Goldman Sachs:by 2030 the size of the middle class will grow to be two billion.If the middle class is incomes of $16/day and $82/day in terms of PPP By 2030, roughly 50% of the world population would fall into the $16 -$82 a day bracket, up from around 29% currently- Somewhere between a Brazilian and an Italian:households with an income level between that of an average Brazilian household and that from Italy. This global group of households can have a good deal of commonality. The rule of one-third applies: that is, these people are not poor and do not live from job to job and season to season; they can have a third of their income left for discretionary spending after providing for the basics; and they can comfortably buy white goods, brown goods, cars and have decent healthcare.
- The “developing world’s middle class” is defined here as those who are not poor when judged by the median poverty line of developing countries, but are still poor by US standards- using the $13 a day line, I find that over 95% of the developing world in 2005 is deemed to be poor by US standards in 2005. -In 2005, there were only 250 million people in the developing world who were not poor by US standards (below $13/day)- Although barely 80 million people in the developing world entered the Western middle (above poverty line) class over 1990-2002, economic growth and distributional shifts allowed an extra 1.2 billion people to join the developing world’s middle class. Of the extra 1.2 billion people who joined the middle class, only 95 million made it to the “upper middle class”: $9/day< X < $13/day2009 poverty line in USA was $30/day
In 2010, households with annual disposable incomes of US$5,000-15,000 as a percentage of total households is expected to be 31.7% in China, 14.6% in India and 35.7% in Indonesia. This will reach 46.2% in China, 41.1% in India and 58.3% in Indonesia in 2020;The total number of households in this income band for EMEs is expected to reach 331 million in 2010 from 104 million in 2000
People with incomes of US$6000 and $30,000 a year (app. $15 and $80 a day) in terms of PPP (Wilson & Dragusanu) The lower bound is roughly the level at which rates of discretionary spending seem to pick up sharply The upper bound is roughly the median income of the current OECD group, so the upper half of this group qualifies as the ‘global rich’. Although this group may not always feel ‘rich’ within the context of their own countries by 2050, global incomes, including and excluding India and China, seem to center around $30,000,World population in 2030 is projected to be 8 billion
N11:Egypt, Philippines, Indonesia, Iran, Mexico, VietnamBangladesh* Egypt* Indonesia* Iran* Mexico* Nigeria* Pakistan* Philippines* South Korea* Turkey* Vietnam
In the past decade, half of the number of people crossing the $6,000 line came from China. But that is set to change. As average incomes there rise, the rate at which China is adding to the middle class globally will probably peak in the next few years, though it will remain at high levels for at least another decade. India will take over where China is leaving off, becoming the driver of middle class creation over the next decade. Its contribution to growth in the middle class will increase sharply and is unlikely to peak until around 2030. The percentage of people who we count as middle class has already increased from close to 1% at the beginning of the 1990s for China, to close to 35% today. By 2020, 70% of China’s population will have this middle class status. Meanwhile, India seems to be around 10 years behind China, with the percentage of people in the middle class increasing from 1% in 2000 to 5% today. But if growth conditions along the lines of our projections eventuate, the vast majority of Indians could be in this group by 2040. Already by 2020, one third of the new entrants to the world middle class will come from outside China and India.
Irina Lyakhnovskaya is a go-getter. Her hometown of Samara in central Russia straddles the Volga River and is surrounded by miles of fertile grassland and the Zhigulevskiye Mountains. In 1996, she started a tourist company, with seed capital supplied by herself and three friends, that specializes in arranging hunting and fishing trips for visitors from Finland and Norway. She drives a Russian-made Lada that she purchased new, for $3,500, 10 years ago, and she spends weekends at a country dacha that has an apple orchard she harvests to make her own wine. Last year she took vacations in Hungary and Romania, and this year she plans to get to Britain. In a country where the average factory worker is lucky to make $800 a month, she makes as much as $1000.Analysts estimate 12 million to 30 million Russians, some 8% to 20% of the nation's 145 million population, qualify as middle class.
Additional income per household goes hand in hand with the unemployment rate. As the rate goes down, more people are employed and can consume more.
Region-Media, specialists in Russian advertising, have conveniently identified seven types of consumers in this market.(25% of consumers in Russia and 21% in Moscow), a rather traditional group with great brand affinity: innovations barely interest them. The “Traditionalists” pack a low consumer potential, as half of them are retired and loyal to retail outlets that have survived since Soviet times.
The rise of female economic power will be a transformative growth engine
In developing countries, the social effects of female economic empowerment are particularly evident, since women reinvest 90 percent of their income into community and family, compared with 30 to 40 percent reinvested by men.
