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
NORTH AMERICA 92 CITIES EUROPE 140 CITIES NEW YORK LA MOSCOW PARIS CHICAGO LONDON Each circle indicates a with a population greater than 500k SILK ROAD ASSOCIATES 3
NORTH AMERICA 92 CITIES EUROPE 140 CITIES CHINA 250+ CITIES NEW YORK LA MOSCOW PARIS SHANGHAI BEIJING CHICAGO LONDON CHONGQNIG Each circle indicates a with a population greater than 500k SILK ROAD ASSOCIATES 4
UNITED STATES 2015 GDP growth by municipality CHICAGO NEW YORK SAN FRANCISCO LOS ANGELES HOUSTON -8% +8% SILK ROAD ASSOCIATES 5
CHINA 2015 GDP growth by city BEIJING CHONGQING WUHAN SHANGHAI -12% +12% GUANGZHOU SILK ROAD ASSOCIATES 6
16 87 167 POPULATION 5 million + POPULATION 1 to 5 million POPULATION 500k to 1 million GDP $3.1 trillion GDP $4.3 trillion GDP $2.5 trillion SILK ROAD ASSOCIATES 7
Opportunities in China s smaller cities will create local competitors and localised preferences
Share of Branches 25% 50% 75% 90% FOREIGN BRANDS 10 leading brands 2 CITIES 9 CITIES 24 CITIES 62 CITIES SILK ROAD ASSOCIATES 9
Share of Branches 25% 50% 75% 90% FOREIGN BRANDS 10 leading brands 2 CITIES 9 CITIES 24 CITIES 62 CITIES CHINESE HOTEL CHAINS 10 leading brands 5 CITIES 18 CITIES 55 CITIES 120 CITIES SILK ROAD ASSOCIATES 10
CHINA Blue Moon China s Blue Moon used an innovative model to change the way consumers purchased laundry liquid. Blue Moon leveraged old and new online economies 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.
Taiyuan Beijing Chongqing 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 Indoor water parks offer a winter alternative without the air pollution. 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.
China s subway construction boom is about to open up new retail opportunities
SILK ROAD ASSOCIATES 14
China will build 1,400 new metro stations by 2019 2,400 2,900 3,400 3,800 2017 2018 2017 2018 2017 2019 TODAY TODAY TODAY TODAY Each square indicates a metro station SILK ROAD ASSOCIATES 15
SHENZHEN SILK ROAD ASSOCIATES 16
LINE 11 Longhua POP 1.5 MN Longgang 2.0 MN SHENZHEN Commercial Density & Metro Lines Metro lines completed and under construction Nanshan 1.2 MN Futian 1.0 MN Luohu 1.4 MN Sheung Shui LOW HIGH HONG KONG SILK ROAD ASSOCIATES 17
E-commerce and online payments will challenge the traditional retail model
China s e-commerce and online payments sector is booming and, in many areas, leapfrogging the rest of the world. Percent of retail sales made online Percent of people owning smartphone Europe 7.8% Hong Kong 87% China 7.2% Singapore 87% United States 5.8% United States 77% Singapore 4.5% Malaysia 80% Malaysia China 71% Thailand Thailand 49% Philippines Around or below 1% Indonesia 23% Indonesia India 18% Vietnam Philippines 15% Sources: A.T Kearney Sources: Nielsen SILK ROAD ASSOCIATES 19
China s skincare market is hypercompetitive with local brands emerging as select competitors for the biggest brands. 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. SILK ROAD ASSOCIATES 20
China is going global, so expect more Chinese MNCs and tourist spending power.
