When emerging has emerged

Ogilvy calls them the Velocity 12 markets and says there is an urgent need to rechristen them, away from the old-fashioned western way of labelling them as ‘emerging’. “The phrase now seems too gradualist and even colonial,” says the agency’s recently released study. The reason for saying this is because, the so called “emerging markets” accounted for only 10 per cent of global trade in 1970. At present, they hold a 30 per cent share, a number that is expected to grow to over 40 per cent by 2050. In fact, when the agency used a Purchase Power Parity (PPP) measure, nearly half of the world’s top GDPs come from V12 markets.

So which are these Velocity 12 markets? “With the epicentre in South Asia, principally India, Pakistan, and Indonesia but extending up to China in one direction, and to Egypt, Nigeria, Mexico, and Brazil in the other, these markets represent a vast arc of future growth,” the report says.

It’s different However, the biggest mistake that companies, especially the MNCs, could make is to equate the middle class in these markets with the western countries. Here’s why. The middle class of the V12 represent a social tapestry of greater ethnic, linguistic, cultural and religious diversity than previous generations of middle-class consumers in the West. But the most important change over the previous years is that these consumers enjoy the power of connectivity to a global grid of commerce, influence, and social interaction, which means that many velocity market consumers have the same access to information, utility, and competitive options as higher income markets.

So, while they are diverse, plus locally loyal and culturally proud, they live in a world with a levelling consumer playing field. “The middle-class consumers of the coming decade will have a more accelerated understanding of their options than prior generations of middle-class consumers, plus a megaphone to express their tastes and opinions. These next billion middle-class consumers won’t simply be a next instalment of the estimated two billion middle-class consumers who have joined the global consumer class over the past 35 years,” emphasises the report.

Move over culture The other highlight of the study is that a significant number of the respondents in these V12 countries feel that culture is, in fact, becoming less important. Nationality tends to be the differentiator, perhaps surprisingly, not age or class.

A significant one-third of V12 consumers buy only local brands. In some markets, local brands have a distinct advantage; in fact, the proportion of V12 consumers preferring local brands is twice as large as those that prefer international brands (24 per cent versus 13 per cent, respectively). Preference for local brands is strongest among Indonesians, Brazilians, Filipinos, Bangladeshis and Indians, with Indonesians and Bangladeshis most likely to purchase domestic brands as part of their weekly shopping patterns.

The environment is highly competitive, not just with other regional and international corporations, but with the appearance of more aggressive and capable local companies, including new e-players aiming to disrupt traditional business models in every corner of the globe. Local companies are savvy and sophisticated; they can imitate the best practices of global brands and generate and capitalise on innovation faster than ever before. Continued product proliferation is supported by increased media spending across the V12 markets. As both international and domestic companies seek growth, they will need to fully leverage their traditional strengths, but brand-builders of all stripes will also need to create new advantages for themselves. This essentially will mean local brands adopting and exploiting approaches that were previously the domain of international companies, at scale, while international companies will need to act with speed and agility that has previously been the hallmark of local brands.

The eco-brandvantage There are emerging, new battlegrounds for international versus local brands. For example, consumers are most divided about the environmentally-friendly credentials of international products with Chinese, Egyptian, Vietnamese and Burmese respondents, saying that international brands were stronger on these attributes. Consequently, companies and marketers will need a combination of flexibility and foresight, and the ability to rapidly tune their efforts to local cultures with content and relations programmes (government, consumer, employees) that truly resonate locally. The next billion middle-class consumers will provide substantial opportunities — but only for the most inventive, nimble, and consumer-centric companies.

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