March 2018 Research Institute Thought leadership from Credit Suisse Research and the world’s foremost experts Emerging Consumer Survey 2018 Editorial This year, we also examine the savings behavior The eighth edition of the Credit Suisse Research of consumers across our eight emerging countries Institute’s Emerging Consumer Survey contin- and their relative sophistication. The 2017 edition ues our exploration of growth opportunities across of the Credit Suisse Research Institute’s Global Brazil, China, India, Indonesia, Mexico, Russia, Wealth Report has singled out emerging markets South Africa and Turkey. This year’s report shows as the fastest source of wealth accumulation, with ongoing improvement in consumer sentiment their share of global wealth set to reach 22% in across the surveyed economies. Interestingly, we see the group of geographies that increasingly WKHQH[WɇYH\HDUVUHODWLYHWRLQ$VKLIW in the manner in which this growing wealth is held drive consumption broaden, moving away from a predominantly Asia-driven trend. While India and FDUULHVSRZHUIXOLPSOLFDWLRQVIRUɇQDQFLDOLQVWLWXWLRQV - China continue to top our country scorecard, there DQG ɇQDQFLDO PDUNHWV :H QRWH WKDW VXFK FKDQJ es are taking place in India, which is currently one DUHVLJQLɇFDQWLPSURYHPHQWVLQ%UD]LO0H[LFR5XVVLD of the greatest sources of wealth accumulation. and Turkey, where consumers are growing increas- Direct investment in equity markets and mutual ingly optimistic about their income prospects. The funds is rising sharply and we see both an emerging analysis in our survey sets out how some of consumer and an emerging saver. the key macro trends are being exhibited in Ultimately, we explore the impact of the VSHFLɇF FRQVXPHU EHKDYLRU DQG SUHIHUHQFHV 7KH connected economy, which continues to deepen unifying theme is the role of the young and increas- ingly wealthy consumer, particularly in China, whose DQGZLGHQLQWKHHPHUJLQJZRUOG,Q&KLQDRQHɇIWK of retailing takes place online, with mobile payments consumption patterns steadily gravitate toward a reaching USD 3 trillion in 2016. In India, online healthier, mobile and active lifestyle. This year’s Emerging Consumer Survey SD\PHQWV DUH VHW WR ULVH ɇYHIROG LQ WKH QH[W ɇYH years. Rather than disrupting established retail further lays out how the structural drivers behind channels, these developments are key facilitators of consumer development in emerging countries growth in emerging economies. differ from those across the developed world. We hope that this report and the accompany- Notably, the consumption share of GDP in ing country and industry reports contribute to your mature economies has been in steady decline, understanding of the nature of the dynamical- while among our surveyed emerging countries, ly evolving emerging economies and wish you an we witness a doubling in its share since 2000. insightful read. We believe that reduced income prospects and deteriorating demographic trends in developed economies continue to be the force behind this sentiment and contrast starkly with the conditions Urs Rohner across the emerging world, where urbanization Chairman of the Board of Directors continues to positively impact incomes. Credit Suisse Group AG 02 Editorial 04 Emerging Consumer Survey World Map 05 The Emerging Consumer in 2018 10 Spotlight on Macro 13 The “Supertrend”: Still on track 20 Spotlight on Wealth 23 An active lifestyle or virtual reality 38 E-commerce: A facilitator, not a disruptor 49 Consumer Titans &RXQWU\SURɇOHV 56 Brazil: A gradual recovery 58 China: Product upgrades 60 India: Top of the rankings ,QGRQHVLD$VRIWHUWRQHWRFRQɇGHQFH 64 Mexico: Recovering but risks remain 66 Russia: Signs of active spending 68 South Africa: Bottom of the scorecard 70 Turkey: Steady progress 72 Appendix 1: Purchase intentions for young versus old 74 Appendix 2: Rural versus urban spending intentions 76 Appendix 3: The consumer by area, age and income 77 About the survey 78 Imprint 79 Disclaimer For more information, contact: Richard Kersley, Head Global Thematic Research, Credit Suisse Investment Banking, [email protected], or 0LFKDHO2ǵ6XOOLYDQ&KLHI,QYHVWPHQW2IɇFHU Photo: Shutterstock, drpnncpptak International Wealth Management, Credit Suisse, michael.o’[email protected] Cover photo: iStock Nikada Emerging Consumer Survey 2018 3 Credit Suisse Emerging Consumer Survey 2018 Number of respondents : 14,077, across 8 countries, 71% in urban areas; 29% in rural areas Mexico (11%*) Turkey (11%*) Russia (11%*) China (18%*) No. of respondents: 1,533 No. of respondents: 1,521 No. of respondents: 1,505 No. of respondents: 2,584 Locations: 5 Locations: 14 Locations: 8 Locations: 10 Urban areas: 70% Urban areas: 70% Urban areas: 67% Urban areas: 76% Rural areas: 30% Rural areas: 30% Rural areas: 33% Rural