Generic Links

 

Welcome to RL360°'s

dedicated financial adviser website

For financial advisers only

Not to be distributed to, or relied on by, retail clients

Online Services Secure online services

Sign in | Register

Global Consumer Trends

The consumer landscape is changing. Whatever the state of the global economy, new long-term consumer trends will emerge, affecting what people buy and how they live.

It’s possible to benefit from these changes by investing in companies that are best able to capture the significant profit growth potential caused by these durable, long-term trends. The trends that are worth exploring are those which have persistence and which are likely to produce sustainable returns for investors.


For example, Starbucks effectively convinced us to spend two to three pounds a day on a cup of hot milk with a shot of espresso – and we didn’t even know we had that need before. Likewise, who’d have thought that up until recently there would be a demand for a product that sits between a smartphone and a computer – until Apple created that demand with the highly successful iPad, which has already spawned an industry of imitators.


The changing consumer landscape will see companies realign operations to channel new revenue streams. For example, large companies that sell household products in the west might now be looking towards emerging markets and exploring how to benefit from rising incomes there. This may involve changing their pricing structure or even developing new products.


The key is to be able to spot the companies that are attuned to these developments and are well-placed to capitalise. Spotting these trends early can be a great source of return for investors, but there are many indicators you can follow that help you make informed investment judgements.


It may make sense to look at potential areas of investment by classifying them into broad segments, chosen because it is often easy to quantify shifts in human behaviour within them, thereby increasing the level of scientific evaluation you can bring to a portfolio.


Trends for a changing age

Low year on year growth in money and credit

One of the benefits of demographics is its predictability. It is a rational and quantifiable driver of economic change. Ageing populations and urbanisation drive changes in buying patterns, transforming the economy of a country and opening up new revenue streams for companies that can meet the new demands.


For example, in Japan in 2005, about 30% of people were of retirement age; by 2020 that will be more like 50% (Source: United Nations Population Division). So you can expect companies that make products like hip replacements and other goods that serve the elderly to grow much faster than they have done traditionally.


Urbanisation is another trend where the numbers speak for themselves. In 2000 there were about 3 billion people in cities globally; by 2030 the United Nations predicts that number will rise to 5 billion. This creates an enormous amount of potential for companies who meet the needs of city dwellers, from retail outlets to transport companies, to infrastructure firms – these are identifiable trends that have occurred many times before as cities expand and form.


Trends are also often easily quantifiable within the health and wellness arena. In the western world, health and wellness is about the fact that people want to live longer, look better and change to a healthier lifestyle. In emerging markets, often it is about meeting peoples’ basic sanitary needs – so tissue paper is a growing market in China.


It’s also worth exploring the prospects for aspirational demand where, simply, people aspire to a higher standard of living. One of the ways of getting access to this trend is through western companies selling into emerging markets. Most of the great brands in the world still reside in, or come from, western countries – brands like Gucci, Louis Vuitton, Prada, Burberry and others. As wealth levels rise to levels approaching developed markets, people aspire also to own these western goods.


These are just examples of opportunities created by sustainable, long-term consumer trends. We believe they offer investors a very interesting take on global markets. As well as being inherently diverse they are focused on sustainability and durability, with profit potential tied in to long-term demand.


As we’ve seen, these trends can emerge from any location throughout the world. They can spring from companies in thriving emerging markets or in western companies where sales are benefiting from changes in consumer demand. What investors need is the confidence they can partner with a company that has a proven record and expertise in selecting companies with longterm prospects.


Peter Kirkman, Portfolio Manager - JP Morgan, February 2011

Please note that these are the views of Peter Kirkman, Portolio Manager, JP Morgan, and should not be interpreted as the views of RL360°.

Author

Peter Kirkman

Portfolio Manager, JP Morgan
February 2011

Please note that these are the views of Peter Kirkman, Portolio Manager, JP Morgan, and should not be interpreted as the views of RL360°.

360° fund links

A range of JP Morgan funds can be accessed through our guided architecture products LifePlan, Oracle, Paragon and Quantum, and also through our PIMS portfolio bond.