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Strategy Briefing
How BRICS Consumers Behave
Aug 2013
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About This Report
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With growing economies, rising incomes and expanding middle classes, the five emerging countries that form the BRICS (Brazil, Russia, India, China, South Africa) offer a wealth of potential for consumer goods companies facing stagnant demand in the West. However, these markets are far from homogeneous and each has its own advantages and pitfalls. This new global report compares and contrasts the characteristics and buying behaviour of BRICS consumers, and identifies future opportunities for grow
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Overview
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A formidable new force
The BRIC markets of Brazil, Russia, India and China were joined by South Africa in 2010 to form the BRICS. The group provides a formidable new force, accounting for 40% of the world’s population, a quarter of its land mass and a fifth of global GDP.
These countries’ vast and growing pool of middle class consumers are providing immense opportunities for consumer goods companies facing stagnant demand in developed markets. However, they are a disparate group with diverse characteristics and habits.
China dominates the BRICS in terms of economic might
With its GDP of US$13.5 trillion (at PPP) being 22 times the size of South Africa’s. China also saw the fastest economic expansion over the 2008-2013 period.
India has the second highest GDP of the BRICS group, projected at US$5.2 trillion (PPP) in 2013. India has also witnessed consistent economic growth over the last five years and, like China, was relatively unaffected by the global recession.
Russia and Brazil had similar GDP levels measured at PPP in 2012, at US$2.7 and US$2.5 trillion, respectively. Russia was more severely impacted by the global recession than other BRICS, but was quick to recover on the back of high oil prices.
South Africa has by far the smallest economy of the BRICS, but is a significant force within the Middle East and Africa region, with a well capitalised banking system, abundant natural resources and an established manufacturing base.
Unemployment levels are relatively low and falling among most of the BRICS, contributing to growing consumer confidence and spending levels. However, South Africa suffers from very high joblessness, at over 25% in 2013, which is especially severe among the young.
Gap between rich and poor
Despite the wide and growing gap between rich and poor, per capita disposable income rose strongly in all five markets over the 2008-2013 period. Forecasts for 2013 show per capita income to be highest in Russia and Brazil, at US$9,432 and US$8,345, respectively.
Disposable incomes in India are still very low by international standards, amounting to just US$1,331 in 2013, with the majority of the rural population still living in extreme poverty.
A strong, largely urban middle class consumer base has emerged in all markets, boosting domestic consumption in a wide range of categories, such as household durables and everyday goods, housing, communications, financial and healthcare services, education and leisure.
The share of “middle income” households is highest in India and Brazil, at 29% and 28%, respectively, and is particularly low in South Africa, at 15%. However, Russia has the highest share of households with an annual disposable income over US$10,000 (PPP), at 86%.
One visible indicator of the growth of middle classes is the rapid growth in car use. While in Russia, over half of all households possessed a car in 2013, only 7% of Chinese and fewer than 5% of Indian households did so, suggesting huge potential for growth in these markets.
Despite growing incomes in general and the rise of the middle classes, income inequality remains a massive problem facing all of the BRICS economies. South Africa is the most unequal society in the world, with a Gini coefficient of 0.64.
Brazil and Russia were the only BRICS markets to see a slight improvement in equality over the review period as government measures to reduce the income gap began to bear fruit.
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EXECUTIVE SUMMARY
Market Drivers
Chart 1 A Comparison of Income and Spending in BRICS Markets in 2013Consumer Spending
Chart 2 How BRICS Consumers SpendConsumer Behaviour and Markets
Summary 1 Commonalities and Differences in Behaviour between BRICS MarketsOutlook
INTRODUCTION
A Formidable Force
The History of the BRICS Grouping
But Are They Compatible?
