Glimmers amid the gloom

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This report, produced in co-operation with the Economist Intelligence Unit, focuses on six segments: food and general retail, fashion and apparel, fast food restaurants, fast moving consumer goods, luxury goods and consumer durables and electronics – and on emerging markets in Asia, Latin America and Central and Eastern Europe.

The good news from the report is that the industry as a whole appears to be more resilient than many others – even though some short-term pain is certainly expected. We may see that, post-recession, the fortunes of certain sub-sectors become even more divergent.

The main findings of the report are as follows:

There is little evidence to suggest that the expansion plans of multinational supermarket chains will not continue apace. Multinational retailers—such as Wal-Mart, Metro and Tesco—will continue to expand their operations in emerging markets.

For apparel retailers, Asia represents the most exciting growth region. China and India are both expecting double-digit growth in sales. CEE and Russia, as well as Latin American countries, have witnessed comparatively small growth in 2009.

Fast food is proving recession-proof in emerging markets. In Asia, lower-income consumers continue to be able to afford to eat out, hence restaurant chains are rapidly increasing the number of their outlets and are keeping costs down to fund this expansion. The focus for international restaurant chains in CEE is Russia and Turkey, while in Latin American countries the main battleground for fast food is Brazil.

The FMCG sector faces competitive threats from retailers’ private-label goods. FMCG companies face an increasingly competitive environment, as consumers focus more on cost and less on brand name.

Sales of luxury brands are tumbling in CEE and Russia. The crisis has slashed the number of Moscow billionaires, which has had a serious impact on the sales of luxury goods. Sales are also slowing in Latin America. However, despite the crisis, rich Chinese consumers are developing a voracious appetite for luxury goods. India also has huge potential, but regulation there is impeding rapid expansion.

Sales of household audio-visual equipment are suffering in the downturn; PCs and TVs continue to sell. These are turbulent times for consumer electronics companies, as their goods are expensive on-off purchases that consumers can delay or forego. Of the three regions examined in this report, the picture is most rosy in Asia, while CEE, Russia and to some extent Turkey will see household electronics and audio-visual equipment sales decline, although there is still growth in sales of PCs and TVs. The same trend is true for Latin America.