Building your own growth compass
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Some cities will outperform entire countries in absolute growth terms, highlighting the need for different resource allocation in certain regions vs. others.
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Building your own growth compass
- 1. Building Your Own Growth Compass Any use of this material without specific permission of McKinsey & Company is strictly prohibited October 2012 McKinsey on Marketing & Sales – Slideshare Brief navigating growth across markets effectively
- 2. LastModified3/19/20143:19PMEasternStandardTimePrinted 1 Are you thinking at a city level? ▪Of 200,000+ cities in the world, ~2,400 cover almost 70% of global consumption and growth in the next decade ▪The Global 100 cities will bring ~30% of total growth in the next decade; 66% of these cities are located in emerging markets ▪Small-middleweights drive almost half of covered city growth, ‘stealing’ share from other city types over the next 10 years ▪Some cities will outperform entire countries in absolute growth terms, highlighting the need for disproportionate resource allocation in certain regions vs. others
- 3. LastModified3/19/20143:19PMEasternStandardTimePrinted 2 ICPG in emerging markets: ~60% of growth in the next decade will come from BRIC (48%) and Next-10 (12%), SOURCE: McKinsey Global Growth Compass database; World Bank 1,934 621 750 287 332 365 2,011 13,7332020 Total Developed Other Brazil Next-10 India Russia China 2010 Total 7,434 BRIC Next 10 emerging markets USD billion, 2010-20 (nominal) Global consumer goods revenues – growth breakdown
- 4. LastModified3/19/20143:19PMEasternStandardTimePrinted 3 There are growth opportunities outside of BRIC as well: Next-10 countries are important to access SOURCE: McKinsey Global Growth Compass database; Global Insight 65 69 128 0 100 200 300 400 500 600 700 800 24010090807060 Poland Mexico 110 250 56Argentina Colombia Ukraine Indonesia 70 South Korea 87 Turkey 106 50403020 52 Indonesia 52 Philippines Population Millions GDP Growth 2010-2020 USD Billions (Real, PPP) Eastern Europe Latin America Asia Africa Size indicates CPG growth revenues 2010-2020 (nominal)
- 5. LastModified3/19/20143:19PMEasternStandardTimePrinted 224 251 181 703 664 338 333 Middle East and Africa Asia Pacific Latin America Europe North America 2020 3,251 1,740 2009 1,863 155 525 4 This emerging market growth is underpinned by the step-change in middle class population in Asia SOURCE: Centro de Desarrollo de la Organización para la Cooperación y el Desarrollo Económico (OCDE) 1 Middle class defined as daily consumption between $10-100 per capita adjusted for PPP Millions of people -5 39 70 1,215 69 Absolute growth Millions of people 2009-2020 Global middle class1
- 6. LastModified3/19/20143:19PMEasternStandardTimePrinted 5 Global Consumption, 2010 (200,000+) 100% Other small cities and rural areas (195,000+) 31% Focus cities (in our database) (2,388) 69% Emerging markets are ‘the place to be’ for cities and countries: emerging cities represent 35% of covered consumption and 70% of future growth SOURCE: Global CityNav, Brazil CityNav, MGI CityScope v1.5 Developed market cities 1.4 Emerging market cities 3.1 2010 5.1 1.8 3.3 Emerging market cities Developed market cities 2020 9.6 5.0 4.6 70% of growth CAGR, 2010-20, % 3.5% 10.5% 2010-20, USD trillion Contribution to total cities growth Distribution of growth across cities 2010, USD billion (%) (X,XXX) Number of cities
- 7. LastModified3/19/20143:19PMEasternStandardTimePrinted 6 The Global 100 cities (G100) will contribute to 30% of total growth in the next decade; 66% of these cities are located in emerging markets 30 All others 2300 covered cities 40% G100 cities 30% G100 Total 1,874 Developed (34 cities) 639 Emerging (66 cities) 1,235 2010-20, USD billion (%) 66% 34% 100% Share of growth SOURCE: Global CityNav, Brazil CityNav, MGI CityScope v1.5 Share of consumption growth covered, 2010-20,% Growth in $ bn and number of G100 cities by location
- 8. 7 In India, a regional and city view is going to be critical to capitalize on recent Retail FDI reform India India retail FDI heat map Retail FDI situation ▪ India opened FDI in retail sector – 51% FDI allowed in multi-brand retail – 100% FDI permitted in single brand retail ▪ Key riders for multi-brand retail – Decision to allow FDI will lie solely with the States, who have the right of refusal – Minimum investment of $100 million – Stores allowed only in cities with 1 million plus population (~40-50 cities) ▪ What does it mean : Size of opportunity and rate of growth differ from state to state ▪ For existing retailers & new entrants it is important to assess opportunity in each state and by city - and allocate disproportionate resources mapped to the growth potential Hyderabad Vijaywada Visakhapatnam Guwahati Silchar Delhi Faridabad Gurgaon Panipat Mumbai Nasik Pune Bhiwandi Jaipur Jodhpur Dehra Dun HaridwarRoorkee N/A <___>
- 9. LastModified3/19/20143:19PMEasternStandardTimePrinted 8 Growth varies significantly by category: top 10 cities contribute 25% of growth in deodorants vs. 10% in laundry care 111212 15 16 17 18 19 2021 25 32 Deod- orants Fish & Seafood Laundry care Bottled water Ice cream Hair Care Confec- tionery Baby care WineTeaMeatReady Meals +14 2010-20, % share SOURCE: Global CityNav, Brazil CityNav, MGI CityScope v1.5 Contribution of top 10 cities to the category covered growth
- 10. LastModified3/19/20143:19PMEasternStandardTimePrinted 9 Cities can grow faster than entire countries e.g., Paris vs. Germany in canned food and Shanghai vs. Malaysia in skin care 4,113 1,913 Paris (France) 2X Germany 622 Shanghai (China) 3X Malaysia 1,724 Cities SOURCE: Global CityNav, Brazil CityNav, MGI CityScope v1.5 Growth for 2010-20, $ Million Canned food Skin care Countries
- 11. LastModified3/19/20143:19PMEasternStandardTimePrinted 10 Prioritizing ‘Where to play’ is important - CPG companies with highest growth momentum focus more on emerging markets SOURCE: McKinsey CPG granular growth decomposition database 52 72 82 88 12 10018 10028 10048 100 5.6 5.0 4.5 2.6 Emerging markets Developed markets Average Momentum growth 2002-10 Percent Fourth Third Second Top Momentum Quartile Today, just identifying which countries is not enough – you need to have a more granular view of where to play to succeed Percent of total sales