EM Consumption: Who's Buying What

EM Consumption: Who's Buying What?

January 26, 2015 |Author: EGA Investment Strategy | Categories: Chart of the Week, Emerging Markets

Emerging market consumer opportunity. The emerging market (EM) consumer theme is not new and research on this long term trend suggests that it should sustain. The consulting firm McKinsey & Co. forecasts that “by 2025, annual consumption in EM will reach $30 trillion, (nearly half of the global total)—the biggest growth opportunity in the history of capitalism.”¹ We believe that harnessing the EM consumer trend should be central to most emerging market investment strategies.

The drivers of consumption growth. Favorable demographics support rapid population and labor force growth in emerging market economies. Together with continued wage and credit growth, this should fuel sustainable economic and consumption growth. Household consumption of food and beverages must be satisfied first before the consumption of the more expensive discretionary goods.

Where investors should look. We believe investors must look for both consumer staples and consumer discretionary companies in the least developed economies. Additionally, they should look for stocks in the discretionary sector in countries where the consumption of staples has been satisfied, but consumption of durable goods has not. We believe this opportunity exists principally in Brazil, China, Colombia, Egypt, India, Indonesia, Malaysia, Mexico, Peru, Philippines, South Africa, Thailand and Turkey.

For more details on emerging markets consumption, click the PDF below:

Defintions

Gross Domestic Product is the money measure of the goods and services produced within a country's borders over a stated time period.

Additional Disclosures

¹McKinsey & Co., August 2012, “Winning the $30 Trillion Decathlon”.

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