Growing Consumer Class
Mass urbanisation across ASEAN is accompanied by rapid expansion in the middle class. Six ASEAN countries – Cambodia, Indonesia, Laos, Myanmar, the Philippines and Vietnam – are classified by the World Bank as lower middle-income economies, defined as those with a gross national income per capita between US$1,006 and US$3,955. This accounts for over 80 per cent of ASEAN's total population of 637 million. As these countries continue to urbanise, the number of middle class households, with an annual income in excess of US$10,000, is forecast to more than quadruple across the region to 161 million households by 2030.6
Growth of the ASEAN middle class
Ego Pharmaceuticals turns to direct sales model for ASEAN success
Founded in 1953, Ego Pharmaceuticals develops and manufactures skin and healthcare products in Australia, and markets them worldwide.
In the ASEAN region, the business started exporting into Singapore in the 1960s and Malaysia in the 1970s. Having delivered $6.7 million in revenue in 2016–17 – up 15 per cent over the previous year – Singapore is Ego Pharmaceuticals' second largest international market. Malaysia grew 18 per cent to $5 million over the same period to rank as the business's fifth largest market.
Ego Pharmaceuticals' Managing Director, Alan Oppenheim, says the more recent success in those markets is driven in part by moving from a distributor to a direct presence in Singapore 13 years ago, and Malaysia nine years ago.
Other success factors for Ego Pharmaceuticals in Singapore and Malaysia include new product launches; marketing plans that better communicate the value of the business to consumers; forging closer relationships with trade partners such as dermatologists and pharmacists; and ensuring the right mix of products is supplied to each country.
The ASEAN region is also vital to Ego Pharmaceuticals' plans to increase the share of its business coming from export.
The growth of middle class households is driving substantial increases in consumer demand. The economic diversity across the ASEAN region reinforces the importance of looking at specific market opportunities. For instance, while major cities will remain significant drivers of demand, rising consumer power is likely to be most pronounced in satellite and second-tier cities. Research demonstrates that several sub-regions in ASEAN will have greater consumer sales growth than entire countries.7
ASEAN 'urbanites' of the future will be younger, with more discretionary spending power and a greater demand for premium products.
Across the region, there's been a significant shift in recent years from buying staple commodities towards higher-value and quality food, dairy and agricultural products. Australian companies can benefit from these shifting consumer patterns by taking advantage of Australia's reputation as a premium food and beverage supplier. Companies looking to enter ASEAN markets should consider presenting a narrative to consumers around Australia's food safety credentials.
As consumer patterns change, there will be opportunities for Australian exporters in the food and beverage, agriculture and agribusiness, services including telecommunications and healthcare, and education sectors
The ASEAN region proves fertile territory for Australian agribusiness
In 1986, Duy Ly arrived as a refugee from Vietnam. Over the following 30 years, he built his Adelaide-based, family agribusiness – 4 Ways Fresh – into a major supplier of fresh vegetables to supermarkets.
Today, he is heading back to Asia, turning 4 Ways Fresh into an international business and helping small farmers across the ASEAN region become suppliers to fast-growing, Western-style supermarkets in the region.
Austrade is helping by setting up meetings with logistics companies, lawyers and local government bodies, and providing insights into Vietnam's regulatory system.
Since 2014, Ly's company has invested in greenhouses in Kon Tum Province in Vietnam's Central Highlands and started growing trial crops. Meanwhile, he has begun training his employees in horticulture skills. Ly's Vietnamese-speaking employees are teaching community farmers Australian-style, high-tech farming techniques and food safety. They are also explaining what Western-style supermarkets look for in long-term suppliers.
'Right now, small-scale Australian entrepreneurs have a huge amount to offer in the region, where governments want family businesses to prosper,' says Ly. 'There's a perception that Asia is only for big companies, but there are great opportunities for small players with smart ideas. In many fields, our commercial skills are well respected and in demand. Asia is changing fast; now's the time to go.'
Ironbark Citrus relies on expertise and relationships for ASEAN success
Queensland-based mandarin producer Ironbark Citrus exports mandarins to a range of countries in ASEAN. In 2017, the company exported 1,500 tonnes of mandarins into ASEAN countries. Its major ASEAN markets are Thailand, the Philippines and Indonesia. Smaller ASEAN markets include Malaysia, Singapore, Myanmar and Vietnam.
