ASEAN consumption set to boom

Warc, 22 May 2014

MANILA: The number of households in the "consuming class" is set to double across South East Asia over the next ten years, according to a new study.

McKinsey, the consultancy, noted that the member states of the Association of Southeast Asian Nations (ASEAN) – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam – already collectively constitute the seventh largest economy in the world.

And while the development of their individual economies is at very different stages, all these nations share "immense growth potential".

Currently, some 67m households, defined as those with annual incomes of more than US$7,500 (adjusted for purchasing power parity), are able to make significant discretionary purchases. But by 2025, that figure is projected to rise to 125m.

The number of "emerging" consumers earning between US$7,500 and US20,000 is set to increase from 45m to 75m over the same period, while the "consuming middle class" was forecast to expand from 19m to 41m.

An elite group of "globals", with household incomes exceeding US$70,000, is likely to more than double in size, too, from 3m to 7m.

At the other end of the scale, the proportion of the ASEAN population earning just enough to meet basic consumer needs was predicted to fall from 51% to 30%, as extreme poverty declines rapidly.

There is no such thing as a "typical" ASEAN consumer, but McKinsey noted some broad trends that have emerged. These included a greater focus on leisure activities, a growing preference for modern retail formats and increasing brand awareness.

Among the wider socioeconomic developments for marketers to be aware of are urbanisation and the spread of digital and mobile.

But it is the region's mid-sized cities, not its megacities, that are expected to see the greatest growth in the next decade. According to McKinsey, nearly 40% of ASEAN's GDP growth between now and 2025 is expected to come from 142 cities with populations of between 200,000 and 5m.

ASEAN consumers are also becoming increasingly digital: mobile penetration stands at 110% and internet penetration at 25%. There are, however, huge differences locally. Only 1% of people in Myanmar have internet access, compared to 75% in Singapore.

Data sourced from McKinsey; additional content by Warc staff