BRIC Middle Class
The Emerging Middle Class <br />Corissa Koopmans<br />Pier Levy<br />Paula Pitol<br />Vanessa Meyer<br />Daniel Finamore Martins<br />
Introduction<br />The middle class overview<br />Growing middle class in BRIC’s<br />Main highlights and trends<br />Implications for consumption<br />Challenges<br />Conclusions and Perspectives<br />Agenda<br />
Middle Class?? <br />Per capita income of US$2 and $13 a day at 2005 PPP (Ravallion)<br />Per capita Income of US$6000 and $30,000 a year (app. $16 and $80 a day) in terms of PPP (Goldman Sachs)<br />Households with annual disposable income of US$5,000-15,000 (Euromonitor)<br />Per capita income of US$10-20 a day (World Bank)<br />Income interval from 75% to 125% of the median (Thurow,1987)<br />“A person who could routinely buy items sold at a typical Western-type discount store” (Miller-McCune, 2008)<br />Have1/3 of income left for discretionary spending (Dilip K. Das) <br />(Milanovic and Yitzhaki, 2002)<br />
Middle Class: $2-$13 a day (2005 PPP)<br />80 million people in developing world joined “western middle class” (i.e. above US poverty line) between 1990 – 2005<br />
Middle Class: Household income of US$5,000-15,000 a year <br />Number of households with annual disposable income of US$5,000-15,000 in selected economies: 2000-2020<br />The total number of households in this income band for EMEs was expected to reach 331 million in 2010 from 104 million in 2000<br />Euromonitor<br />
By 2030, roughly 50% (4 Billion) of the world population would fall into the $6,000-$30,000 bracket, up from 29% today <br />
The Tortoise & The Hare… and everybody else<br />
The Tortoise & The Hare<br />By 2020, 1/3 of new entrants to middle class will come The “others”<br />
Change of Lifestyle and Product Awareness<br />“Brands are fueling the rise of the middle class in China. The Chinese have an aching ambition to climb up the ladder of success, and brands are the mark of people who have made it.” <br />- Marketing expert Tom Doctoroff told U.S. News and World Report<br />
Product Awareness: Importance of Advertising<br />Region-Media in Russia identified the seven types of consumers in the market.<br />
Times are changing!<br />In Brazil, the United Arab Emirates, and Russia, the vast majority of college graduates are female.<br />In Russia, 86% of women ages 18 to 23 are enrolled in tertiary education. <br />For every year beyond fourth<br /> grade girls attend school,<br /> a country’s wages rise by <br /> 20% and the child-mortality<br /> rate dips by 10%. <br />-The Women’s Learning Partnership<br />The trends within BRIC<br />Source: http://www.newsweek.com/2010/07/06/women-will-rule-the-world.html<br />
Women of BRIC<br />Woman make up between 30 and 50% of BRIC workers as a whole<br />Companies who’d made efforts to empower women in emerging markets, 34% reported increased profits, and another 38% said they expected to see profit as a direct result of those efforts.<br /><ul><li>85% of women in India consider themselves “very ambitious”; in Brazil, India, and China, at least 75 % of women aspire to hold a top job.(compare these figures with the mere 36 percent of U.S. women who consider themselves very ambitious)</li></li></ul><li>Dependency Trend<br /><ul><li>The dependent population in relation to the working population.
This is important as it illustrates dependency on the working population, which will slow growth as the ratio increases. </li></ul>China and Russia are following a similar trend as their dependent population is starting to increase while Brazil and India’s dependent pop. is still decreasing.<br />
1<br />Newservices<br />CreditCardOwnership<br />in Brazil<br />50%ClassC1<br />36%Class C2<br />2<br />Differentproduct<br />categories<br />TV<br />Computer<br />98%ClassC2<br />99%ClassC1<br />14%ClassC2<br />34%ClassC1<br />Middle classes are increasing access and developing new needs…<br />(Latin Panel, Brazil, 2007)<br />(Nielsen, China, 2010)<br />(Trendsniff, India, 2010)<br />
% Permanent Expenditures in Brazil<br />(Food, Transportation and Household)<br />52%<br />54%<br />AB1<br />B2<br />55%<br />58%<br />C1<br />59%<br />C2<br />D<br />67%<br />E<br />…consequence of more available income<br />“The money they earn is either saved or spent on things like televisions, household appliances and education for their children” (Nielsen, China 2010)<br />(Latin Panel, Brazil, 2007)<br />(Nielsen, China, 2010)<br />
…since basic needs are being met…<br />Penetration of Goods<br />(FAO, 2001)<br />(World Bank, 2008)<br />
…the penetration of new categories is growing faster<br />“R$ 20 bi in electronics in 2010”<br />(PNAD, Brazil, 2010)<br />
…and Internet users are increasing throughout BRIC’s <br />Internet Users in Brazil <br />% of total population<br />Internet Users: % of total population<br />USA: 78%<br />Millions of users<br />2 x Brazilian Population<br />PNAD (2010), ITU (2010)<br />INTERNET WORLD STATS (2010)<br />
Companies are investing in Market Research & Segmentation for Middle Class…<br />Unilever – Laundry Powder<br />Chocolate Brands in Brazil<br />(same company)<br />“Data popular was establish to build unparalleled knowledge on low-and medium-income consumers” <br />Class A<br />Class C<br />…and adapting brands and products<br />(Data Popular, 2010)<br />
