The Benefits of Going ’Glocal’

04/23/2012 11:00 am EST

Focus: GLOBAL

Mark Mobius

Executive Chairman, Templeton Emerging Markets Group

One of the biggest trends that we can expect to grow in coming years is the ability of emerging markets to access developed markets directly, which will have huge implications for public companies that have global vision, writes Mark Mobius of Investment Adventures in Emerging Markets.

Many emerging-market brands are no longer waiting backstage. I’ve noticed this in my travels for a while now.

Most recently, for instance, I noticed people queuing at a shopping center in the US, all waiting to buy footwear made by a South American company. And while dining at a restaurant in another part of the world, I observed a diner at the table next to mine ordering Mexican beer.

As I said, this is not the first time I’ve noticed emerging-market brands entering the developed world’s consumer mainstream. China’s hunt to acquire global brands may be seizing the most news headlines lately, but there are companies in emerging nations—including Brazil, India, Russia, Mexico, and South Korea—that have been on the same search. For example, an Indian company bought a luxury British car manufacturer, and a Chinese company purchased an American IT company.

According to Millward Brown, of the top 100 brands globally in 2006, there were only two brands from emerging countries—more specifically China—in the top 100. In 2011, there were 19 from the BRIC countries (Brazil, Russia, India, and China) and Mexico. So despite their relatively shorter time in the marketplace, emerging-market brands currently represent nearly one-fifth of the top 100 global brands.

If this momentum continues, I think the increasing acquisitions of existing brands by emerging market businesses could position many emerging-market brands as not just entering the global stage, but rather taking center stage with a global audience. Why do I believe this momentum could continue? A few reasons:

Growth of the Emerging-Market Consumer
If the growth of the emerging-market consumer class persists, it should translate into more clout for local consumer brands.

The global emerging markets’ middle class is anticipated to grow from 430 million in 2000 to 1.2 billion by 2030. By some estimates, China and India are expected to account for two-thirds of the expansion in emerging markets.

It’s not a given, but such a large group of people with diverse tastes in consumer goods could be a boon to emerging brands over the long term.

Demographics
Emerging markets tend to be dominated by a younger demographic, a result of the rapid increase in populations within these markets.

The workforce (population aged 15 to 64) for emerging markets is estimated to increase to 3 billion in 2020 from 2.7 billion in 2010, accounting for more than two-thirds of their total population in 2020. The growing brands in emerging markets appear to me well positioned to serve this demographic shift.

Disposable incomes in key emerging markets are rising as well, especially with demographics, employment, and urbanization, thereby creating the right conditions for income growth.

Access to Capital
Emerging-market firms generally have easier access to capital than before, because many emerging-market economies have built operating capital markets over the last 20 years.

Emerging markets have come a long way since 1986 when the International Finance Corporation (IFC), a World Bank subsidiary, undertook efforts to promote capital market development in less developed countries. Since then, many emerging countries have progressed from being simply low-cost manufacturing economies to growth-driven economies with a very strong consumer base.

Changing Tastes
Lastly, I believe patterns of taste are changing. With international tourism arrivals projected to hit the 1 billion mark this year, more people throughout the world are gaining exposure to different cultures.

Add to that greater global Internet access, and it’s not surprising to see Korean pop music, India’s Bollywood music and films, and Nigerian “Nollywood” movies growing beyond their regional audience to gain multinational status.

I have often been asked if the multinational giants’ branding messages of “Go global, think local” or “Glocal” will affect the growth of emerging-market brands onto the global stage. In my view, the hunger for global brands to expand in emerging markets—with their innovative taglines—will show emerging-market businesses the potential of brand building.

Brand building among some of the emerging-market brands is still at an infancy stage, with the focus on logos, names, and advertising still dominating brand building. Point-of-sale and branding throughout the customer experience is largely ignored.

It will be interesting to follow how well emerging brands can do on the global stage. While some brands may have a brief run at success, in the long run I expect that there should be richer roles for many emerging brands with universal appeal.

Read more Investment Adventures in Emerging Markets here…

Related Reading:

Related Articles on GLOBAL