Emerging markets are home to 86% of the world’s millennials1, accounting for almost two billion people. China and India account for over 400 million – more than the combined working population of the United States and Western Europe3. Consumer behavior and consumption patterns are changing and new industries and opportunities are emerging, driven by wealth creation and the impact of the millennial consumer. We see potential investment opportunities across three key themes: digitalization, leisure and experience, and premium brands.
Tech-enabled consumption in EM could continue to outpace that of the US (see chart below)4, setting the stage for e-commerce platforms to thrive and creating opportunities across the supply chain including delivery and logistics companies.
Source: Euromonitor, GS Global Investment Research, and GSAM, as of Jun-2016.
Millennials in emerging markets typically have different priorities and consumption preferences than their parents, who were largely preoccupied with improving their basic living standards. With increased emphasis on experiences, recreation and wellness, millennials are spending more on leisure activities, self-improvement, travel, health, eating out, beauty products and apparel1. These industries are still largely under-represented in traditional market-cap weighted benchmarks, and investors must go beyond this generic universe to properly capture these early stage growth opportunities.
As a result of their increasing purchasing power, millennials in emerging markets are more willing to pay for perceived quality. In China, the premium segment has seen disproportionately strong growth over the past few years across a wide range of consumer industries5. The investment implications go beyond “luxury” western brands. Innovative EM companies have also been able to benefit by leveraging their understanding of local tastes and demands, such as Korean cosmetic companies and food and beverages companies in China6.