asia as the world’s future consumer -...

ASIA AS THE WORLD’S FUTURE CONSUMER

Ben Simpfendorfer

CITYWIRE SOUTH EAST 2017

China’s many cities will result in multi-speed growth and

a multi-speed consumer

SILK ROAD ASSOCIATES | 3

EUROPE

140 CITIES

NORTH AMERICA

92 CITIES

Each circle indicates a with a population greater than 500k

NEW YORK

LONDON

LA PARISMOSCOW

CHICAGO


Each circle indicates a with a population greater than 500k

CHINA

250+ CITIES

SHANGHAI BEIJING

CHONGQNIG

EUROPE

140 CITIES

NORTH AMERICA

92 CITIES

NEW YORK

LONDON

LA PARISMOSCOW

CHICAGO


LOS ANGELES

HOUSTON

CHICAGO

NEW YORK

SAN FRANCISCO

-8% +8%

UNITED STATES

2015 GDP growth by municipality


-12% +12%

CHONGQING

GUANGZHOU

BEIJING

SHANGHAIWUHAN

CHINA

2015 GDP growth by city


16

POPULATION

5 million +

GDP

$3.1 trillion

87

POPULATION

1 to 5 million

GDP

$4.3 trillion

167

POPULATION

500k to 1 million

GDP

$2.5 trillion

Opportunities in China’s smaller cities will create local

competitors and localised preferences


25% 50% 75% 90%

Share of Branches

FOREIGN BRANDS

10 leading brands

62

CITIES

2

CITIES

9

CITIES

24

CITIES


25% 50% 75% 90%

Share of Branches

FOREIGN BRANDS

10 leading brands

CHINESE HOTEL CHAINS

10 leading brands120

CITIES

5

CITIES

62

CITIES

2

CITIES

18

CITIES

9

CITIES

55

CITIES

24

CITIES

“Blue Moon

leveraged old and

new ‘online’

economies”

CHINA

Blue Moon

China’s Blue Moon used an innovative model to

change the way consumers purchased laundry liquid.

A local competitor

• Blue Moon is a Guangzhou-based Chinese personal and

household care products company established in 1992.

• In the mid-2000s, Blue Moon noticed that consumers still

regularly washed clothes by hand even if owning a

washing machine.

• The company introduced soft laundry product for hand

washing and invested heavily to educate consumers on

the benefits.

• Today, the company generates revenues in excess of $3

billion annually and employs 10,000 people.

“Indoor water

parks offer a winter

alternative without

the air pollution.”

CHINA

Staycation Resorts

China’s overnight vacation industry is a huge

opportunity, but likely to be missed by foreign

companies unable to localise their models

Localised preferences

• Families in Beijing, Chongqing, and Taiyuan earning

around $25k to $40k annually.

• Families are looking for structured activities with an

education element for children.

• Taiyuan families have little interest in ‘Western’ activities

and prefer activities with Chinese themes.

Wanda World v. Disneyland

• Wanda World opened in May offering families a Chinese

alternative to Disneyland.

Beijing

Chongqing

Taiyuan

China’s subway construction boom is about to open up

new retail opportunities


TODAY

2018

20172019

China will build 1,400 new metro stations by 2019

2,400 2,900 3,400 3,800

TODAY

2017

TODAY TODAY

2017

2018

Each square indicates a metro station


SHENZHEN


Nanshan

1.2 MN

Futian

1.0 MN Luohu

1.4 MN

HONG KONG

Sheung Shui

Longhua

POP 1.5 MN

Longgang

2.0 MN

LOW HIGH

SHENZHEN

Commercial Density

& Metro Lines

Metro lines completed

and under construction

LINE 11

E-commerce and online payments will challenge the

traditional retail model


Europe

China

United States

Singapore

Malaysia

Thailand

Philippines

Indonesia

Vietnam

Percent of retail sales

made online

Percent of people owning

smartphone

7.8%

7.2%

5.8%

4.5%

Around or below 1%

Hong Kong

Singapore

United States

Malaysia

China

Thailand

Indonesia

India

Philippines

Sources: Nielsen

87%

87%

77%

80%

71%

49%

23%

18%

15%

China’s e-commerce and online payments sector is booming and, in many areas,

leapfrogging the rest of the world.

