The middle class has long been the engine of the US economy. Consumer demand is not only driving economic growth, but also driving innovation — it is no coincidence that the FAANG stocks that have come to dominate market capitalization tables started life as consumer companies. The conventional wisdom seems to be that this trend will continue, with demand for gadgets and on demand services continuing to create unicorn after unicorn.
This is very much a backwards looking view. If you look forwards, the picture is quite different.
The global middle class is now bigger than it has ever been in written history — it is now more than half the world’s population, projected to grow to 4 billion by 2021 as five people enter the middle class every second. But this growth is not coming from the US or other developed economies, but in emerging markets. 88% of the additions to the middle class by 2030 will be in Asia. By any measure this represents an attractive new market, and indeed Bain was already talking it up to its CPG clients in 2012.
But there is an important multiplier effect, which is that the income and economic activity for these new middle class families will grow faster than their developed world counterparts. As the New York Times put it, the American Dream is alive and well — in China. And just think about it — the US and developed world middle classes are in the business of replacing, while emerging market middle classes are buying all sorts of things for the first time — and they will continue to buy as their incomes increase.
And finally, there is the mobile multiplier. These middle class families are being born into the mobile age, and will look at their mobile devices first for key products and services. They likely have more familiarity with Whatsapp, Transsion, Samsung, and Oppo than their banks, leaving an opening for new mobile first companies to serve them in new ways. Below is an overview of what new users in Asia expect from the Internet (source).