Multinational companies, however, see the rise of Asia for what it is—a massive opportunity. Companies ranging from Unilever and Nestle, to Coca-Cola and Johnson & Johnson, are experiencing their fastest growth in emerging markets, particularly among middle-class consumers. The vast majority of those consumers reside in the Asia-Pacific: some 1.5 billion today, and a projected 3.5 billion by 2030, according to Homi Kharas, a scholar at Brookings who focuses on the global economy. The Kellogg Company seemed to speak for everyone in its 2016 annual report: “Our success in emerging markets is critical to our growth strategy.” If it fails, the company noted, its results will be “materially and adversely affected.” To make Kellogg, well, great again, it needs to ride the emerging-markets wave.
Most American multinationals understand the necessity of tapping new areas of consumption growth around the world, and, as the S&P notes, it’s in the emerging markets. And there is no more important part of that story than Asia’s growing middle classes. As Kharas noted, of the next billion entrants into the middle class worldwide, 88 percent of them will be Asian. Asian consumers will account for the overwhelming majority of new middle-class spending through 2030, to the tune of some $29 trillion. Ford, for instance, sold its millionth car in the Asia-Pacific last year.
As the potential of Asian markets expands, American companies are seeing a decline at home. Companies like Pepsi, Subway, and Ford, are seeing their sales in North America flat line. As American millennials increasingly shun big name, older brands of the sort that advertised on The Apprentice in favor of smaller, local, or organic brands, it’s no wonder that the Kellogg Company wants to build its emerging-markets portfolio.
The Asian expansion is in full force. McDonald’s will storm China with some 2,000 new restaurants by 2021, bringing its total there to 4,500. China is well on its way to becoming the number two global market for the Golden Arches, according to the company’s CEO, Steve Easterbrook. If McDonald’s hits its goals, it will be within striking distance of KFC, which already has more than 5,000 restaurants in China. Yum! Brands, the Kentucky-based parent company of KFC as well as Pizza Hut and Taco Bell, earned about half of its global revenues from China last year. Starbucks is also chasing the Chinese middle class, aiming to double its number of locations there from 2,500 to 5,000 by 2021. That’s almost two branches launching every single day for the next four years.
The larger point: U.S. companies that create jobs and drive growth in Americans’ stock portfolios are finding their most rapid growth in Asia. Apple is on pace to generate some $45 billion in revenue from what it calls greater China (including Hong Kong, Singapore, and Taiwan) in fiscal year 2017. “We are very bullish on China,” Apple CEO Tim Cook said on a recent earnings call. “We continue to see a middle class that’s booming there.” Apple also reported strong quarterly earnings this month on the back of China growth.