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
SILK ROAD ASSOCIATES | 3
EUROPE
140 CITIES
NORTH AMERICA
92 CITIES
Each circle indicates a with a population greater than 500k
NEW YORK
LONDON
LA PARISMOSCOW
CHICAGO
SILK ROAD ASSOCIATES | 4
Each circle indicates a with a population greater than 500k
CHINA
250+ CITIES
SHANGHAI BEIJING
CHONGQNIG
EUROPE
140 CITIES
NORTH AMERICA
92 CITIES
NEW YORK
LONDON
LA PARISMOSCOW
CHICAGO
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LOS ANGELES
HOUSTON
CHICAGO
NEW YORK
SAN FRANCISCO
-8% +8%
UNITED STATES
2015 GDP growth by municipality
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-12% +12%
CHONGQING
GUANGZHOU
BEIJING
SHANGHAIWUHAN
CHINA
2015 GDP growth by city
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16
POPULATION
5 million +
GDP
$3.1 trillion
87
POPULATION
1 to 5 million
GDP
$4.3 trillion
167
POPULATION
500k to 1 million
GDP
$2.5 trillion
Opportunities in China’s smaller cities will create local
competitors and localised preferences
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25% 50% 75% 90%
Share of Branches
FOREIGN BRANDS
10 leading brands
62
CITIES
2
CITIES
9
CITIES
24
CITIES
SILK ROAD ASSOCIATES | 10
25% 50% 75% 90%
Share of Branches
FOREIGN BRANDS
10 leading brands
CHINESE HOTEL CHAINS
10 leading brands120
CITIES
5
CITIES
62
CITIES
2
CITIES
18
CITIES
9
CITIES
55
CITIES
24
CITIES
“Blue Moon
leveraged old and
new ‘online’
economies”
CHINA
Blue Moon
China’s Blue Moon used an innovative model to
change the way consumers purchased laundry liquid.
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.
“Indoor water
parks offer a winter
alternative without
the air pollution.”
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
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.
Beijing
Chongqing
Taiyuan
China’s subway construction boom is about to open up
new retail opportunities
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TODAY
2018
20172019
China will build 1,400 new metro stations by 2019
2,400 2,900 3,400 3,800
TODAY
2017
TODAY TODAY
2017
2018
Each square indicates a metro station
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SHENZHEN
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Nanshan
1.2 MN
Futian
1.0 MN Luohu
1.4 MN
HONG KONG
Sheung Shui
Longhua
POP 1.5 MN
Longgang
2.0 MN
LOW HIGH
SHENZHEN
Commercial Density
& Metro Lines
Metro lines completed
and under construction
LINE 11
E-commerce and online payments will challenge the
traditional retail model
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Europe
China
United States
Singapore
Malaysia
Thailand
Philippines
Indonesia
Vietnam
Percent of retail sales
made online
Percent of people owning
smartphone
7.8%
7.2%
5.8%
4.5%
Around or below 1%
Hong Kong
Singapore
United States
Malaysia
China
Thailand
Indonesia
India
Philippines
Sources: Nielsen
87%
87%
77%
80%
71%
49%
23%
18%
15%
China’s e-commerce and online payments sector is booming and, in many areas,
leapfrogging the rest of the world.
Sources: A.T Kearney
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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.
China’s skincare market is hypercompetitive with local brands emerging as select
competitors for the biggest brands
• .
China is ‘going global’, so expect more Chinese MNCs
and tourist spending power.
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• Regional loan to GDP ratios
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Daily flights to ASEAN
41CHINESE
CITIES
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.
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China’s outbound FDI, 2012-2014
Circle size denotes US$ billion
AUSTRALIA
$9.7bn
SINGAPORE
$5.6bn
KAZAKHSTAN
$3.8bn
U.K
$6.4bn
U.S.
$15.5bn
INDONESIA
$4.2bn
China’s Belt and Road Strategy will have implications for
all of Asia
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NORTHERN ROUTE
“The Belt”
An oil and energy route
SOUTHERN ROUTE
“The Road”
A consumer and industrials route
Circle size indicates city population multiplied by spending power
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CHINA
INDIA
TURKEY
INDONESIA
SAUDI ARABIA
KOREA
VietnamPhilippines
Malaysia
Shandong
Henan
Jiangsu
Zhejiang
Guangdong
Kazakhstan
Thailand
Pakistan
Hong Kong
Belt and Road GDP by
country
US$ value including China’s five
largest provinces
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
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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.
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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.