Sources: A.T Kearney


E-COMMERCE SALES

Facial Moisturiser

Tmall sales

• Tmall has 500 facial moisturiser brands competing for

consumer awareness.

• Top selling Tmall brands are almost all Chinese, such

as Kans, Pechoin, and Oranot.

• The packed bubble chart on the right shows each of

those brands based on monthly sales.

China’s skincare market is hypercompetitive with local brands emerging as select

competitors for the biggest brands

• .

China is ‘going global’, so expect more Chinese MNCs

and tourist spending power.


• Regional loan to GDP ratios


Daily flights to ASEAN

41CHINESE

CITIES

Our flight analytics shows that

41 Chinese cities have at least

one daily flight to Indonesia,

Malaysia, the Philippines or

Thailand.

Bangkok is the most connected

city followed by Kuala Lumpur

and Phuket.


China’s outbound FDI, 2012-2014

Circle size denotes US$ billion

AUSTRALIA

$9.7bn

SINGAPORE

$5.6bn

KAZAKHSTAN

$3.8bn

U.K

$6.4bn

U.S.

$15.5bn

INDONESIA

$4.2bn

China’s Belt and Road Strategy will have implications for

all of Asia


NORTHERN ROUTE

“The Belt”

An oil and energy route

SOUTHERN ROUTE

“The Road”

A consumer and industrials route

Circle size indicates city population multiplied by spending power


CHINA

INDIA

TURKEY

INDONESIA

SAUDI ARABIA

KOREA

VietnamPhilippines

Malaysia

Shandong

Henan

Jiangsu

Zhejiang

Guangdong

Kazakhstan

Thailand

Pakistan

Hong Kong

Belt and Road GDP by

country

US$ value including China’s five

largest provinces

The five Chinese provinces

highlighted in green would rank

among the Belt & Road’s 10

largest economies.

The rest of the Belt and Road is

too small to support China’s

domestic growth


China-linked projects by sector

Chinese firms have focused on

opportunities in the railway, energy, and

industrial sectors

The bubble shows China-linked projects in the Belt and

Road region by total project type in US$ million.

The dataset includes projects either agreed,

construction started or investment made, or completed

since 2012 where figures are available.


China-linked projects

by country

Southeast Asia and South

Asia are a priority for

Chinese companies

The bubbles indicate a broad

selection of China-linked projects

in the Belt and Road region by

country.

Circle size shows relative number

of actual or signed deals.

BELT AND ROAD | SILK ROAD ASSOCIATES

But China’s Belt and Road initiative will have different

implications for each country


CHINA

LAOS

Hanoi

Hai Phong

Sanya

DonguanGuangzhou

Shenzhen

LIGHT RAIL

Hanoi light-rail and Hanoi to

Hai Phong railway

INDUSTRIAL PARK

Tan Truong and Yun Zhong

outside Hanoi

POWER PLANT

Hai Duong and Mong Duong

outside Hanoi

VIETNAM

Imports from China

Pingxiang

LOW HIGH

COMMERCIAL DENSITY

$31 MN

Buttons

$103 MN

Zippers

$4,100 MN

Electronics

BELT AND ROAD | SILK ROAD ASSOCIATES | 32

INFRASTRUCTU

RE

• Tan Honh bridge

• Tan Honh bridge

JANUARY 2014 China and Thailand

initial project.

DECEMBER 2015 Groundbreaking

ceremony for the project.

FEBRUARY 2016 Disagreement over

funding for the project.

MARCH 2016 Thailand decides to fully-

fund construction.

JANUARY 2017 First phase of bidding

completed.

THAILANDDUAL-TRACK RAILWAY

Bangkok

MYANMAR

CHINA

VIETNAM

CAMBODIA

LAOS

Nong Khai

Chiang Rai

Map Ta Phut

LOW HIGH

COMMERCIAL DENSITY

$39 BN

$37 BN

BELT AND ROAD | SILK ROAD ASSOCIATES | 33

Population

100 K 10 MN

Jakarta

Surabaya

Singapore

Kuala Lumpur

Makassar

Sorong

Banda Sea

Belwan

Major Port

Minor Port

SEA TOLL ROAD

• Jokowi announces development of 24 ports,

including 11 passenger and 13 cargo

• Indonesia to develop a container backbone

or Pendulum Nusantara

Asia is the world’s future consumer. But there are critical

differences to China

UNITED STATESCHINA

INDIA

KOREA

1990

$6.8 TN

1990

$1.7 TN

Asian consumers are a growing opportunityHousehold Consumption, US$ terms

• .

