Get in on the con­sump­tion boom

We con­sider why it makes sense to in­vest in con­sumer-fac­ing com­pa­nies listed on First World ex­changes.

Finweek English Edition - - MARKETPLACE -

thein­vest­ment land­scape over the next decade is likely to be shaped by global con­sumerism as the emerg­ing mid­dle class con­tin­ues to grow. Led by China and In­dia, it is es­ti­mated that by 2025 an­nual con­sump­tion in emerg­ing mar­kets will in­crease by $18tr and ac­count for nearly half of the world’s to­tal con­sump­tion. This has been de­scribed by McKin­sey as “the big­gest growth op­por­tu­nity in the his­tory of capital­ism”. Multi­na­tional con­sumer-fac­ing com­pa­nies listed on First World ex­changes are likely to be ma­jor ben­e­fi­cia­ries of this con­sump­tion boom. This is why Mar­riott be­lieves that one of the low­est risk and pos­si­bly best re­turn­ing in­vest­ments for the next decade will be those busi­nesses that pro­duce ev­ery­day ba­sic ne­ces­si­ties that con­sumers can’t go with­out.

The emerg­ing mid­dle class is ex­pected to more than dou­ble by 2030. Thus, in ap­prox­i­mately 15 years’ time there will be an ad­di­tional 3bn peo­ple buy­ing more goods and ser­vices.

First World con­sumer-fac­ing multi­na­tion­als are ide­ally po­si­tioned to take ad­van­tage of this de­vel­op­ment as they: 1) Sell prod­ucts and ser­vices that con­sumers

can’t go with­out; 2) Have strong footholds in emerg­ing mar­kets; 3) Have trusted brands; and 4) En­joy pric­ing power. The ta­ble along­side high­lights how Coca-Cola and Col­gate-Pal­mo­live, two com­pa­nies that have con­sis­tently in­creased their div­i­dends an­nu­ally over the last 50 years, are well po­si­tioned for this op­por­tu­nity.

Th­ese com­pa­nies are also at­trac­tively priced rel­a­tive to bonds and cash in First World mar­kets. Very low in­ter­est rates mean in­vestors can cur­rently re­ceive more in­come from eq­ui­ties than gov­ern­ment bonds and money in the bank. This is a very rare oc­cur­rence as eq­ui­ties, un­like bonds, also pro­vide in­vestors with in­come growth, which ul­ti­mately trans­lates into cap­i­tal growth. A start­ing yield of above 3%, com­bined with an out­look for div­i­dend growth of 6% p.a., gives in­vestors an at­trac­tive

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