New Emerging Markets: Nigeria, Indonesia, Mexico, The Philippines and Turkey

February 2015

With their growing economies, rising incomes and young, expanding populations, the five emerging markets of Nigeria, Indonesia, Mexico, Philippines and Turkey offer a wealth of opportunities for marketers facing stagnant demand in developed markets. However, these countries are far from homogenous, each with its own advantages and drawbacks. Following on from our recent BRICS report, this new global study compares and contrasts the “NIMPTs” and their potential as consumer markets.

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Economic giants of the future

The five emerging markets of Nigeria, Indonesia, Mexico, the Philippines and Turkey (collectively dubbed here the “NIMPTs”) are tipped to provide some of the most exciting growth opportunities for consumer goods manufacturers.

All five economies performed well over the review period. Indonesia and Nigeria showed the strongest real GDP growth between 2008 and 2013, averaging 6%, followed closely by the Philippines (5%).

While smaller than their BRICS counterparts (Brazil, Russia, India, China, South Africa), the NIMPT countries have similar levels of purchasing power on a per capita basis.

Although their economies are very different in size, with Mexico’s GDP being more than four times that of the Philippines in 2013, all offer promising long-term potential for investors.

Large youthful populations

The five markets have large populations, ranging from 75.6 million in Turkey to 247.2 million in Indonesia. They all experienced population growth over the review period, with Nigeria’s increasing at the highest rate, of 13%.

All the NIMPTs have relatively youthful demographics. The highest mean age among the five countries in 2013 was 30 years (Turkey), which was still far lower than in most developed markets.

Compared to developed markets, average household sizes are large in all of the NIMPTs countries but this is gradually changing due to urbanisation, the growing number of working women, lower fertility and later marriage.

Urban vs rural

Indonesia and the Philippines are still predominantly rural, with only 49% and 45% of their populations classified as urban. Despite this, Greater Jakarta is believed to be the world’s second most populated urban area, with over 26 million people.

Big cities are expanding in all countries as a result of on-going industrialisation. Mexico and Turkey are the most urbanised of the five, with almost 79% and 71% of their populations living in urban areas in 2013.

Dynamic instability

All five countries have suffered for several years from a combination of ethnic tensions, anti-government protests, drug-related violence and national insurgencies. Poverty and income disparity are prevalent, creating a huge wealth gap between rich and poor.

However, a new middle class is expanding, due to social reforms and wealth created by economic progress trickling down to reach more consumers.

Growing disposable income

In 2013, Mexico and Turkey recorded the highest per household disposable incomes of the five markets, at US$32,282 and US$29,818, respectively, while Indonesia ranked lowest with a per-household disposable income of US$8,044.

Indonesia made by far the fastest progress over the review period, as economic growth, low unemployment and high commodity prices led to a progressive rise in earnings and boosted consumer confidence.

Unemployment is 5% in Mexico and 23% in Nigeria. However, what all five have in common is very large informal sectors, which distorts employment figures and makes for low wages and poor job security.

Getting connect

The use of the internet and mobile phones rose rapidly throughout the five markets during the review period – in some cases from a very small base. This has had a major impact on consumer lifestyles and companies’ methods of marketing communication.

Turkey and Mexico are most connected of the five nations, with internet usership rates of 46% and 44%, respectively, in 2013. Indonesia lagged behind with just 16% of its population using the internet and less than 3% of households having a broadband internet enabled computer.

Indonesia nevertheless ranked highest when it came to mobile internet subscriptions, with a massive 100.5 million subscriptions in 2013 (equal to 1.6 per household), compared with just 16.6 million in Mexico (0.6 per household).

EXECUTIVE SUMMARY

Market drivers and constraints
Chart 1 A Comparison of New Emerging Markets: the NIMPTs in 2013
Consumer spending
Consumer markets
Retail and leisure market trends
Outlook
Summary 1 SWOT for the New Emerging Markets, the NIMPTs in 2014/15

INTRODUCTION

Summary 2 Commonalities And Differences Among the New Emerging Markets, the NIMPTs in 2014/15