MARKET DRIVERS
Economic Indicators
Differing levels of growthSlower growth in China is inevitable
Reform is needed
India suffers from lower investment
Brazil’s growth set to pick up
Russia propped up by oil
Domestic consumption fuels South Africa’s growth
Chart 3 BRICS GDP by Country 2013
Chart 4 BRICS Real GDP Growth by Country 2008-2013
Employment
South Africa suffers from chronic unemploymentService industry provides more jobs in India
Brazil sees strongest fall in unemployment
Chart 5 BRICS Unemployment by Country 2008/2013
Chart 6 BRICS Female Employment by Country 2008/2013
Income Trends
A rise in earnings across the boardIndia lags behind
Chart 7 BRICS Per Capita Disposable Incomes 2008/2013
Growing Middle Classes
No universal definitionMiddle earners still a minority in all markets
Chart 8 BRICS Middle Income Households 2008/2013
Table 1 BRICS Population by Social Class 2013
Households moving out of poverty
Chart 9 BRICS Households with Income over US$10,000 (PPP)
Rising Vehicle Ownership
Russians have the most carsBrazilians aided by credit
Car ownership explodes in urban China
Chart 10 BRICS Car Ownership by Country 2008/2013
Income Disparity
Inequality is rife throughout BRICSSituation improving slowly in Brazil
China’s market economy creates growing wealth gap
Russia increases minimum wage
Table 2 BRICS Gini Coefficient by Country 2008/2013
the Growth of Hnwis
Chart 11 BRICS HNWI Population by Country 2010-2011Demographic Trends
A combined population of 3.0 millionRussia’s population stagnates
Chart 12 BRICS Total Population by Country 2008/2013
Chart 13 BRICS Birth Rates by Country 2008/2013
BRICS populations begin to age
Russia and China have oldest demographics
While populations of India and South Africa remain young
Chart 14 BRICS Mean Age of Population by Country 2008/2013
Levels of Urbanisation
Urban consumers spur spendingBrazil is the most urbanised of the BRICS
The cost of urbanisation
China has adapted best to city growth
Chart 15 BRICS Urban Population as % Total by Country 2008/2013
BRICS account for more than half of the top 15 cities
Chart 16 World’s Most Populous Cities in 2012
CONSUMER SPENDING PATTERNS
Savings Ratio
The Chinese are the most cautiousRussians are saving more
Brazilians spend as they earn
South Africans spend more than they earn
Chart 17 BRICS Savings Ratio by Country 2008/2013
Consumer Expenditure
Most of spending still on necessitiesHousing shortages push property prices up
Discretionary spend is growing
Indians invest in education
Consumers take more responsibility for health
Chart 18 BRICS Per Household Expenditure by Category 2013
Chart 19 BRICS Growth in Per Household Expenditure by Category 2008-2013
CONSUMER BEHAVIOUR AND MARKETS
Eating and Drinking
National preferences vary widely in fresh foodsTable 3 BRICS Per Capita Consumption of Fresh Food by Country 2012
Increased uptake of packaged food is universal
Russia’s market is the most mature
Brazilians seek more sophistication
India holds the most potential for growth
Chinese market benefits from premiumisation
Table 4 BRICS Sales of Packaged Food by Country 2008/2013
Table 5 BRICS Per Capita Sales of Packaged Food by Country 2008/2013
Summary 2 Packaged Food Trends by Country 2008/2013
Drinking Habits
South Africans and Russians drink the mostBeer gains popularity among BRICS consumers
Alcohol consumption still low in India
Table 6 BRICS Per Capita Consumption of Alcoholic Drinks 2012
Leisure Habits
Chinese enjoy travel and shoppingCinema going on the rise in China
Brazilians are more cultural
Indians sociable, but most averse to exercise
Russians are most active
South Africans head to the mall
Table 7 BRICS Middle Class Consumers: Favourite Activities Away From Home 2012
Eating Out
Chinese eat out most frequentlyIndia sees influx of Western-style eateries
Dining out considered a luxury in South Africa
Russians eat out to socialise
Chart 20 BRICS Frequency of Eating Out by Country 2012
Foodservice Market Trends
BRICS consumers experiment with new cuisinesChina’s foodservice doubles in size
Fast food competition heats up
Brazilian has most established coffee culture
Franchise concepts expand in Brazil
India’s foodservice market is low in value
International players take growing interest in India
Russia’s foodservice market is less dynamic
Coffee shops become popular meeting places
Fast food leads foodservice category in South Africa
Table 8 BRICS Sales of Consumer Foodservice by Country 2008/2013
Table 9 Per Capita Sales of Consumer Foodservice by Country 2008/2013
Attitudes To Health
Growing awareness of health issuesObesity reaches high levels in Russia, South Africa and Brazil
Rates still low, but growing, in China and India
Chart 21 Obesity Rate by Country 2012
Smoking Prevalence
Russians are the largest smokersAffluent consumers more likely to smoke in South Africa