areas: 24% Brazil (11%*) South Africa (8%*) India (20%*) Indonesia (11%*) No. of respondents: 1,528 No. of respondents: 1,056 No. of respondents: 2,814 No. of respondents: 1,536 Locations: 5 Locations: 6 Locations: 10 Locations: 10 Urban areas: 70% Urban areas: 70% Urban areas: 73% Urban areas: 66% Rural areas: 30% Rural areas: 30% Rural areas: 27% Rural areas: 34% Note: % of survey sampled from this country Emerging Consumer Survey 2018 4 The Emerging Consumer in 2018 The relevance to an investor of the “supertrend” of the emerging consumer has always been a FDVHRIEDODQFLQJWKHVWUXFWXUDOZLWKWKHF\FOLFDO7KHLQɈXHQFHRIWKHODWWHUKDVRIWHQVZDPSHG WKHIRUPHU+RZHYHULQRXUHLJKWK(PHUJLQJ&RQVXPHU6XUYH\ZHɇQGDEURDGEDVHGLPSURYH- PHQWDFURVVWKHUDQJHRIRXUFRQɇGHQFHLQGLFDWRUVDVZHORRNLQWR7KHVWUXFWXUDOXQGHUSLQ- ning of the consumption in Asia remains the more robust with the countries of India, China and Indonesia topping our relative scorecard rankings. However, the cyclical economic negatives and, in certain respects, politics that have weighed on countries such as Russia, Brazil, Mexico and Turkey, have abated. They have all seen improvements, adding breadth and a timeliness to the emerging consumer theme. Richard Kersley, Maria Bhatti A unique perspective While we are very cognizant of the macro drivers LQHPHUJLQJHFRQRPLHVDQGUHɈHFWRQWKHPUHJX- The Credit Suisse Emerging Consumer Survey larly in the study, this ground level and behavioral SURYLGHVDJUDQXODUDQDO\VLVRIWKHSURɇOHPRRGDQG analysis has proved to be as valuable for investors behavior of consumers across eight major emerging as a macro appraisal of the consumer landscape. economies, with an aggregate population approach- Throughout the life of the report, we have tracked a ing four billion people, representing total consump- range of key investment themes, including the rapid tion of USD 9.4 trillion and structurally growing. The shift in on-line spending that has made China the 14,000 detailed face-to-face interviews conducted biggest e-commerce market globally, the demo- RQ RXU EHKDOI E\ OHDGLQJ FRQVXPHU UHVHDUFK ɇUP JUDSKLF LQɈXHQFH RI D \RXQJ FRQVXPHU DQG KRZ Nielsen, provides unique bottom-up insights into this has uniquely shaped the pattern of consump- VSHFLɇF HQGPDUNHWV SURGXFWV DQG EUDQG SUHIHU- tion; and the shift to a healthier lifestyle among con- HQFHDORQJVLGHRYHUDOOEDURPHWHUVRIFRQɇGHQFH sumers. Such themes have proved not only highly As well as benchmarking consumer behavior rewarding for investors but have also underlined that across countries, we ask a range of micro ques- the development of the consumer in the emerging tions tailored to each country and not typical of world does not always follow a notional script written macro-based surveys. Our proprietary database by his/her developed market counterpart. also allows all the questions to be assessed by de- In this year’s study, demographic drivers are a mographic considerations of age, gender, region common theme: how trends in the emerging world and income level. There is no other survey conduct- contrast with those in the developed world and how ed that benchmarks consumers across emerging WKH\LQɈXHQFHWKHVL]HRIWKHJURZWKSRWHQWLDODQG economies with such granularity. The full question- importantly its mix. A dedicated focus on the young, naire and additional data not provided in this report XUEDQDQGZHDOWK\GHPRJUDSKLFWKDWW\SLɇHVHPHUJ- are available on request. LQJPDUNHWVLVODLGRXWLQ&KDSWHU:HDOVRUHɈHFW Table 1 Survey sentiment indicators (average readings) 3HUVRQDOɇQDQFHV ,QɈDWLRQH[SHFWDWLRQV Good time to make a Income expectations Income change in last major purchase 12 months Net balance, better Net balance higher Net balance, excellent Net balance increase Net balance increase vs. vs. worse vs. lower time vs. bad time vs. decrease decrease 2017 21.8 41.3 -6.4 24.5 2.0 2016 19.6 39.3 -10.4 19.1 -4.2 2015 15.3 46.4 -13.0 24.5 2.7 2014 25.5 46.1 -7.4 31.3 10.3 Source: Credit Suisse Emerging Consumer Survey 2018 5 Emerging Consumer Survey 2018 Figure 1 on the topic of saving as well as spending. The Credit Net percentage of respondents replying “Yes” to “Is now a good time Suisse Research Institute Global Wealth Report has to make a major purchase?” highlighted the rapid wealth accumulation in the emerging world and its likely continuation. China is 40 now the second biggest source of household wealth 30 globally. How the consumer saves as well as spends 20 WKLVQHZIRXQGZHDOWKZLOOEHNH\IRUɇQDQFLDOPDUNHWV 10 institutions and investment more generally. 0 The mood of the moment -10 -20 ,Q WKLV ɇUVW FKDSWHU ZH DJDLQ H[DPLQH WKH PRRG RIWKHPRPHQWIURPRXUFRQɇGHQFHLQGLFDWRUVE\ -30 ranking the countries against each other. To sum- -40 marize the overall mood of consumers, we highlight -50 WKHVXUYH\UHDGLQJVLQUHVSRQVHWRɇYHNH\TXHVWLRQV