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Future for FMCG Companies is in India and China

|Includes:CBY, CSG, NSRGY, The Procter & Gamble Company (PG), UN

According to Mc Kinsey Global Institute, the combination of China and India together will constitute  the biggest consumer market in the world as early as 2025. This will coincide with the contraction of the consumer expenditure in the West. Developed world will be facing some serious issues such as ageing populations and decreasing productivity.

Moreover, the emerging market consumer is not overburdened by debt as the developed market consumer is. In sum, all FMCG companies are aware of the fact that they will need to grow in Asia to be able to show the topline and bottomline growth that the markets expect.  For example, P&G CEO Mc Donald recently noted that P&G’s annual U.S. sales average about $100 per person, McDonald said if it can increase sales in India just to Mexico’s level of $20 per person, it would boost overall sales by 50 percent. The company’s Indian sales currently average $3 and less than $1 per person, respectively. “So the potential is absolutely amazing,” McDonald said.

Among the Western FMCG companies, Unilever, Nestle and Cadbury seem to have the upper hand in the Indian market; whereas P&G seems to struggle.
In China;  Procter has a strong position so does Nestle.

 The major challenge for the FMCG companies will be their pricing strategies. They know that they can only win in these markets by having low and mid-tier brands which offer good value for money. They also know that their over-engineered and expensive premium products will not sell in these markets. They need to be able to produce affordable and good-quality products without falling in the trap of over-engineering and excessive brand-worshipping.
 



 



Disclosure: Nestle
Stocks: PG, UN, NSRGY, CBY, CSG-RETIRED