Chief Executive Officer, Sue Jenkin, says the company from its inception has focused on exporting and becoming expert in the countries and markets it operates within.
'We work to establish enduring relationships with export customers and visit them regularly,' says Jenkin. 'We're always looking for new markets in ASEAN and while we use Australian-based exporters for the logistics, payments and other services, we insist on visiting our export customers to discuss their experiences.'
Ironbark Citrus operates three farms in Queensland, two of which are in production with the third expected to start production in 2018. It has also established a business in Laos that works with farmers in remote areas to establish a citrus industry in Vilabouly District, Savannakhet Province.
Jenkin sees ASEAN as integral to Ironbark Citrus' expansion in coming decades. 'ASEAN provides the core of our customer base,' she says. 'The rise of the middle class in a number of ASEAN countries will allow huge growth over the next 10 to 20 years.'
Training ASEAN's tourism industry
Founded in 1940 and headquartered in Melbourne, William Angliss Institute provides training services for the tourism, hospitality and food sectors. The institute has a presence in several ASEAN markets.
A commercial arm – Angliss Consulting – provides tourism and hospitality consultancy projects across a range of countries in the ASEAN region. The institute continues to be highly active and has delivered projects for the ASEAN Secretariat on a continuous basis since 2004.
William Angliss Institute is investing heavily in several ASEAN markets. For example, William Angliss Institute Singapore (a wholly owned subsidiary of the William Angliss Institute) has operated as the training partner for the Singapore Grand Prix since 2013.
In Thailand, the institute has delivered training and consulting projects for hotels, tourism operators, catering companies and restaurant groups.
William Angliss Institute has provided a range of industry training projects in Vietnam since 1996, and general cooking, pastry cooking and bakery skills assessments since 2005. In 2015, the institute established a campus partnership in Da Nang with seed-funding assistance from the Australian Government.
In the Philippines, William Angliss Institute has undertaken cooking, bakery and pastry cooking training and skills assessments since 2005. In 2017, the institute reached a heads of agreement with Southville University in Manila, in a campus partnership arrangement, to deliver Australian commercial cooking qualifications.
Australian businesses should consider emerging mega-trends in the retail and tourism sectors. Intra-ASEAN tourism is significant, with around 44 per cent of tourist arrivals coming from within the ASEAN region. Intra-ASEAN tourism has been growing at a rapid eight per cent per year since 2011.8
Cultivating a labour force with the skills and training to meet the demands of the growing consumer class is a priority for ASEAN
Student and labour mobility are central to deeper economic integration and developing a skilled workforce. ASEAN countries are strengthening their education and training systems. This includes developing a common framework to help compare qualifications and make it easier for workers to move to jobs that match their skills. Australian education providers and firms with relevant experience are well placed to support this ambition.
English is the common language across all countries and English language courses are in high demand. Australia is considered by ASEAN as a world leader in education, qualifications frameworks and qualification recognition. This reputation benefits Australian education and service providers offering in-country solutions that equip students with vocational training and leadership skills.
Population growth, rising incomes and improved access to healthcare has led to strong demand for health services across ASEAN
There's scope for Australian businesses to offer intelligent health solutions around services, technology, equipment and training.
ASEAN skills support Cochlear's global growth
Established in 1981, Cochlear is a global leader in hearing-implant devices – and over the past 35 years their technologies have transformed the lives of over 450,000 people. The Asia Pacific is a vital region for Cochlear and within that region, Southeast Asia is also a growing support base for the company's global business activities.
In 2012, Cochlear began building an ICT support unit in Malaysia to provide global help-desk support, systems architecture and design, and database support. Then, in early 2016, the company expanded again, centralising global repair and maintenance activities in Kuala Lumpur. Today, a locally recruited team of technicians repairs the sound processor components of Cochlear™ implant systems for customers around the world.
For Cochlear, investment also involves building medical skills. In May 2015, the company opened the Cochlear Training and Experience Centre (CTEC) in Jakarta, Indonesia. 'Our objective is to transfer knowledge, so that local audiologists can work with patients to build a critical learning path,' says Greg Bodkin, Cochlear's Senior Vice President for Manufacturing and Logistics. 'Cochlear is a global company and Southeast Asia is a huge opportunity for us.'