The New Emerging Market Consumer

The New Emerging Market Consumer

The evolution of consumer spending patterns in emerging markets is a fascinating aspect of the growth story and a compelling investment theme.

With larger middle classes and maturing industries, emerging market (EM) growth is coming increasingly from premium products and the provision of new, or augmented, services in areas like education and healthcare. Here are just a few current examples:

Cosmetics – beauty at a premium

The growing spending power in Asia is fuelling a rise in luxury cosmetics. This is particularly evident in China, where the retail sales value of cosmetics trebled between 2009 and 2017 and premium cosmetic sales are expected to continue at a rapid clip.1

Chinese consumers value the provenance of brands, in particular goods from nearby South Korea, with those products viewed as better quality, higher status and preferable to domestic-made cosmetics. Consumer goods business LG Household & Health Care has been harnessing this spending power, through its duty-free sales and rapidly expanding direct sales into mainland China. The majority of these come from its luxury cosmetics brand ‘The History of Whoo’ (where its skin care and treatment sets sell for hundreds of dollars). It’s notable that this demand held up, even as political tensions arose between the two countries. The de-escalation of Sino-Korean tensions should boost duty-free sales, as inbound tourism from China resumes.

Cosmetic Sales in China
Column chart showing retail sales volume of cosmetics in China from 2009-2017

Source: National Bureau of Statistics of China, as of 12/31/17. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.

Food delivery – the next online frontier

Despite the common belief that EM consumption is focused on basic items, high-quality takeaway delivery has seen unprecedented growth in emerging markets. Latin America’s largest online food delivery platform, iFood, which includes South African internet investment group Naspers among its major stakeholders, has expanded to 390,000 orders per day in Brazil alone, seeing faster growth than Grubhub, a global leader which serves 2,200 US cities and London.2 This is particularly remarkable considering the relative income levels between the two countries, and that smartphone penetration in Brazil is far lower than in the US.

Meanwhile, in India, Swiggy (which also has Naspers as a shareholder) doubled its gross merchandise value in six months3, with its focus on bringing quality foods to its consumers. It is also investing in technology and artificial intelligence (AI) to improve its delivery systems.

iFood Orders Per Day
Column chart comparing iFood orders per day in third quarter 2017 with third quarter 2018

Source: Naspers press release, November 2018, Grubhub Q3 results 2018. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.

Premium services

The consumer evolution is not just limited to goods. We’re seeing it expanding into a number of services as well.

In education for example, there has been a huge growth in demand for private education providers, particularly in China, as parents seek out-of-hours tuition for their children.

Healthcare provision is also an area of increasing importance. Looking at Brazil again. The service offered by OdontoPrev is tapping into the changing nature of how the country’s oral-health conscious citizens receive their treatment. Brazilians tend to pay out of pocket for their treatment (rather than through an insurance plan). OdontoPrev is changing this by offering an insurance package cheaper than the average out-of-pocket yearly payment. With an oversupply of dentists in Brazil, the company has been able to spread its treatments among large numbers of dentists who are under-utilised, rather than rely on a smaller few who then charge higher fees.

Accessing the consumer growth story

Consumer growth in emerging markets is one of the world’s most compelling investment themes. This economic megatrend is driven by growing working-age populations, rapid urbanisation and a boom in the middle class.

Accessing the growth potential is now more nuanced than ever, and the huge take-up in technology has permanently shifted the consumer landscape. In our view, this is only the beginning and there is a wealth of untapped potential. Identifying the winners from such monumental change requires patience, skill and a long-term mindset.


Emerging markets (EM) are nations with social or business activity in the process of rapid growth and industrialization. These nations are sometimes also referred to as developing or less developed countries.


1 Source: Statista, National Bureau of Statistics of China, February 2018.

2 Source: Naspers press release November 2018, Grubhub third-quarter results 2018.

3 Source: Naspers press release.


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