BELT AND ROAD | SILK ROAD ASSOCIATES
But China’s Belt and Road initiative will have different
implications for each country
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CHINA
LAOS
Hanoi
Hai Phong
Sanya
DonguanGuangzhou
Shenzhen
LIGHT RAIL
Hanoi light-rail and Hanoi to
Hai Phong railway
INDUSTRIAL PARK
Tan Truong and Yun Zhong
outside Hanoi
POWER PLANT
Hai Duong and Mong Duong
outside Hanoi
VIETNAM
Imports from China
Pingxiang
LOW HIGH
COMMERCIAL DENSITY
$31 MN
Buttons
$103 MN
Zippers
$4,100 MN
Electronics
BELT AND ROAD | SILK ROAD ASSOCIATES | 32
INFRASTRUCTU
RE
• Tan Honh bridge
• Tan Honh bridge
JANUARY 2014 China and Thailand
initial project.
DECEMBER 2015 Groundbreaking
ceremony for the project.
FEBRUARY 2016 Disagreement over
funding for the project.
MARCH 2016 Thailand decides to fully-
fund construction.
JANUARY 2017 First phase of bidding
completed.
THAILANDDUAL-TRACK RAILWAY
Bangkok
MYANMAR
CHINA
VIETNAM
CAMBODIA
LAOS
Nong Khai
Chiang Rai
Map Ta Phut
LOW HIGH
COMMERCIAL DENSITY
$39 BN
$37 BN
BELT AND ROAD | SILK ROAD ASSOCIATES | 33
Population
100 K 10 MN
Jakarta
Surabaya
Singapore
Kuala Lumpur
Makassar
Sorong
Banda Sea
Belwan
Major Port
Minor Port
SEA TOLL ROAD
• Jokowi announces development of 24 ports,
including 11 passenger and 13 cargo
• Indonesia to develop a container backbone
or Pendulum Nusantara
Asia is the world’s future consumer. But there are critical
differences to China
UNITED STATESCHINA
INDIA
KOREA
1990
$6.8 TN
1990
$1.7 TN
Asian consumers are a growing opportunityHousehold Consumption, US$ terms
• .
Asian consumers are a growing opportunityHousehold Consumption, US$ terms
• .
UNITED STATES CHINA INDIA
KOREA
2015
$12.3 TN
2015
$8.2 TN
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Asia’s will age at twice the speed of Europe…. and China is already old.Figures and shading indicate median age
“Mothercare is
tapping a growing
affluent middle-
class”
INDONESIA
Mothercare
Mothercare launched an online platform in
Indonesia to better tap smaller cities
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.
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Population
100 K 10 MN Jakarta
Surabaya
Singapore
Kuala Lumpur
KALIMANTAN
2
SUMATRA
3
JAVA
26
INDONESIA
Mothercare Branches
40
SULAWESI
3
“Mang Inasal
started in the
Philippines smaller
cities”
PHILIPPINES
Mang Inasal
Mang Inasal (Mr Barbeque) is one of the Philippines leading
fast food chains.
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.
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Population
LOW HIGH
PHILIPPINES
Mang Inasal
Green and orange circles indicate
high branch density in medium- and
small-sized cities.
Branch density in Manila and Davao
city is lower.
Branch Density
Greater Manila
Davao City
Iloilo Cebu
The BPO industry and secondary
cities in the Philippines
The BPO industry is another reason to be
excited about opportunities outside
Greater Manila.
DumaguetePuerto Princesa
Angeles
Greater Manila
Davao City
18 MN
20 to 30 yr olds
Is India the next big thing? Will the story be the same or
different to China?
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CHINA
Starbucks Branches
1,812
INDIA
Starbucks Branches
76
Beijing
Shanghai
Shenzhen
ChengduMumbai
Delhi
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
“Hollywood is big
in China. But a flop
in India”
INDIA
Bollywood
Hollywood’s biggest brands have struggled to win in India and
instead gone local
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.
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TITLE GROSS
Dangal $61 mn
Sultan $47 mn
M.S. Dhoni – The Untold Story $21 mn
Airlift $20 mn
Rustom $20 mn
Housefull 3 $18 mn
TITLE GROSS
The Jungle Book $29 mn
Captain America 3 $10 mn
Batman vs Superman $9 mn
Mission Impossible 5 $7 mn
X Men $6 mn
Kung Fu Panda 3 $5 mn
Bollywood (2015) Foreign (2015)
It’s still Indian films that make money
Top grossing films
• .
ASIA AS THE WORLD’S FUTURE CONSUMER