The Rising Influence of Rising Affluence

[DewDiligence]

Re: Brands in Emerging Markets

Further to your excellent post about the importance of brands, it’s worth noting that emerging markets generally have a 3-tier structure with wide disparities in prices between each tier:

• In the top tier are international brands, such as Heinz ketchup and Pampers. These products have sky-high profit margins for the simple reason that consumers are willing to pay. The emerging middle classes can afford to buy a few of these products, but not a lot of them.

• In the middle tier are regional brands, some of which are sold by the same multinational firms who sell the top-tier products. These products are affordable by intended to be affordable for the emerging middle classes.

• In the lowest tier are generics, which are made by local firms and are of plainly lower quality than the products in the higher tiers.

HNZ in particular has made a science out of the above kind of “trifurcation.”

p.s. #msg-51490876 is the iconic post on this subject, IMO.