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Emerging Markets: A New Spin

By: Briony Davies
Posted: April 5, 2007

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Manufacturers looking to succeed in these relatively underdeveloped environments need to be aware of individual peculiarities. Pakistan, for example, is hindered by illegally imported goods from China, India and Afghanistan—the low prices of knockoffs are an inevitable lure for Pakistani consumers. Furthermore, government taxes of 50% on imported products present a barrier to entry. Manufacturers must get creative with ways to keep unit prices low to stimulate consumer demand there.

Vietnam, like India, draws in manufacturers eager to capture a slice of its youth market—over 50% of the population is under 25—and it is this group that is expected to drive the cosmetics and toiletries market forward to 2011. A recent survey from Taylor Nelson Sofres indicates that some 82% of 15–19 year olds and 74% of 20–24 year olds in Vietnam are skilled at using the Internet, suggesting that manufacturers keen to tap into this group could achieve success via Web-based marketing campaigns.

Bad Year for Mature Markets—But Some Hope
Euromonitor International’s 2006 data points to a number of markets that are unlikely to attract new entrants. The performance in a number of Western European nations has been poor—notably the performance of France, Portugal, Italy, Switzerland, Sweden and Germany. The U.S. and Japan also posted low growth rates, and cosmetics and toiletries in Germany, the U.S. and Japan has been struggling to recover from economic difficulties for the past five years—indicating that saturation has almost been reached.
The economic climate is also having an impact on German consumers beyond the immediate purchase decision. Germany’s birth rate, for example, is at an all-time low and is currently one of the lowest in Europe. While Germany’s population is aging, young Germans are concerned about the uncertain political and economic situation. Consequently, the trend is to delay having a family or simply opting to not have a family at all. This, in turn, is affecting demand for related products, with a strong decline in baby care products, for example, while the aging population is increasing the call for nourishers/antiagers and anticellulite body care. In both the U.S. and Germany, the discounter channel is the most popular, for cosmetics and toiletries. Consumers in these markets have become experts at hunting out bargains, effectively shrinking cosmetics and toiletries sales.

The trend toward health and wellness products is another shared characteristic in these markets, and could be considered an opportunity for niche manufacturers. Organic and natural products have entered the mainstream and present a way to at least maintain current levels of sales in harsh economic circumstances.

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