What Refrigerators Can Tell Us About Global Markets
After a look inside a refrigerator, you might be able to form some economic conclusions. In emerging markets, the contents of refrigerators provide clues about affluence.
Climbing up the development spending ladder, households can afford a refrigerator starting with the $3,000 GDP rung. As we saw last week, refrigerator ownership in China is soaring with the household total now close to 88%. A second BRIC, Brazil, is higher with numbers above 90% while India remains at 27%.
You can see (below) how refrigerator ownership has risen in Brazil with China close behind.
Based on one investment analyst’s peek at 70 refrigerators in 12 emerging market countries, we could decide whether a refrigerator belongs in India, China or Brazil. An Indian working class family’s refrigerator would have mostly “efficiency items” such as eggs, fruits, vegetables and some pre-cooked food. Several steps higher, middle class households in China are starting to add some “indulgences” like alcohol, chocolate and ice cream. Then, at the top, perhaps in Brazil, the difference is the addition of health foods.
Where are we going? To use chocolate as an example of how the items in developing countries’ refrigerators will affect us.
According to a confection industry website, chocolate consumption in developing countries is indeed growing. Not close to Switzerland where the average person downed an average of 240 candy bars in 2012, Russia is the only developing nation in the world’s top 20 chocolate eaters. But, with China’s growing affluence, its current level of 2 chocolate bars per person per year is expected to soar. Similarly, the number of refrigerators stocked with chocolate in Brazil and India will rise.
And that takes us to our own refrigerators. Because increasing chocolate demand from developing nations is helping to elevate cocoa costs, Hershey’s announced a price hike. As a result, we might have less chocolate in our refrigerators.
Our bottom line: In addition to chocolate, as people in developing nations eat more meat and dairy products and need more energy for their refrigerators, changes in supply and demand will affect global markets.