Asian consumers are a growing opportunityHousehold Consumption, US$ terms

• .

UNITED STATES CHINA INDIA

KOREA

2015

$12.3 TN

2015

$8.2 TN


Asia’s will age at twice the speed of Europe…. and China is already old.Figures and shading indicate median age

“Mothercare is

tapping a growing

affluent middle-

class”

INDONESIA

Mothercare

Mothercare launched an online platform in

Indonesia to better tap smaller cities

A strong physical store strategy.

• Mothercare has over 40 stores in 14 cities across

Indonesia. Less than half the company’s stores are

in the capital Jakarta.

E-commerce strategy is key

• However, the company’s online website offers

delivery to any city. Delivery is often made by

motorcycle courier.

• Mothercare also offers a gift registry for friends and

relatives, allowing them to celebrate a new birth for

relatives living in other cities.


Population

100 K 10 MN Jakarta

Surabaya

Singapore

Kuala Lumpur

KALIMANTAN

2

SUMATRA

3

JAVA

26

INDONESIA

Mothercare Branches

40

SULAWESI

3

“Mang Inasal

started in the

Philippines smaller

cities”

PHILIPPINES

Mang Inasal

Mang Inasal (Mr Barbeque) is one of the Philippines leading

fast food chains.

A strategy of focusing on smaller cities

• Mang Inasal opened its first branches in the country’s

smaller cities. Only in the later stages of growth did it

open outlets in the capital Manila.

• The founder, Edgar Sia, was himself from a smaller city

and understand the localised preferences and spending

power of consumers.

From local champion to national leader

• Edgar Sia sold the business to a leading Philippines

conglomerate, Jollibee, for $70 million, in 2010.

• Today Mang Inasal is one of the country’s most popular

fast food chains with over 460 outlets across the country

in all sized cities.


Population

LOW HIGH

PHILIPPINES

Mang Inasal

Green and orange circles indicate

high branch density in medium- and

small-sized cities.

Branch density in Manila and Davao

city is lower.

Branch Density

Greater Manila

Davao City

Iloilo Cebu

The BPO industry and secondary

cities in the Philippines

The BPO industry is another reason to be

excited about opportunities outside

Greater Manila.

DumaguetePuerto Princesa

Angeles

Greater Manila

Davao City

18 MN

20 to 30 yr olds

Is India the next big thing? Will the story be the same or

different to China?


CHINA

Starbucks Branches

1,812

INDIA

Starbucks Branches

76

Beijing

Shanghai

Shenzhen

ChengduMumbai

Delhi

India has lost its opportunity to be part of the global supply chain. This will

impact the distribution of manufacturing, jobs, and spending.

Container Ports

City Population

“Hollywood is big

in China. But a flop

in India”

INDIA

Bollywood

Hollywood’s biggest brands have struggled to win in India and

instead gone local

Hollywood has struggled in India

• Hollywood accounts for just 8 percent of India’s total box

office owing to the success of local films.

Bollywood also struggles in India

• Even Bollywood struggles accounting for less than half

the total box office. Local language films, such as Tamil,

are equally popular.

• Walt Disney changed its proposition

• Walt Disney is one of the major studios keen to succeed

in India. The company already earns 60% of its box office

from foreign sales.


TITLE GROSS

Dangal $61 mn

Sultan $47 mn

M.S. Dhoni – The Untold Story $21 mn

Airlift $20 mn

Rustom $20 mn

Housefull 3 $18 mn

TITLE GROSS

The Jungle Book $29 mn

Captain America 3 $10 mn

Batman vs Superman $9 mn

Mission Impossible 5 $7 mn

X Men $6 mn

Kung Fu Panda 3 $5 mn

Bollywood (2015) Foreign (2015)

It’s still Indian films that make money

Top grossing films

• .

ASIA AS THE WORLD’S FUTURE CONSUMER

asia as the world’s future consumer -...

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