refrigerator shelves, we think investors can gain vital intelligence to understand the people, lifestyles and spending scenarios that will unlock earnings growth in emerging consumer companies

This article originally appeared at The Alliance Bernstein Blog. Copyright 2014.

Read more: http://blog.alliancebernstein.com/index.php/2014/06/20/cold-facts-in-emerging-market-fridges/#ixzz35M4aCKN2

Advertisements

About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

The Ship Modeler

Ship Modeling News from Clare Hess

Site Title

“Love recognizes no barriers. It jumps hurdles, leaps fences, penetrates walls to arrive at its destination full of hope.” — Maya Angelou

Museum of International Trade & Merchant Banking (MoMBIT)

chronicling the importance of international trade and merchant banking in the global development

Fluent In Foreign Business

Helping To Grow Your Business Abroad

Emerging Market Insights

How to make a killing in Emerging Markets without losing your shirt?

Ideas That Work @ GIDASPOV.COM

Strategy | Creativity | Innovation | Fundraising | Marketing

Nu Leadership Revolution Blog

“Helping Emerging Leaders Gain the Competitive Advantage in the Future"

Mike Z's Blog

Exploring the causes of cancer throughout the world

Bucket List Publications

Indulge- Travel, Adventure, & New Experiences

FranchisEssentials

Sharing Information, Insight and Perspective about Franchising, Small Business and Entrepreneurship

bizrisk.wordpress.com/

We Help Insurance Agencies Stand Out

The WordPress.com Blog

The latest news on WordPress.com and the WordPress community.

%d bloggers like this: