NEW EMERGING MARKETS

NIGERIA, INDONESIA, MEXICO,

THE PHILIPPINES AND TURKEY
Not to be distributed without permission.
NEW EMERGING
MARKETS: NIGERIA,
INDONESIA, MEXICO,
THE PHILIPPINES
AND TURKEY

AN EXTRACT FROM THE REPORT

NEW EMERGING MARKETS: NIGERIA, INDONESIA, MEXICO,
THE PHILIPPINES AND TURKEY

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EU R OMONITOR INTER NAT I ONA L 2 0 16

 With growing economies, rising incomes and young, expanding populations, these
five emerging markets offer a wealth of opportunities for marketers facing stagnant
demand elsewhere. They are far from homogenous, each with its own advantages
and drawbacks. Following on from the 2013 Strategy Briefing on the brics (Brazil,
Russia, India, China and South Africa), Euromonitor International has identified
five new emerging marketsNigeria, Indonesia, Mexico, the Philippines and Turkey,
collectively dubbed the nimptswhich have entered a rapid growth phase and
therefore provide exciting growth opportunities for manufacturers of a wide range
of consumer goods and services.

iv E UR OM O N I TO R IN TERN ATIO N A L
 MARKET DRIVERS
AND CONSTRAINTS

The five emerging markets of Nigeria, Indonesia, Mexico, the Philippines and Turkey
(collectively dubbed here the nimpts) are tipped to be economic giants of the
future, thus providing exciting growth opportunities for consumer goods
manufacturers. These markets have a number of points in common but also display
some stark differences. For instance, their economies are very different in size, with
Mexicos gdp being more than four times that of the Philippines in 2013. All five
economies performed well over the review period. Indonesia and Nigeria showed the
strongest real gdp growth between 2008 and 2013, averaging 6%, followed closely
by the Philippines (5%).

A negative factor among the nimpts is they are all characterised by varying degrees
of political instability. All five countries have suffered for several years from
a combination of ethnic tensions, anti-government protests, drug-related violence and
national insurgencies. These markets offer promising long-term potential for investors,
though each has a number of hurdles to overcome to make them more attractive in
the short term. These include poor infrastructure, high levels of corruption and huge
informal sectors. Widespread poverty and income disparity are also features of all
five markets, creating a huge wealth gap between rich and poor. Nevertheless, a new
middle class is expanding, due to social reforms and wealth created by economic
progress trickling down to reach more consumers.

While smaller than their brics counterparts (Brazil, Russia, India, China, South Africa),
the nimpt countries have similar levels of purchasing power on a per capita basis.
In 2013, Mexico and Turkey recorded the highest per household disposable incomes
of the five markets, at US$32,282 and US$29,818, respectively, while Indonesia ranked
lowest with a per household disposable income of US$8,044. Indonesia made by far
the fastest progress over the review period, as economic growth, low unemployment
and high commodity prices led to a progressive rise in earnings and boosted
consumer confidence.

EU R OMONITOR INTER NATIONAL 1

M a rk e t D r iv e r s a n d C onstr a ints

In terms of class structure, most nimpt consumers are still classified as social classes
D and E (with gross incomes of up to 100% of the average). Combined, these two
classes represented more than 60% of populations aged 15+ years in all five markets.
Unemployment levels vary substantially between the nimpt markets, from just
5% in Mexico to 23% in Nigeria. However, what all five have in common is very large
informal sectors, which distorts employment figures and makes for low wages and
poor job security. The female employment rate is fairly low in all markets, ranging
from just 29% in Turkey to 53% in Indonesia. This is partly for religious and cultural
reasons, as greater prominence is given to the female roles of homemaking and
motherhood in these countries.

The nimpt countries are all major suppliers of workers to other parts of the world.
This has caused a brain drain in some cases, as many educated citizens seek better
opportunities in developed markets. Mexico and the Philippines are the largest
labour-exporting countries in the world. As a result, remittances have long been
a major form of support for private consumption in these markets, totalling US$28.4
billion in the Philippines and US$24.2 billion in Mexico in 2014.

These five markets have large populations, ranging from 75.6 million in Turkey to 247.2
million in Indonesia. They all experienced population growth over the review period,
with Nigerias increasing at the highest rate, of 13%. A notable commonality among
the nimpts is that they all have relatively youthful demographics. The highest mean
age among the five countries in 2013 was 30 years (Turkey), which was still far lower
than in most developed markets.

Compared to developed markets, average household sizes are large in all of the nimpt
countries but this is gradually changing due to urbanisation, the growing number
of working women, lower fertility and later marriage. Big cities are expanding in all
countries as a result of on-going industrialisation. Mexico and Turkey are the most
urbanised of the five, with almost 79% and 71% of their populations living in urban
areas in 2013. Indonesia and the Philippines are still predominantly rural, with only
49% and 45% of their populations classified as urban. Despite this, Greater Jakarta
is the worlds second most populated urban area, with over 26 million people.

2 E UR OM O N I TO R IN TERN ATIO N A L
 M ark e t Dri ve rs an d Const ra ints

Use of the internet and mobile phones rose rapidly throughout the five markets during
the review periodin some cases from a very small base. This has had a major impact
on consumer lifestyles and companies methods of marketing communication. Turkey
and Mexico are the most connected of the five nations, with internet usership rates
of 46% and 44%, respectively, in 2013. Indonesia lagged behind with just 16% of
its population using the internet and less than 3% of households having a broadband
internet enabled computer. Indonesia nevertheless ranked highest when it came
to mobile internet subscriptions, with a massive 100.5 million subscriptions in 2013
(equal to 1.6 per household), compared with just 16.6 million in Mexico (0.6 per
household). Increasing broadband and smartphone use has led to the growing
popularity of social media throughout the nimpts. Indonesia is among the top five
largest Facebook and Twitter markets in the world, with around 69 million registered
Facebook users in 2014.

There is a strong divide in terms of the dominant religions in these countries. While
Indonesia and Turkey are predominantly Muslim nations, Mexico and the Philippines
are predominantly Christian (mainly Catholic). Nigeria is largely split between
Muslims (50%) and Christians (40%).

Although there is growing health awareness in the nimpts, life expectancy is much
lower than in the advanced markets of North America and Western Europe, ranging
from 76.1 years in Mexico, down to just 52.5 years in Nigeria.
NEW EMERGING MARKETS: NIGERIA, INDONESIA, MEXICO, THE PHILIPPINES AND TURKEY Passport 3

A Comparison of New Emerging Markets: the NIMPTs in 2013

Source: Euromonitor
Source: International
Euromonitor International
Note: Bubble
Note: Bubble size
size representssize
represents sizeofofpopulation
population in
in 2013.
2013

Consumer Spending
All markets experienced steady real growth in consumer expenditure over the review period,
due to rising incomes and population expansion. Another factor that helped boost spending
was the widespread availability of consumer credit.
Total consumer expenditure was highest in Mexico and Turkey, at US$856.6 billion and
US$611.5 billion, respectively, reflecting the higher disposable incomes in these markets.
Indonesia enjoyed the strongest real spending growth over the review period, at 31%.
Discretionary spending is still relatively low throughout the five markets, and essential items
such as food, drink and housing (and to a lesser extent, transport) represented the largestINTER NATIONAL
EU R OMONITOR 3
areas of consumer spending in all markets.
 CONSUMER SPENDING

All five markets experienced steady real growth in consumer expenditure over the
review period due to rising incomes and population expansion. Another factor that
helped boost spending was the widespread availability of consumer credit.

Total consumer expenditure was highest in Mexico and Turkey, at US$856.6 billion
and US$611.5 billion, respectively, reflecting the higher disposable incomes in these
markets. Indonesia enjoyed the strongest real spending growth over the review
period at 31%. Discretionary spending is still relatively low throughout the five markets,
and essential items such as food, drink and housing (and to a lesser extent, transport)
represented the largest areas of consumer spending. Nevertheless, expenditure on
non-discretionary items grew faster than on essentials in all markets over the review
period. For example, Indonesians spent a substantial 73% more in real terms on
education in 2013 than in 2008.

The growing availability of credit has fuelled spending, especially on big ticket items,
mobile phones and tourism. While the nimpts are all still predominantly cash-based
societies (many people are unbanked), usage of financial cards grew rapidly over the
review period.

Consumer markets
Packaged food sales were buoyant in all markets except Turkey over the 20092014
period, driven by the rise in modern retail formats, a move away from sales of loose
products in open markets, and a trend towards convenience and greater food variety.
A feature common to most of the nimpts is the presence of packaged food products
in smaller packaging formats, such as sachets. This makes these items more affordable
to lower income consumers, and they are often sold in local grocers for convenience.

4 E UR OM O N I TO R IN TERN ATIO N A L
 Con sume r S p e nd ing

Bakery and dairy were the two largest packaged food categories in all markets except
Indonesia, in which dried food led. As the only two markets of the five that do not
have a rice-based diet, bakery products are of particular importance in both Turkey
and Mexico. Frozen food has not yet made significant inroads into the nimpts
due to a lack of freezer facilities and, in some cases, a perception that frozen food is
not healthy. However, this is gradually changing, as companies install more freezer
cabinets in smaller stores. Ready meals and chilled foods are also relatively ndeveloped
compared with advanced markets. However, with more women entering the workforce
and with the growth of modern retailing channels, these are likely to develop in the
coming years. Retail sales of soft drinks were buoyant in all five markets during the
20082013 period. Bottled water remained the dominant category due to a lack of safe
drinking water in many areas and is often distributed direct to peoples homes rather
than via supermarkets.

In most markets, the last few years have seen a noticeable trend towards more healthy
varieties of soft drinks, such as water and rtd tea, as well as towards sports and energy
drinks. However, Mexicans are the worlds largest per capita consumers of regular cola
carbonates, and this is thought to be contributing to the countrys obesity problem.
As a result, the Mexican government has taken several measures to curb the intake of
sugary drinks.

With regard to hot drinks, the Philippines and Mexico are very much coffee drinking
nations, while Turkish consumers prefer tea. Hot drinks registered the highest
real value growth in Indonesia, where tea and coffee are purchased in almost equal
measure. One of the main drivers of growth for the hot drinks market has been
the growing caf culture observed in all of the nimpt markets. This has widened
consumers tastes and had a positive knock-on effect on retail sales of tea and coffee.

Interest in beauty and personal care is growing throughout the five markets as higher
disposable incomes leave more money for discretional spend, more women join
the workforce, and the use of celebrities in advertising increases awareness of major
brands. A preference for lighter skin tones across these markets has ensured
strong and growing demand for skin whitening products, especially in the Philippines,
Indonesia and Nigeria. Male grooming represents a small but emerging segment
throughout the nimpts as style-conscious, largely urban men are increasingly breaking
free from stereotypes about traditional masculinity and embracing the metrosexual
trend. As in the packaged food market, smaller packages of beauty and personal care
products, such as sachets, are available throughout the nimpts to
cater to low income consumers.

Volume sales of consumer electronics were very buoyant over the review period,
driven by rising demand for smartphones, tablets and computers. These are
becoming more affordable to lower income consumers as a result of lower prices and
credit facilities.

EU R OMONITOR INTER NATIONAL 5

 RETAIL AND LEISURE
MARKET TRENDS

A common feature across the five nimpt countries is the prevalence of informal
retailing. Many products are still sold loose in open markets or in sachets from small
mom and pop stores, although modern retailing formats are expanding in all
markets. Shopping malls are developing strongly in response to economic growth and
rising purchasing power. These offer consumers the exciting concept of one-stop
shopping, usually in a safe, air conditioned environment.