GROWTH DRIVERS AND CONSTRAINTS

Political instability
Nigeria’s religious and political tensions worsen Turkey suffers spillover from war in Syria Mexico’s on-going drugs war Indonesia and Philippines relatively stable Table 1 Political Stability and Absence of Violence Ranking in the New Emerging Markets 2008-2013
Economic growth
Mexico leads in total economic output Indonesia and Nigeria see strongest economic expansion Nigeria thrives on oil wealth The Philippines also makes rapid progress Turkey and Mexico hit by the recession of 2009 Chart 2 GDP by New Emerging Market 2008-2013 Chart 3 Per Capita GDP by New Emerging Market 2008-2013 Chart 4 GDP Constant Growth by New Emerging Market 2008-2013 Table 2 Inflation by New Emerging Market 2008-2013
Attractiveness to foreign investors
Mexico benefits from proximity to US Indonesia opens up to investors Turkey must overcome hurdles Nigeria and the Philippines offer long term potential Chart 5 Foreign Direct Investment Inflows by New Emerging Market 2008-2013
The wealth gap
Poverty is rife Table 3 National and International Poverty Levels by New Emerging Market 2008-2013 Income gap remains high Social programmes help bring people out of poverty Turkey marked by geographical divide Table 4 Gini Coefficient by New Emerging Market 2008/2013
Income trends
Average incomes highest in Mexico and Turkey Incomes rise fastest in Indonesia Table 5 Per Household Disposable Incomes by New Emerging Market 2008/2013
The rise of the middle classes
Middle earners still a minority in all markets Middle class households gain share in Mexico Chart 6 Middle Class Households Incomes by New Emerging Market 2008/2013 Social classes D and E dominate class structure Share of social class A highest in Mexico and Nigeria Table 6 Population by Social Class by New Emerging Market 2013
Income by decile
Turkey displays smallest disparity between poorest and richest households Poorest households showing strongest income growth in Mexico Chart 7 Growth in Average Household Disposable Income in Deciles 1, 5 and 10 by New Emerging Market 2008/2013 Table 7 Average Household Disposable Income (at PPP) in Deciles 1, 5 and 10 by New Emerging Market in 2013
Labour and employment
Figures distorted by huge informal workforce Over a fifth of Nigerians unemployed Turkey creates more jobs outside of agriculture Unemployment remains low in Mexico, Philippines and Indonesia Chart 8 Unemployment by New Emerging Market 2008/2013 Chart 9 Female Employment Rate by New Emerging Market 2008/2013 Exporting labour Remittances boost consumption among low-income families Chart 10 Migrant Remittance Inflows by New Emerging Market 2009/2014
Demographics
Large and growing populations Youthful demographics Fertility rates high but falling Chart 11 Total Population by New Emerging Market 2008/2013 Chart 12 Birth Rates by New Emerging Market 2008/2013 Chart 13 Median Age of Population by New Emerging Market 2008/2013
Household structure
Average households are large but shrinking Single-person households on the rise in Turkey Chart 14 Average Household Size by New Emerging Market 2013 Chart 15 Average Household Size by New Emerging Market 2013
Urbanisation
Mexico and Turkey are most urbanised Urban consumers spur spending Chart 16 Urban Population as % Total by New Emerging Market 2008/2013
Connectivity
Explosion in mobile phone use Broadband still out of reach for most Nigerians Turkey has the most developed broadband network Indonesia leads in mobile arena Share of internet users goes up six-fold in the Philippines Mobile internet access remains very low in Mexico Chart 17 Internet Users as % Total Population 2008/2013 Chart 18 Possession of Broadband Internet Enabled Computer 2008/2013 Table 8 Mobile Internet Subscriptions 2008/2013 Growing use of social media Filipinos offered free access to Facebook in Asia push Companies shift marketing to social media Chart 19 Number of Facebook Users by New Emerging Market 2013/2014
Religion
Indonesia and Turkey predominantly Muslim Islamic banking on the rise Summary 3 Religions in the NIMPT Countries
Health
Growing awareness of health issues Mexicans suffer high levels of obesity Chart 20 Life Expectancy At Birth by New Emerging Market 2008/2013

CONSUMER SPENDING PATTERNS

Consumer expenditure
Spending highest in Mexico and Turkey Indonesia sees strongest growth Mexican expenditure picks up following recession Table 9 Consumer Expenditure by New Emerging Market 2008/2013 Discretionary spend is on the rise Education especially important to Asian cultures Clothing expenditure affected by cheap imports Chart 21 Consumer Expenditure by Category by New Emerging Market 2013 Chart 22 Constant Growth in Consumer Expenditure by Category by New Emerging Market 2008-2013
Payment trends
Credit fuels consumer spending among middle classes Financial cards most highly developed in Turkey More than half the Mexican population is unbanked Banks engage in heavy marketing of financial cards in the Philippines Indonesia and Nigeria remain cash-based economies Limited credit facilities in Nigeria Table 10 Consumer Payment Transactions by Type by New Emerging Market 2014

