Emerging Markets Consumer: Rapid Growth in the Global Consumer Sector

During the last ten years, the emergence of economic superpowers such as China, India and Brazil has led to the dramatic expansion of the middle class and with it the rapid growth in consumerism, urbanization, trade and e-commerce. We are addressing these important trends by creating a new sector area of focus: Emerging Markets Consumer, targeting investment opportunities in consumer oriented growth companies in the emerging markets.

Several data points underscore our thesis for this sector, including:

• One-third of the world's population, 2.6 billion people, live in cities that are located in emerging markets. By 2030, the urban residences of emerging markets will increase by another 1.3 billion while there will be only 100 million new residences in cities in developed countries in the next 20 years.

• Emerging market cities will account for 15% of global private consumption by 2015 with annual CAGR of 11%.

• In particular, China, India and Brazil are expected to achieve annual GDP growth of 8%, 8% and 5% from 2010 to 2015, respectively.

• The middle and above-middle class population of China, India and Brazil will grow from 172 million, 186 million and 48 million in 2010 to 314 million, 366 million and 69 million, respectively, in 2015.

• China, India and Brazil will become the 2nd, 4th and 9th largest consumer markets in the world with $2.9 trillion, $1.5 trillion and $0.8 trillion market size by 2025.

• The Internet users of China, India and Brazil will grow from 384 million, 81 million and 68 million in 2009 to 650 million, 237 million and 155 million, respectively, in 2015. This will be 3 times the number of internet users in the U.S. and Japan combined.

• By 2015, there will be 1.2 billion, 953 million and 253 million mobile phone subscriptions in China, India and Brazil, respectively, compared to 372 million in the U.S. and 140 million in Japan.

Growth equity will likely play an important role in complementing capital markets to accelerate the economic growth of these consumer markets. Growth equity can provide long-term capital for the emerging local brands to expand their national footprints, facilitate the early winners continue to grow through mergers and acquisitions, and share international experience to help the leading players to expand business globally.

General Atlantic is looking to partner with great management teams and existing shareholders to work together in building outstanding growth companies in the Emerging Markets Consumer sector. As one of the earliest global growth investors to enter China, India and Brazil, we currently have established offices in Hong Kong, Beijing, Mumbai and São Paulo, each staffed with local nationals.

Our current top investment themes include:

Rise of Middle Class & Consumerism

• Branded Consumer Goods - Rise of the middle class and increased disposable income from dual-income families leads to increased consumption of branded goods.

• Branded Services Chains/Franchises - Intensifying competition and growing demand for standardized service facilitate the sectoral consolidation and establishment of regional and national brands.

Urbanization and High Growth of Modern Trade

• Penetration and Consolidation of Modern Trade - Increasing household disposable income and the emergence of small and middle cities support further penetration of modern trade formats like department stores, super and hyper markets and specialty retail. National and regional consolidators are likely to enjoy robust growth in next decade.

• Logistics: Upgrade and integration in logistics industry are favored by robust GDP growth and fast penetration of modern retail.

Trading up and Increasing Awareness of Health and Wellness

• Aspirational Purchases - Consumption becomes more social-identity driven among middle class and above so as to increase the demand for premium and luxury brands.

• Healthy Food & Beverage - Growing concerns on health and food safety create demand for new product categories.

• Lifestyle-Related Services - Growing income enables consumers to afford more lifestyle-driven services.

E-commerce Penetration

• Established E-commerce Models - Increased broadband penetration rates allow established e-commerce models to be replicated and scaled quickly in emerging markets.

• Mobile - Young populations with increased comfort are consuming more contents and services online supported by fast penetration of broadband.

If you would like further information on our investment activities in the Emerging Markets Consumer sector, or if you have suggestions on companies we ought to know, please contact the GA Team.