Relational Solutions Blog

Emerging Market Volatility - Part 5

Posted by Janet Dorenkott

Wed, Sep 3, 2014 @ 04:30 PM


In the past two years, economies in emerging market countries have shown significant weakness. Political unrest and economic difficulties are widespread and are having an impact on incomes. Plus the weakened US and European economies are having an effect on emerging markets.

Over the past few decades, emerging markets have contributed to the overall, worldwide, GDP. However, their recent slowdowns will have far-reaching impact on countries throughout the world.

Volatility of currency is an ongoing issue in emerging markets. CPG companies trying to report sales need to account for this volatility. They also need a mechanism in their data warehouse or demand signal repository to manage currency conversions.

This chart from February shows market performance. This year Western firms that bet on the emerging markets will come under more scrutiny. American firms made a 12% return on equity in 2012, roughly in line with their global average. But having grown fast, profits are now falling. There has been recent underperformance in these markets. They are seeing a weakening in demand, and a currency drag. That said, most companies are still upbeat about the long term.

Currently, global markets are shaky and many experts are blaming that on emerging markets. Their weakness over the past 6 months has been widespread. They had a decade of high performance but as with anything, slow downs inevitably happen.

Recently, for example, Nivea skin cream maker Beiersdorf reported lower-than-expected quarterly results. So they determined they would plan to be a little more cautious in the next year while emerging markets are stuttering. They had previously seen growing demand and increased brand awareness in Asia, Eastern Europe and Latin America. The CEO of Biersdorf, Stefan Heidenreich recently said "Markets are cooling down dramatically," He was talking about mainly China, Thailand and Vietnam.

My next blog on emerging markets will discuss emerging market differences. 

You are also welcome to download our whitepaper.

Relational Solutions invites you to be our guest at the CGT Consumer Goods Emerging Markets Forum #cgem14! on September 17-19th at the Ritz Carlton in Fort Lauderdale. Click below for more information and enter promo code EMRSVIP.

Read Whitepaper Emerging Market  Basics for CPG

Topics: Emerging Markets, CPG