The designation 'BRIC' – referring to the emerging markets of Brazil, Russia, India and China – has outlived its usefulness, and the stage is set for a new group of contenders. That is the message from Miles Young, the worldwide chairman of London-based marketing and advertising company Ogilvy & Mather. The company's recently published report, Ogilvy & Mather Velocity 12 Report: the Reshaping of Global Growth, identifies 12 key markets in the emerging world, as well as core demographic trends the company predicts will shape growth in years to come.
Compiled by a variety of international experts and economists, the report points to an emerging middle class that will drive consumer trends and social change, and identifies south Asia as the epicentre of future middle-class growth. In a nutshell, the future is urban and increasingly connected, and some of the key drivers, perhaps surprisingly, will be women and progressive Muslims.
Critical tipping point
“Centred principally in India, but inclusive of Pakistan, Bangladesh, Myanmar, Vietnam, Indonesia and the Philippines, and extending up to China, and to Egypt, Nigeria, Mexico, and Brazil in the other direction, the Velocity 12 markets represent a vast arc of future growth,” says the report. In the next 10 years, these 12 markets will be the source of the next 1 billion middle-class consumers. This will create a “critical tipping point”, the report says, as the middle class becomes the majority of the local population in many of these markets.
The country with the highest number of middle-class arrivals, India, is projected in the next decade to gain 400 million middle-class consumers from its current tally of 187 million. Pakistan’s middle class will grow by 60 million, Indonesia by 50 million, Bangladesh by 37 million, and the Philippines and Vietnam by 21 and 19 million, respectively.
This rapid growth must be understood by its impact on social progress and consumer habits, according to Mr Young, the report’s author. “The new middle classes are very different from their predecessors, they’re much more connected. They are much more choice-orientated, and much more opinionated,” he says. “The key thing to understand is that this is a middle-class revolution, and it is happening very, very fast.
“Emerging markets have almost always been looked at through the lens of bankers. Labels such as 'BRIC' are essentially defined by broad macroeconomic data and GDP. What we’ve noticed, however, is that our clients’ FDI is being led by other indicators, in particular the growth of the consumer base.”
The report therefore calls for a fresh view of economic development around the world, one that goes beyond indices focusing only on the largest growth markets. It spotlights the number of people moving to the middle class, which is measured by income and purchasing power parity.
The new drivers of consumer trends will increasingly be women, youth and progressive Muslims, according to the report, and this particularly occurs in cities, which function as centres of innovation and are becoming more connected than ever before. This evolution has led to a new concept, the Urbangea, which connects large swathes of these countries into a virtual trading zone. Comprising the largest new block of consumers, its purchasing power will cross cultural, religious and demographic divides.
“The emerging middle classes are coming in at a time of huge technology changes and massive urbanisation. India, Pakistan, Indonesia and Bangladesh all have significant Muslim populations,” says Mr Young. “And we also notice there is a massive trend of women entering the workplace. So if we ask what the future is going to look like in this new middle-class world, it’s going to be Muslim, it’s going to be female, and it’s going to be urban.”
Widespread optimism was recorded among the women in the V12 countries surveyed for the report. Eighty-five percent of women saw improved career and business opportunities, and 84% believe they have positive personal prospects. However, of those same women, more than 40% admitted to facing serious discrimination at school or at home. “So with that, they are becoming more activist,” says Mr Young. “Thanks to the internet, women are becoming more socially connected and, in some countries, better educated than men. As they become financial participants in the world, they use their voices in social media to press for change in a variety of issues, from women’s issues to the environment.”
Ogilvy & Mather has also identified a group called “Muslim futurists”, who tend to be under 30, educated and entrepreneurial. “They believe that their faith affects their consumption, but 60% of the respondents hold that international business doesn’t understand their needs at all,” says Mr Young. “This is a challenge for global business leaders. If they’re really serious about investing in these countries, are they conscious of their obligations after that?”
What does all this mean for multinational corporations? First, local competitors are increasingly nimble and are using social media and digital tools to retain customers. “Local companies often have products tailored to local tastes, as well as a localised distribution strategy, and a localised communication strategy that is often digital at heart,” says Mr Young. “They move very quickly and are highly integrated, and a large Western company is normally slower and less flexible. What we’ve seen is that local brands are taking share from global brands, and this is a worry if you’re a global brand.”
Multinationals are increasingly having to find ways to relate to local consumers and adapt their branding to each individual market, being sensitive to their needs rather than simply applying a global recipe which many may not find appealing. An example is cosmetic and food brands in many Muslim countries. Local producers know that these products need to be halal and abide by certain religious requirements, so local consumers are therefore likely to be more trusting – and more loyal – than they would be toward a large Western brand.
Just as important is the new middle class’s power to affect policy change. Government spending on education and other public services is critical amid these seismic demographic shifts, according to Mr Young. “The new middle class will demand that, without doubt,” he says. “As it starts to assert itself, it will demand that for its children. And if governments don’t deliver it then they will be voted out. Governments should be transparent. They have to fight this monster of corruption.”
Corruption, oppressive regimes, political unrest, continued poverty and inadequate public services present enormous challenges to widespread inclusive growth. FDI and corporate social responsibility can play a role in supporting middle-class growth and persuading governments to be more transparent. “An investor wants to feel they are entering a level playing field. Hidden protectionism and corruption are all still too common in these countries, and they are the biggest enemy of growth,” says Mr Young. “As the middle class is enfranchised, it is a weapon against this. You can already see it in Brazil’s protests. And that is a very positive sign.”