CONSUMER MARKETS

Food trends
National diets vary widely Instant noodles appeal to all Packaged foods driven by demand for convenience Mexico leads in packaged food sales Bakery and dairy dominate Frozen foods still nascent Working mums switching to packaged baby food Smaller portions for low-income consumers Domestic companies challenge multinationals Private label developed in Turkey Chart 23 Sales of Packaged Food by New Emerging Market 2009/2014 Table 11 Key Categories of Packaged Food by New Emerging Market 2009/2014
Beverage trends
Bottled water dominates soft drinks in all markets Mexico registers highest sales volumes Trend towards healthier drinks Juices gain traction in Nigeria Carbonates are big in Turkey and the Philippines Chart 24 Sales of Soft Drinks by New Emerging Market 2008/2013 Indonesia leads in hot drinks sales The influence of café culture Health trend benefits green tea New products focus on convenience and sophistication Chart 25 Sales of Hot Drinks by New Emerging Market 2008/2013
Beauty and personal care trends
Mixed performances among the NIMPTs Whitening products remain popular Men embracing the metrosexual trend Micro-packaged products Competition gets fiercer Muslim brands in Indonesia Chart 26 Sales of Beauty and Personal Care by New Emerging Market 2008/2013 Table 12 Key Categories of Beauty and Personal Care by New Emerging Market 2008/2013
Consumer electronics trends
Increased internet usage drives sales of computers and portable devices Philippines market benefits from finance schemes Social media fuels demand for internet-enabled devices in Turkey Chart 27 Sales of Consumer Electronics by New Emerging Market 2008/2013 Table 13 Sales of Consumer Electronics by Category by New Emerging Market 2008/2013

RETAILING TRENDS

Overview
Informal retailing prevails Governments clamp down The rise of shopping malls International retailers enter the non-grocery sector
Trends in grocery shopping
Modern retailing at different stages Hypermarkets and convenience stores most developed in Mexico Supermarkets and discounters most developed in Turkey Supermarkets account for a fifth of grocery sales in the Philippines Convenience stores grow rapidly in Indonesia Nigerian market remains undeveloped Chart 28 Share of Modern Grocery Retail Formats by New Emerging Market 2009/2014 Table 14 Grocery Retailing by Channel by New Emerging Market 2014
Non-store retailing
Direct selling is big business in Mexico Online retailing burgeoning in Indonesia E-commerce hurdles still exist in Nigeria Table 15 Non-store Retailing by Channel by New Emerging Market 2014
Leisure trends
Middle class consumers eating out more Security is a concern The rising popularity of fast food Takeaway services benefit from rise in dual income families Growth of international chains Chart 29 Fast Food: McDonald’s and KFC Brand Shares, Indonesia, Philppines, Mexico and Turkey 2013 The infiltration of international cuisines Table 16 Sales of Consumer Foodservice by New Emerging Market 2008/2013 Mexicans travel most Indonesia see dramatic growth in foreign travel Domestic tourism declines in Turkey in favour of outbound trips Philippines enjoys boom in domestic tourism Security concerns deter holidaymakers in Nigeria Chart 30 Domestic Tourism by New Emerging Market 2008/2013 Chart 31 Outbound Tourism by New Emerging Market 2008/2013

FUTURE OUTLOOK

Economies set for further expansion
All markets face vulnerabilities set against positive growth potential Philippines and Nigeria will see strongest economic expansion Nigeria to reduce dependence on oil Reforms on the cards for Indonesia Syrian crisis will continue to impact on Turkey Mexico needs investment in infrastructure Chart 32 Forecast Real GDP Growth by New Emerging Market 2013-2018 Chart 33 Forecast Unemployment by New Emerging Market 2013/2018
Incomes will continue to rise
Chart 34 Forecast Disposable Income Per Household by New Emerging Market 2013/2018
Expanding, more urban, populations will sustain demand
Nigeria to see the strongest population growth Urban life will boost demand for convenience Table 17 Population Trends by New Emerging Market 2013/2018
Inequality to worsen, but at a slower pace
Table 18 Projected Gini Coefficient by New Emerging Market 2013/2018
Middle classes set to expand further
More consumers to move out of poverty Middle classes will spend more on discretionary items Chart 35 Forecast Number of Middle Class Households by New Emerging Market 2013-2018
Continued expansion of telecoms and internet
Chart 36 Forecast Internet Users as % Total Population by New Emerging Market 2013/2018
Growth markets for the future
FMCG markets will benefit from the need for convenience Modern grocery channels will develop further Indonesia holds the strongest growth potential Chart 37 Forecast Growth in Selected FMCG Sectors by New Emerging Market 2013/2018
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