Smoking less common in Brazil and India
Chart 22 Smoking Prevalence by Country 2012
Consumer Healthcare
Consumers turn to self-medicationRussia has most developed OTC market
Emergence of OTC in China and India
Table 10 BRICS Per Capita Sales of OTC Products by Country 2008/2013
Health and Wellness
Per capita spending highest in Brazil and RussiaChina sees rapid growth
Market remains underdeveloped in South Africa
Table 11 BRICS Per Capita Sales of Health and Wellness by Country 2008/2013
Beauty and Personal Care
Celebrity influenceBrazilians spend most on looking good
Russians maintain a taste for luxury
South Africans like to smell good
Chinese pamper their babies
Basic hygiene products dominate Indian sales
Table 12 BRICS Sales of Beauty and Personal Care by Country 2008/2013
Table 13 BRICS Per Capita Sales of Beauty and Personal Care by Country 2008/2013
Summary 3 BRICS Personal Care Trends by Country 2008/2013
Technology
Internet use burgeons throughout the BRICSOwnership levels soar
Table 14 BRICS Middle Class Consumers: Ownership of Electronic Devices 2012
Less affluent still access internet from cyber cafés
Access on the move
Chart 23 BRICS Internet Users as % Total Population 2008/2013
Retail sales take off
Table 15 BRICS Per Capita Sales of Selected Consumer Electronics in 2013
E-commerce still in its infancy
India and South Africa remain undeveloped
Table 16 BRICS Internet Retailing by Country 2008/2013
Trends in Grocery Shopping
Habits remain largely traditionalChina has the most developed supermarkets/hypermarkets network
Convenience stores make progress in Russia
South Africans see a reverse trend
Supermarkets yet to take off in India
Chart 24 BRICS Share of Modern Retail Formats 2008/2013
Attitudes Towards Shopping
Table 17 BRICS Middle Class Consumers: Shopping Habits 2012the Market for Luxury Goods
Newly rich consumers aspire to luxuryRussians live up to their reputation for extravagance
Luxury goods companies invest in Brazil
India experiences strongest growth
Table 18 BRICS Sales of Luxury Goods by Country 2008/2013
Attitudes Towards Travel
Chinese discover international travelLow-cost airlines open up tourism in India
Russians expand their horizons
Travel in Brazil shifts from coaches to planes
International travel beyond the means of most South Africans
Chart 25 BRICS Domestic Tourism by Country 2008/2013
Chart 26 BRICS Outbound Tourism by Country 2008/2013
Attitudes Towards Money and Status
Financial security is paramountRussians like to spend
Table 19 BRICS Middle Class Consumers: Money, Status and Shopping 2012
FUTURE OUTLOOK
BRICS Economies Set for Further Expansion
Growth will be slowerSouth Africa will continue to be dogged by unemployment
The next growth markets
Chart 27 BRICS Forecast Real GDP Growth by Country 2013-2017
Incomes Will Continue To Rise
Russians will maintain highest incomesIncome growth will fuel discretionary spending
Consumer confidence is high
Chart 28 BRICS Forecast Per Capita Disposable Incomes 2013/2017
Inequality To Worsen, But at A Slower Pace
Gini coefficients to rise marginally in all countries except BrazilPotential for luxury goods
Table 20 BRICS Projected Gini Coefficient by Country 2013/2017
Middle Classes To Expand Further
More consumers to move out of povertyNewly rich consumers to drive demand for consumer goods
Chart 29 BRICS Forecast % Households With Annual Income Over US$10,000
Consumer Expenditure Set To Rise Across BRICS
Per household spending will remain highest in BrazilDiscretionary categories will gain share of household budgets
Chart 30 BRICS Household Consumer Expenditure 2013/2017
A More Sophisticated Consumer Base
Populations Will Continue To Age
Chart 31 BRICS Forecast Mean Age of Population by Country 2013/2017Cities Will Expand Further
BRICS will be home to more of the world’s mega citiesUrban life will boost demand for convenience
Future Spending Habits
Holidaying is at the top of consumers’ wish listsIndians are most keen to save
Brazilians want to pay off debts
Table 21 BRICS Middle Class Consumers: Future Spending Habits
Growth Markets for the Future
China to dominate sales in most categoriesChina holds most potential for alcoholic drinks and tobacco
Consumer foodservice to take off in Russia
Brazil to lead in beauty and personal care
Indians to take a greater interest in self-medication
China will remain top consumers of electronics
Table 22 BRICS Forecast Growth in Selected Consumer Categories by Country 2013/2017
Challenges for Marketers
Untapped potentialCompeting with domestic giants
Putting things into perspective
Service is key
Using local expertise
Infrastructural hurdles
Why buy this report?
Gain competitive intelligence about market leaders. Track key industry trends, opportunities and threats. Inform your marketing, brand, strategy and market development, sales and supply functions.