The same is happening in Mobile Industry<br />% of households with telephone<br />In Brazil, 84% of the Middle Class has a mobile<br />Pre-Paid system<br />Many people have 2 or 3 “SIM CARDs” from different companies to enjoy promotions<br />Households with telephone<br />Both<br />Just lend line<br />Just cell phone<br /><ul><li> China and India are now the world’s 1st and 2nd largest mobile phone markets (2009)
Citibank launched its mobile banking services in Russia
without any additional applications to be installed on their mobile.</li></li></ul><li>15-30% is the growth of this industry each year for the last decade (India and China)<br />A car takes up to 140% of the buyers’ annual income compared to 35% in the United States<br />8 million passenger cars sold in China in 2009<br />more than 10 million private cars in China now - about one car for every 120 people (2006) <br />“As the middle class expands, car sales in China are skyrocketing”<br />“By varying the specifications and prices of RBrs, we want to serve not only customers for C-segment cars but also those for the B-segment in order to achieve the highest sales in the category of small vehicles,” said a Hyundai Motor official in Russia.<br />(Renaissance Capital, 2007)<br />(The Economist, 2009)<br />
Growth tendencies are very impressive among retailers…<br />Bharti-Walmart opened 59 stores in Northern India in 2010<br />Expected to open 10-15 wholesale locations by 2013<br />Planning to add 10-15 new brands to its community family shopping centers in Bangalore.<br />Retail Sales Expectation<br />Us$ 674 bi<br />2014<br />US$ 393 bi<br />72%<br />2011<br />
Change of Habits<br />Less “monthly” purchases<br />More reposition purchases<br />Development of small <br />and local retailers<br />...thatneeded to adapttheirstores...<br />PLANO REAL<br />Inflation control<br />“Local companies will maintain leads in smaller cities in China” (Nielsen)<br />...but small and local retailers are alsoincreasing<br />(Nielsen, Brazil, 2008)<br />(Nielsen, China, 2010)<br />
…they also adapted the European Cash & Cary into “Atacarejo” in Brazil<br />From 86 to 291 stores in Brazil (2000-2009)<br />(Revista no Varejo, 2010)<br />
McDonald’s in India<br />Vegetarianism predominance<br />Previous multinational food companies failure<br /><ul><li>Vegetarians selection to suit Indian taste
Adaptation on production process</li></ul>The chain had 170 stores in 2010 and was due to open other 120 in that year<br />
Credit plays important role, but in different ways...<br />22% of the middle class borrow credit cards from friends and family<br />66% prefer retailers to finance their consumption, since they don’t like banks<br />Long-term payment<br />Paying in advance for later retrieval of goods<br />Highest savings rate of any major country<br />Chinese consumers are much less leveraged than others<br />Cash society: most cards used solely for ATM or debit purposes<br />By April 2006, 40 million credit cards had been issued in China <br />FidelityCard<br />(Data Popular, 2009)’ <br />
In Brazil, the number of Undergraduate studentsgrewfrom 3,6 to 5,8 millionsbetween 2002 and 2009<br />theyspend 60% of theirincomemonthy<br />more than 2.000 universities (90% private)<br />…helping the BRIC’s university “boom”<br />350.000 of engineers are graduating in India and<br />700 .000 in China <br />– in USA, this number is around 70.000<br />University students by social class in Brazil<br />2002<br />2009<br />(Business Week, 2006)<br />(Mundo do Marketing, 2010)<br />
80 million Brazilians were building or reestructuring their houses in 2010<br />15% of Brazilians live in unfinished households<br />5,2 times was the increase in decoration expenditures from 2002 to 2010<br />Construction “boom”<br /><ul><li>By 2015, half of the world’s new building construction will take place in China*
48 new airports underway</li></ul>Source:AF&PA China <br />
Luxury goods<br />“Fundamentally, beauty and luxury is an enduring (middle class) segment in Russia, and Russians have a passion for brands.” (Ernst & Young, Russia, 2011)<br />“Brands are fueling the rise of the middle class in China. The Chinese have an aching ambition to climb up the ladder of success, and brands are the mark of people who have made it.” <br /><ul><li>2015: 29% of all luxury goods sold worldwide
As many Chinese women enter the middle class, they start to purchase "affordable" luxuries, like skin creams and cosmetics.
Cosmetics market is estimated to be $5.5 billion per year and grow at an annual rate of 10 to 15% </li></ul>*(Goldman Sachs)<br />
Steady retreat of poverty<br />Engine of the global economy<br />Jobs creation<br />New consumer market<br />Spur for nations to invest in public infrastructure, roads, and schools<br />Advocate for social stability <br />In some cases, wholescalepolitical change<br /> Middle class’shopes<br />
Education: Primary and Tertiaryeducation<br />Infrastructure: roads, mobile telephones, mainline telephones, Internet users, installed electricity and air passengers<br />Political and social changes<br />Challenges for the BRICS<br />
Greater threat of environmental degradation <br />Increased pressure and competition for resources: fuel, food, water<br />Challenges for the world<br />
In Russia, only 22% say they are sufficiently well-off to be considered part of the middle class.<br />In Western Europe, 40-50% of people say they belong to the middle class<br />Inthe United States, it is about 70%<br />The Russian middle-class and the Self-assessment<br />Basis of social stability:<br />Healthy conservatism that saves the country from excessively emotional political decisions. <br />