Regional loan to GDP ratios SILK ROAD ASSOCIATES 22
Daily flights to ASEAN 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. 41 CHINESE CITIES SILK ROAD ASSOCIATES 23
China s outbound FDI, 2012-2014 Circle size denotes US$ billion U.S. $15.5bn U.K $6.4bn KAZAKHSTAN $3.8bn INDONESIA $4.2bn SINGAPORE $5.6bn AUSTRALIA $9.7bn SILK ROAD ASSOCIATES 24
China s Belt and Road Strategy will have implications for all of Asia
NORTHERN ROUTE The Belt An oil and energy route SOUTHERN ROUTE The Road A consumer and industrials route Circle size indicates city population multiplied by spending power SILK ROAD ASSOCIATES 26
Belt and Road GDP by country US$ value including China s five largest provinces Kazakhstan 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 TURKEY SAUDI ARABIA Pakistan INDIA CHINA Shandong Henan Jiangsu Zhejiang Guangdong Hong Kong Thailand Vietnam Philippines KOREA Malaysia INDONESIA SILK ROAD ASSOCIATES 27
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. SILK ROAD ASSOCIATES 28
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. SILK ROAD ASSOCIATES 29 BELT AND ROAD SILK ROAD ASSOCIATES
But China s Belt and Road initiative will have different implications for each country
CHINA LIGHT RAIL Hanoi light-rail and Hanoi to Hai Phong railway Guangzhou Donguan Pingxiang Shenzhen INDUSTRIAL PARK Tan Truong and Yun Zhong outside Hanoi Hanoi Hai Phong VIETNAM Imports from China $31 MN POWER PLANT Hai Duong and Mong Duong outside Hanoi COMMERCIAL DENSITY Sanya Buttons $103 MN Zippers $4,100 MN Electronics LOW HIGH LAOS SILK ROAD ASSOCIATES 31
$39 BN CHINA THAILAND DUAL-TRACK RAILWAY INFRASTRUCTU JANUARY RE2014 China and Thailand initial project. Tan Honh bridge Tan Honh bridge DECEMBER 2015 Groundbreaking ceremony for the project. MYANMAR Chiang Rai $37 BN Nong Khai FEBRUARY 2016 Disagreement over funding for the project. MARCH 2016 Thailand decides to fullyfund construction. JANUARY 2017 First phase of bidding completed. COMMERCIAL DENSITY Bangkok Map Ta Phut CAMBODIA LAOS VIETNAM LOW HIGH BELT AND ROAD SILK ROAD ASSOCIATES 32
Belwan Kuala Lumpur Singapore SEA TOLL ROAD Jokowi announces development of 24 ports, including 11 passenger and 13 cargo Indonesia to develop a container backbone or Pendulum Nusantara Sorong Major Port Minor Port Population 100 K 10 MN Jakarta Surabaya Makassar Banda Sea BELT AND ROAD SILK ROAD ASSOCIATES 33
Asia is the world s future consumer. But there are critical differences to China
Asian consumers are a growing opportunity Household Consumption, US$ terms. 1990 $6.8 TN 1990 $1.7 TN UNITED STATES CHINA KOREA INDIA
Asian consumers are a growing opportunity Household Consumption, US$ terms. 2015 $12.3 TN 2015 $8.2 TN UNITED STATES CHINA INDIA KOREA
Asia s will age at twice the speed of Europe. and China is already old. Figures and shading indicate median age SILK ROAD ASSOCIATES 37
INDONESIA Mothercare Mothercare launched an online platform in Indonesia to better tap smaller cities Mothercare is tapping a growing affluent middleclass 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.
INDONESIA Mothercare Branches Kuala Lumpur 40 Singapore SUMATRA 3 KALIMANTAN 2 SULAWESI 3 Population 100 K 10 MN Jakarta JAVA 26 Surabaya SILK ROAD ASSOCIATES 39
PHILIPPINES Mang Inasal Mang Inasal (Mr Barbeque) is one of the Philippines leading fast food chains. Mang Inasal started in the Philippines smaller cities 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.
PHILIPPINES Mang Inasal Green and orange circles indicate high branch density in medium- and small-sized cities. Greater Manila Branch density in Manila and Davao city is lower. Population Iloilo Cebu Branch Density LOW HIGH Davao City SILK ROAD ASSOCIATES 41
The BPO industry and secondary cities in the Philippines The BPO industry is another reason to be excited about opportunities outside Greater Manila. Angeles Greater Manila 18 MN 20 to 30 yr olds Puerto Princesa Dumaguete Davao City
Is India the next big thing? Will the story be the same or different to China?
INDIA Starbucks Branches 76 CHINA Starbucks Branches 1,812 Delhi Beijing Mumbai Chengdu Shanghai Shenzhen SILK ROAD ASSOCIATES 44
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
INDIA Bollywood Hollywood s biggest brands have struggled to win in India and instead gone local Hollywood is big in China. But a flop in India 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.
It s still Indian films that make money Top grossing films. Bollywood (2015) Foreign (2015) TITLE GROSS TITLE GROSS Dangal $61 mn The Jungle Book $29 mn Sultan $47 mn Captain America 3 $10 mn M.S. Dhoni The Untold Story $21 mn Batman vs Superman $9 mn Airlift $20 mn Mission Impossible 5 $7 mn Rustom $20 mn X Men $6 mn Housefull 3 $18 mn Kung Fu Panda 3 $5 mn SILK ROAD ASSOCIATES 47
ASIA AS THE WORLD S FUTURE CONSUMER