The five markets are at very different stages when it comes to grocery retailing. While
Nigeria still has a very traditional structure, dominated by independent outlets,
Mexico is highly developed, with modern formats having come to account for over
55% of sales in 2014. Modern grocery channels, such as supermarkets/hypermarkets,
convenience stores and, in Turkey, discounters, have gained share and offer significant
growth opportunities for consumer goods companies or retailers wishing to expand
into new markets. Non-store retailing is far more developed in Mexico than in any
of the other nimpts, due to the importance of the direct selling channel. All markets
have seen rapid growth in e-commerce from a small base, and this has become an
established channel in Mexico and Turkey.

The consumer foodservice marketespecially fast foodhas benefited from faster

paced lifestyles, higher incomes, urbanisation and a larger number of working women.
Its size and performance varied considerably from country to country, being largest
in Mexico and smallest in Nigeria. The foodservice markets of Mexico, Turkey and
Nigeria have been impacted by security concerns, which have resulted in many
consumersespecially those living areas most heavily impacted by violenceavoiding
going out at night and opting to entertain at home instead. Consumer foodservice
sales grew fastest in Indonesia and the Philippines. In Turkey, an increasing number
of fast food outlets started declaring their usage of halal food in compliance with
Islamic standards, which helped drive growth in that category.

6 E UR OM O N I TO R IN TERN ATIO N A L
 Re tai l an d Le i sure M ark e t T re nd s

The nimpt markets have witnessed strong growth in domestic and outbound
tourism in recent years, although many low-income consumers still lack the means
to go on holiday, especially abroad. Mexico has by far the largest number of travellers,
with 188.6 million domestic trips and 16.0 million outbound trips made in 2013.
Domestic tourism grew most rapidly in the Philippines between 2008 and 2013, by
67%, while in Indonesia, outbound tourism rose by 60%. Both domestic and outbound
tourism in Nigeria remain undeveloped, due to the inability of the majority of the
population to afford holidays, inadequate infrastructure and the dangers of travelling
within the country.

EU R OMONITOR INTER NATIONAL 7

 OUTLOOK

The future economic performance of the nimpts is very difficult to predict, given
that all five nations are vulnerable to a combination of political unrest and natural
disasters and will continue to be characterised by poor infrastructure and high levels
of corruption. Nevertheless, their increasing wealth and youthful populations make
these markets an attractive option for international companies facing stagnant
markets at home.

While the global economy remains in the doldrums, all five nimpts have strong growth
prospects for the forecast period. Economic expansion is likely to be strongest in the
Philippines and Nigeria, although the latter will continue to suffer very high rates of
joblessness. Disposable income per household is forecast to rise in all five markets to
varying degrees, which will fuel discretionary spending in all areas. Average incomes
will remain highest in Mexico and Turkey, but Indonesia and the Philippines will see
the strongest growth. The large, growing, youthful and increasingly urban populations
of the nimpts will ensure growth in a number of consumer markets over the forecast
period, provided youth unemployment is brought down.

The current speed and scale of urbanisation in emerging markets is unprecedented,

and this trend is expected to continue over the next five years. A growing number of
urbanites will be richer in cash, poorer in time and open to new experiences. However,
overcrowding of cities may create housing shortages, and governments will continue
to face the challenge of providing the basic infrastructure necessary to accommodate
the growing number of city dwellers.

Although per capita incomes will rise overall, a high level of inequality will persist in
all markets, creating a polarisation of demand towards the lower and higher ends of
the price spectrum. This will ensure a strong market for both luxury goods and budget
items. Social classes D and E will continue to make up the bulk of consumers, but
a gradual rise in average incomes, along with a move from the informal to the formal
economy, will allow more consumers to join the ranks of the middle classes, creating
demand for affordable luxuries.

8 E UR OM O N I TO R IN TERN ATIO N A L
 O ut lo o k

All markets are expected to see further rises in internet and mobile phone uptake over
the review period, as governments and companies continue to invest in fibre-optic
networks and telecom infrastructure in order to expand coverage to rural areas and
reduce tariffs.

