MIDDLE-CLASS GROWTH EXPECTED TO BOOST ASIAN OPPORTUNITIES

DAVID MERREFIELD

HONG KONG -- Enormous opportunities await food manufacturers and retailers in upcoming years in Asian markets, Chris J. Nelson, chief executive officer of Hong Kong-based Dairy Farm Co., told a workshop session at the Food Marketing Institute's AsiaMart '95 convention here. Nelson told the session that "between now and the end of the century, a staggering 60 million people will enter the ranks of the middle class in Asia. They will be young, educated, widely traveled and open to new ideas. "This, together with growing urbanization, will drive the economic growth in Asia into the 21st century."

These factors, plus political changes, spell opportunity, he said. "I expect restrictions on foreign investment in food retailing to be progressively lifted, and those countries that prohibit foreign investment in food retailing will, in effect, be holding back the living standards of their own people, and that, in the long term, is not a sustainable position," he said.

As for industry segments other than retailing, Nelson said, "I also see a great opportunity for foreign investment in the wholesaling, distribution and cash-and-carry sectors."

At the same session, Douglas P. Handler, director of global research at A.C. Nielsen Co., Schaumburg, Ill., said Asia offers strong, but slowing, growth rates in food sales.

He predicted that in developing countries, the growth rate of food sales will slow from about 14% per year to 10% during the next five years.

"There are two justifications for this forecast," he said. "There will be a reduced inflation rate and a slower-growing economy.

"Nevertheless, using the most negative set of assumptions will yield a forecast of Asian food sales that will be better than the baseline assumptions for food sales growth in most of the non-Asian world.

"At current growth rates, the Asian economy, excluding Japan, will double within seven years. Food sales will grow by a slower but still strong pace during this period."

Handler pointed out that in more mature economies, such as those of the United States and Japan, food sales typically grow at a rate slower than that of overall economic growth.

"The lesson here is that the more mature an economy, the harder food manufacturers and retailers will have to work to participate in the prosperity."