Few advanced economies can measure up to the potential of emerging markets, which have been forecast to exhibit the fastest growth rates for food and non-alcoholic beverages over the next five years, according to a new report from global law firm Linklaters.com.
While the BRIC nations lead the pack, other emerging markets are gaining ground behind them
Developed with forecasting firm Oxford Economics, Linklaters’ Emerging Opportunity Index balanced the competing factors of opportunity and risk to identify the 10 most attractive emerging food and drink markets as: China, India, Russia, Brazil, Indonesia, South Korea, Malaysia, Mexico, South Africa and Turkey (see table below).
Stuart Bedford, Linklaters’ food and beverage global co-head, Singapore, said: “While the ‘BRIC’ countries [Brazil, Russia, India and China] continue to lead the pack in terms of market potential, the index confirms the growing importance of the Indonesian and Mexican markets and shows that smaller markets, like Malaysia and South Africa, can provide attractive growth opportunities.”
When the same opportunity and risk factors were applied to developed economies, emerging markets still took six of the top 10 slots worldwide and three out of the top five.
Despite this shift, very few multinational food and drink firms were said to be making the most of the opportunities for growth.
Opportunity cannot be ignored
Linklaters’ food and beverage global co-head, London, Paul McNicholl, said: “While increased risk is often cited as a reason for reluctance to harness these opportunities, the index clearly shows that, even on a risk-weighted basis, the emerging market growth opportunity cannot be ignored.”
The fastest-growing markets with the greatest scale were said to involve the highest risks. The Chinese market offered the greatest opportunities, both in terms of market growth and as a competitive production location. Sheer market size meant that even small changes in consumer spending could drive enormous anticipated gains in both dollar and percentage terms by 2017.
Sixth-ranking South Korea offered the lowest risks – it’s a wealthy country on a par with some western European economies.
Companies seeking to access these potentially lucrative markets needed to manage these risks carefully on market entry and throughout their investment.
Manage risks carefully
McNicholl said: “Our experience shows that companies can reduce their exposure to these risks by structuring their market entry strategy and by choosing their local partners carefully.”
Although emerging markets varied in their exposure to current economic risks, such as the potential Eurozone break-up or a hike in oil prices, they largely held on to their high potential, claimed the report. Some of the top 10 markets, such as Indonesia, would be less impacted by these threats.
