<strong>Roland</strong> <strong>Berger</strong> Strategy Consultants Product portfolio and brand positioning – Meeting the needs of diverse <strong>consumers</strong> Socio-demographic change IS DRIVING consumer power
Study 7 Socio-demographic change IS DRIVING consumer power In publication 1, we saw how population growth – at extraordinary levels almost everywhere except Europe – will profoundly shape <strong>to</strong>morrow's global economy. According <strong>to</strong> forecasts, between 2012 and 2030, some 1.2 billion of the world's 1.3 billion <strong>new</strong> citizens will be born in <strong>emerging</strong> or developing countries. That's equivalent <strong>to</strong> 95% of all births. What does this mean for specific regions between 2012 and 2030? A predicted 600 million people in Asia, 500 million in Africa and about 90 million in Latin America and the Caribbean will be added <strong>to</strong> the local population. Europe will be tiny by comparison, <strong>with</strong> only 1 million <strong>new</strong> people, representing 0.1% of the <strong>new</strong> global population. Emerging <strong>market</strong>s will be extremely young in terms of demographics. In 2030, 40% of the population will be under 25, compared <strong>to</strong> just 26% in developed nations. This fact will have a profound influence on consumption patterns. The number of young people in <strong>emerging</strong> <strong>market</strong>s who enjoy a better education will also increase. In the period up <strong>to</strong> 2020, private expenditure on education in <strong>emerging</strong> <strong>market</strong>s is set <strong>to</strong> grow nearly 7% per annum, <strong>reach</strong>ing a level of USD 143 billion. Take China, for instance. Chinese society places a strong em phasis on education. The 2009 Pisa world education rankings put China in first place in all three educational categories: reading comprehension, mathematics and science. Many other develo ping countries, India and Brazil in particular, are also set <strong>to</strong> see an increasing number of university graduates. Since 2006, the number of students in China and India has grown by over 7% a year. China now produces half a million <strong>new</strong> engineers each year – while engineering skills shortages in Germany are leading <strong>to</strong> an estimated annual economic loss of USD 2.3 billion for German business. Young people <strong>with</strong> better education and skills also have a greater chance of employment. Over the last 25 years, the number of people living in poverty in <strong>emerging</strong> and developing countries has fallen by half. Education has played a major role in this development, improving lives on the ground. f1 Every minute, fifty households in developing countries join the middle class. By 2030, an estimated 66% of the world's middle class will live in Asia, compared <strong>to</strong> just 21% in Europe and the United States. Indeed, China's burgeoning middle class is already bigger than the entire American population. As for the rich, the number of millionaires in China surpassed that in America some time ago. Other countries – not least Indonesia, India, Pakistan and Nigeria, along <strong>with</strong> other African nations – are also seeing an expanding middle class <strong>with</strong> money <strong>to</strong> spend. These upwardly mobile sec<strong>to</strong>rs of society share a common wish: <strong>to</strong> create for their children and grandchildren a world of affluence, political stability and opportunities. f2 f3 Disposable incomes are also on the rise. By 2020, many <strong>emerging</strong> countries will see more than 80% of their population <strong>with</strong> annual disposable incomes in excess of USD 10,000. More than 25% of households in Saudi Arabia, Turkey, Argentina, Iran, Russia and Malaysia will command incomes above USD 50,000 a year. Changing spending patterns Total consumer spending in the developing world will nearly double over the next eight years, from USD 14 <strong>to</strong> 22 trillion. Per capita consumer expenditure is forecast <strong>to</strong> <strong>reach</strong> USD 3,319 a year in 2020. This growth will be largely driven by improved education and rising incomes. In particular, BRIC countries will see consumer spending grow from USD 7 <strong>to</strong> 11 trillion, Mercosur countries from USD 2 <strong>to</strong> 3 trillion, and in the Middle East and North Africa from USD 1 <strong>to</strong> 2 trillion. Per capita consumer expenditure is forecast <strong>to</strong> grow at least 3% annually in each region by 2020. Mercosur will see the highest per capita spending <strong>with</strong> USD 10,112, followed by the BRIC countries <strong>with</strong> USD 3,619 and the Middle East and North Africa <strong>with</strong> USD 3,615. Traditional consumer goods segments such as fashion, leisure and communications are likely <strong>to</strong> enjoy per capita growth of about 30% by 2020 in <strong>emerging</strong> and developing countries. European fashion chains such as Zara are already a familiar sight in major cities across India, Indonesia, the Philippines, Saudi Arabia, Thailand and South Africa. Per capita clothing expenditure is forecast <strong>to</strong> <strong>reach</strong> USD 183 a year in 2020, or a <strong>to</strong>tal of USD 1.2 trillion – including USD 800 billion in our Focus 20 countries alone. 2 Russia, Brazil and Turkey will be home <strong>to</strong> <strong>consumers</strong> spending the most on fashion. China, India and Vietnam will see a sharp increase – more than 8%