SWOT for the new emerging markets

in 2014 / 2015
Indonesia

Strengths / Opportunities Weaknesses / Threats

Huge population Still predominantly rural population
Strong GDP growth Regional inequalities
Abundant natural resources Sluggish foreign investment
Relatively stable political climate Huge informal sector
Strategic location within
High levels of corruption
fast-growing Asia-Pacific region
Rapid increase in FDI Poor infrastructure
Lowest proportion of internet users
Young population
among NIMPTs
Lowest penetration of broadband-enabled
Growing middle class
computers among NIMPTs
Fastest growth in average disposable
incomes and total consumer
expenditure among NIMPTs
Highest female employment rate
among the NIMPTs
Highest number of mobile internet
subscriptions per household
Source: Euromonitor International

EU R OMONITOR INTER NATIONAL 9

O u t lo ok

Mexico

Strengths / Opportunities Weaknesses / Threats

Highest economic output of Instability as a result of
the NIMPTs drug-related violence
Strong oil reserves High levels of corruption / tax evasion
Proximity to the US, ensuring
strong export market and Huge informal sector
overseas labour
Ranked highest among NIMPTs in
Prone to hurricane damage
ease of doing business index
Highest disposable income per
Poor infrastructure
household of the NIMPTs
Lowest unemployment of
Monopolistic markets
the NIMPTs
Strong migrant remittance inflows
High level of urbanisation
Highest life expectancy of
the NIMPTs
Most developed modern grocery
network among the NIMPTs
Source: Euromonitor International

10 E UR OM O N I TO R IN TERN ATIO N A L

Nigeria
Strengths / Opportunities
Largest economy in Sub-Saharan Africa,
following recent GDP rebasing
Vast reserves of low-sulphur oil, combined
with high oil prices, have helped spur
economic growth over the last decade
Growing manufacturing and
communications industries will help
reduce the countrys dependence
on oil in the future
Young and expanding population
Developed banking sector
Strong migrant remittance inflows
Source: Euromonitor International
O ut lo o k
Weaknesses / Threats
Widespread poverty and vast
income divide
Highest level of inequality among
the NIMPTs
Most politically unstable of the NIMPTs
Widespread corruption, contributing
to difficult business environment
Very high unemployment and poorly
skilled workforce
Chronic power shortages and
poor infrastructure
Huge informal sector
Strong dependence on oil makes Nigeria
vulnerable to falling oil prices
Lowest per household mobile internet
subscriptions among the NIMPTs
Low life expectancy
Highest share of expenditure on
non-discretionary items among NIMPTs
Much of the population is unbanked
Modern grocery retailing is undeveloped
Very low levels of domestic and
outbound tourism
EU R OMONITOR INTER NATIONAL 11
O u t lo ok

Philippines

Strengths / Opportunities Weaknesses / Threats

Strong economic growth
Low inflation
Relatively peaceful political climate
Valuable mineral deposits
Rapid increase in FDI
Strong migrant remittance inflows
Source: Euromonitor International
Infrastructural difficulties, due to country
being geographically dispersed among
more than 7,000 islands
Some ethnic tension
Lowest economic output of the NIMPTs,
both total and per capita
Heavy reliance on agriculture
Widespread corruption
Prone to earthquakes and typhoons
Restrictions on foreign ownership of land
Chronic power shortages

Turkey

Strengths / Opportunities Weaknesses / Threats

Highest per capita GDP of the NIMPTs Political unrest and ethnic tensions
Construction boom, which has
Spillover from war in Syria
created many jobs
Growing car industry Impact of Eurozone crisis
Economy in need of structural reform,
Lowest income disparity of
as too dependent on credit-fuelled
the NIMPTs
consumer spending
Weak in global competitiveness, with
High level of urbanisation
wages high and productivity low
Highest level of internet usership Reliance on short-term capital inflows
among the NIMPTs leaves economy vulnerable
Highest penetration of broadband
internet-enabled computers
among NIMPTs
Most widespread use of credit cards
among NIMPTs
Developed private label market
Source: Euromonitor International

12 E UR OM O N I TO R IN TERN ATIO N A L
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