Investors equate China with growth. Trendy growth. Companies like Ctrip.com International
Having just visited China, the thing that jumped out at me was that the real trend is simple demographics. The big takeaway of my trip is that I'm convinced of the power of the emerging middle class, and that China's economy will eventually become much more consumer-oriented. I'm in good company -- McKinsey estimates that the middle class will grow from 43% of China's population in 2008 to 76% by 2025. That's a lot of new consumers.
I don't know what services these new consumers will use to surf the Internet in 2025, but I can guess what companies will sell them their soap, shampoo, and laundry detergent. Here's a hint -- the same ones you buy your products from here in the U.S. ... big firms like Unilever
And don't forget the companies that supply these firms. Fragrance ingredient maker Givaudan has research that shows the average Chinese consumer spends $0.03 on hair care annually. That's a small fraction of the $36.50 the French spend, the $34.70 that Americans spend, and even the $13.10 each Russian shells out annually. Over the next 15 years, that $0.03 per person is likely to increase exponentially, creating quite a large Chinese hair care market. That's the reason companies that make the fragrance ingredients for shampoos and soaps, like Givaudan and International Flavors and Fragrances
While other companies may get the headlines and the buzz, firms like P&G that are able to foster loyalty from emerging consumers are likely to see steady gains over the next decades.
This Fool thinks the steady growth potential of personal care products is trendy. What are your hot picks to benefit from the middle-class boom in China?
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Fool contributor Tom Winner owns share of Procter & Gamble. Baidu is a Motley Fool Rule Breakers recommendation. Procter & Gamble and Unilever are Motley Fool Income Investor picks. Unilever is a Motley Fool Global Gains recommendation. Ctrip.com International is a Motley Fool Hidden Gems selection. The Fool owns shares of Procter & Gamble. The Fool has a disclosure policy.
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