The East Rising

The Economist states: "The East is undoubtedly rising but its new day has barely begun." Excellent graphical representation of regional growth comparisons.

Asia Poised for Innovation

A chat with friend and advisor Mr. Martin Ertl, CIO Bombardier Transportation highlighted that the most recent patent applications for alternate energy and/or clean energy have been coming out of China and at a steady pace and massive rate.

The following article from the McKinsey Quarterly, "Asia and the elements of innovation" by Eric Drexler could not have been more apropos to my conversation with Mr. Ertl.  The article discusses some of the key differentiators of Weatern and Asian cultures and why Asia looks to take exponential lead in innovation.  The article states:

"To become a world-class center of technological innovation, a society must have three basic elements:
• drive—a culture that supports change and hungers for it
• human capital—the personal abilities that make world-class technology possible
• a capacity for mobilization—a society’s ability to pursue ambitious new goals"

Having personally experienced education in South Asia, I can attest to the following, though it is changing:

"Cultures differ radically in their attitudes toward education. In the rising societies of Asia, education is a top priority, far above, for example, sports. During national exam season, when students study for the test that will determine their future in higher education, I found that Indian newspapers carry science and mathematics quizzes that would stump most US college graduates. Recent physics tests given to US and Chinese students entering comparable technically oriented universities produced distributions of scores that had little overlap. In Chinese societies, scholarly students have a status among their peers like that of athletes in the United States and run little risk of being marginalized, ridiculed, or beaten. In India, I found that students chase after the autographs, not of entertainers, but of scientists."

Read the complete article here.

Food and Farms

""According to our laws and our policy, foreigners or foreign companies are not allowed to rent or buy land to grow rice or any kind of food, including raising any livestock in Thailand," Deputy Commerce Minister Alonkorn Pollabutr told reporters."

Reports Maktoob Business here.  I have written previously about the consumer choices for farm commodities and products in regions where the ability to produce either is minimal or difficult, and the results of it.  Collectively, the GCC states currently lead the world in land acquisition and/or leasing of farms.  Yet the above may be a small set back for now.

The Economist writes an excellent article on the subject here.  The article states:

"It is not just Gulf states that are buying up farms. China secured the right to grow palm oil for biofuel on 2.8m hectares of Congo, which would be the world’s largest palm-oil plantation. It is negotiating to grow biofuels on 2m hectares in Zambia, a country where Chinese farms are said to produce a quarter of the eggs sold in the capital, Lusaka. According to one estimate, 1m Chinese farm labourers will be working in Africa this year, a number one African leader called “catastrophic”."

Below is a revealing data diagram highlighting investment and deal structure from the Economist.

(Click to enlarge)

A bit of hype and herd (crowd) mentality is shown in the following statistics followed by of course pullback - "Between the start of 2007 and the middle of 2008, The Economist index of food prices rose 78%; soyabeans and rice both soared more than 130%. Meanwhile, food stocks slumped. In the five largest grain exporters, the ratio of stocks to consumption-plus-exports fell to 11% in 2009, below its ten-year average of over 15%."

Yet, all this activity is termed as "neocolonialist" as the article states - "The head of the UN’s Food and Agriculture Organisation, Jacques Diouf, dubs some projects “neocolonialist”."

As the need continues to grow for food, the agri-focused economics will gain from it.  Will the results be similar to oil economics?

Asian Airlines Delight Thier Customers

16.2 million travellers from about 100 countries took part in Skytrax's annual survey - Skytrax specializes in airline and airport research. The top 10 airlines are all Asian airlines, see details here.


The Economist writes in an article "Asian Tigers" here:

"Lining up behind the Hong Kong carrier were, in order, Singapore Airlines, Asiana Airlines, Qatar Airways, Emirates, Qantas, Etihad Airways, Air New Zealand, Malaysia Airlines and Thai Airways. Interestingly/strangely enough, the exact same airlines made up last year's top ten, albeit in a slightly different order."

I am an international traveler, yet I will reserve my comments regarding my personal experiences and share the comments of a customer of the airline industry:

"Yesterday at the airport in Hong Kong, I was waiting to get on an AA/Cathay flight back to the USA, and my heart sank when I realized it was an American 777 as opposed to the Cathay plane."

Consumer Insight - Skin Color: White or Tan?

I have been following Philip Martin's "The Color Initiative" (details here) with interest. Two recent podcasts have provided Asian consumer insights of great value.

Traditionally, from the Far East and South East Asia to South Asia and Middle East, white skin color is prized, darker color has been associated with lower cast or class, implication of an individual's socio-economic standing, etc. Interestingly these influences date back not just centuries but millennia.

To highlight this point, in the podcast a Taiwanese 18 year old girl states:

"I try hard to make my skin white, yes. If my skin is lighter, I think I will be more happier."

Philip Martin states of the skin whitening business:

"Across Asia, skin whitening is a growing and lucrative $18 billion dollar industry. Cosmetic companies and dermatologists are scrambling to cash in – pushing whitening creams, ointments, and skin-bleaching treatments."

Listen to the podcast or read the transcript for "Skin whitening big business in Asia" here.

Next Philip Martin provides a contrarian view that the consumer is choosing to act on from within the same region in the podcast "The color of success in Asia" here.

These two podcasts highlight that a tradition within a culture can have long lasting affects. With economic growth and independence, the consumer can choose to shed the burden of tradition in favor of another choice available to them. The Asian consumer is going to be evolving at a fast pace and the traditional CPG companies engaged specifically in beauty-care may need to look upon this business as FMCG.

"Succeeding in a Volatile Market: 2018 The Future Value Chain"

A report brought to me by way of my friend and colleague Mr. Anthony Tsai, who currently is CEO – BHG Retail Innovation Institute and EVP Operations – The BJ Hualian Hypermarket Co., published jointly by Global Commerce Initiative, CapGemini, HP and SAP. Mr. Tsai is currently leading the development of Hualian Innovation Center in Beijing, see Mr. Franz Dill's blog on the subject here.

"Succeeding in a Volatile Market: 2018 The Future Value Chain" is report on global trends and a study developing a ten year vision of consumer goods and retail industry. It has a strong focus on Asian markets. It has been presented at the Global CEO Forum where its approach and outcomes found great reception. The report is not published on the internet yet but a similar report "Future of Supply Chain 2016: Serving Consumers in a Sustainable Way" is available for download here.

The highlight of the report for me is the focus in its recommendations on consumer insights - to learn and to know the latent need and satisfy it and to act on consumers concerns quickly, such as environment and sustainability.

A few conclusions from the study regarding CPG / FMCG market place are (1) given the continued economic volatility and environmental concerns, retailers and manufacturers have growth opportunities when focused on meeting the consumer needs better, (2) cooperation and collaboration among partners, retailers and manufacturers can help them face trends that are bound to hit the Asian markets currently faced in other parts of the world. These conclusions may be called obvious, yet one must note that the report was developed with competing manufacturers and retailers sitting side by side in GCI conducted workshops.

I personally liked the study's focus on the Asian low income consumer and tangible ideas put forth on how best to deliver to them products that fulfill their needs with the highest quality and the lowest cost - here is a challenge indeed. Yet, here is the market for pure growth versus value based returns.

Finally, a trends analysis usually is mired in details of what the future may be - this report goes further and provides an examination of, at times with deep scrutiny, the on-the-ground implications to consumers, retailers and manufacturers of the said trends.