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Below The Topline The Economic Divide – Finding Opportunities in Rich & Poor Countries
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Below The Topline The Economic Divide – Finding Opportunities in Rich & Poor Countries

Doug Anderson, EVP, Research & Development, Nielsen Consumer Panel Services

SUMMARY: From now until 2050, nearly all population growth worldwide will take place in less-developed countries. Overall, growth in the more-developed world has nearly halted and is expected to stay at very low levels for decades to come. Opportunities for growth, however, will be substantial for marketers able to reconfigure their product lines to meet the needs of struggling young families with many children.

In 2007, the Gini Index—a measure of income distribution—declined in the U.S. for the first time in nearly two decades. A Gini Index of zero, for example, means that everyone in the country earns the same amount and an index of 100 indicates that one person in the country earns all the money. Incomes in the U.S. have become increasingly uneven (i.e., the rich get richer) particularly from 1990 to 2000, during the heights of the bull market.

The only countries in the world with income distributions more skewed than the U.S. are in Africa, the Caribbean, and Central and South America. Most other countries in the more-developed world have far lower—or more equal—income distributions than the U.S., with countries in Northern Europe having the lowest indices (in the mid 20s) in the world. The chart below shows the Gini Index for the U.S. over time.

Income inequality will increase worldwide…

Income inequality will increase

Current world population trends suggest that income inequality will increase worldwide as nearly all population growth over the next 40 years will come from countries with the lowest incomes. After World War II, advances in public health, health care, and disease prevention enabled the less-developed world to begin to grow at a substantial rate. Many of these advances had been developed and implemented in the more-developed world over the prior hundred years, cutting infant mortality and extending life expectancies there. In the future, this trend will intensify.

From now until 2050, nearly all population growth worldwide will take place in less-developed countries (LDCs). Overall, growth in the more-developed world has nearly halted and is expected to stay at very low levels for decades to come.

Almost all of the meager growth in the more-developed world will come in the United States and Canada. But the majority of that growth will not come from natural growth (births minus deaths), but from immigrants coming from LDCs. LDCs will grow from 5.5 billion persons to 8.1 billion in 2050 (+47%), while the more-developed countries (MDCs) will grow at less than one-fifth of that rate. The chart below shows the projections and how the distribution of world population will change over the next several decades.

Live long and multiply

Better access to healthcare, cleaner water, better sanitation and more food have all served to decrease infant mortality in the less-developed world. Although fertility rates have been falling for several decades, they are still much higher in the less-developed world (with the exception of China) as compared with more-developed countries. These high rates, combined with increasing life expectancies will foster rapid population growth.

Rapid growth among young persons will further distinguish the distribution of population by age between MDCs and LDCs that is evident today. The two charts below show the population pyramid for MDCs and LDCs expected in 2010. Note that the largest age group in the more-developed countries is persons aged 45–49.

Each succeeding generation is smaller than the one that came before…

Every younger five-year age break includes fewer persons, meaning that each succeeding generation is smaller than the one that came before—and that populations will eventually begin to decline. Children aged 5–9 in MDCs are less than 75% of the number of persons aged 45–49. In less-developed countries, the population distribution is exactly opposite with the largest numbers in the younger age groups. No five-year group is larger than 0–4 year olds.

Extreme distinctions

To illustrate the impact of uneven population growth at a more concrete level, data from two countries with similarly-sized populations—Italy and the Democratic Republic of the Congo—reveal a massive disparity. While Italy has one of the lowest fertility rates in the world and an old and aging population, the Congo has one of the world’s highest fertility rates and an extraordinarily young and rapidly growing population.

Although Italy is a somewhat extreme example, it should serve as a wake-up call to marketers to begin thinking of creative ways to sell their products in a world made up of more-developed countries like Italy and less-developed countries like the Republic of the Congo.

The more-developed countries will not be places to look to for growth…

The more-developed countries will continue to be good markets for consumer products, with purchasing power far higher than global averages. Their needs will certainly change as populations age and immigrants make up increasing shares, but they will remain strong viable marketplaces. They will not, however, be places to look to for growth. Populations and purchasing power will grow in North America, but will stagnate or begin to decline in most of the other more-developed countries.

Expansion opportunities abound

Opportunities for growth will increasingly fall outside the traditional strong markets for consumer products, to the “ Congos” of the world. These new markets will pose a variety of challenges for marketers. Since these countries are far less affluent, they will have dramatically reduced purchasing power as compared with the markets where most consumer products companies thrive.

Marketers that succeed will re-evaluate packaging and distribution methods in order to conform to the requirements of these markets. Package sizes, for example, will need to shrink as a way to keep prices down (see Sidebar, Know Thy Consumerand Their Market ). Distribution of products will be much more difficult and more expensive. But for those able to reconfigure their product lines to meet the needs of struggling young families with many children, the opportunities for growth are substantial. Marketers who can sustain and grow their current footholds in these countries or establish new benchmarks for their products will see new consumers coming online at rates not seen in the more-developed world since the heyday of the Baby Boom.

Sources:

Population Reference Bureau – 2008 World Population Data Sheet

United Nations – World Population Prospects 2006 Revision