Walking the Olympic tightrope

The Olympics is traditionally big business for sponsors, however this year’s Olympics is turning out to be something completely different. Not only do corporate boards have to deal with angry western protesters, but they are also facing the wrath of more informed internet savvy developing world consumers, as China clearly demonstrates.

Companies like Coca-Cola, Anheuser-Busch and Carrefour with a large footprint in China find themselves in a challenging position. Carrefour is facing criticism from Chinese consumers that includes protests and calls for a shopper boycott after an eventful Olympic Torch Relay in France. In Europe, Carrefour is under increased scrutiny and mounting pressure as the retailer continues to expand in China. Activists have called on sponsors like Coca-Cola to pressure China on issues ranging from Tibet to Darfur. Should Carrefour write a letter to the United Nations criticizing the Chinese government’s actions? How will Chinese activists and consumers respond? While this blog was never intended to address such pressing matters, it does raise some interesting questions for consumer goods companies and retailers.

For many western companies, winning in China has become critical. With the prize being China, the stakes are high in both worlds. Both developed and emerging.

The global food crisis needs further action

The rise in food prices is likely to put enormous pressure on emerging market inflation and lead to increased political instability.

A number of factors have helped contribute to the rise in food prices.

Changing consumer spending. Changing consumer spending habits and growing consumer income have pushed up demand for food products. A growing population has also not helped in any way.

Climate change. Temperature changes and flooding have had a severe affect on food production and supply. Sub Saharan Africa and vulnerable countries like Bangladesh will be under increased pressure to meet food output targets.

Alternative energy. The drive for alternative energy, in particular ethanol, has increased staple food prices which are in turn contributing to rising inflation. Consumers and farmers ranging from the US and Mexico to South Africa are feeling the impact. Some of these strategies were ill conceived from the outset and need to be reevaluated.

Hedging and speculation. Hedging and market speculation are further driving up prices. Countries like Singapore are building up supplies to hedge against further price increases. The Philippines police are currently playing a game of cat and mouse with rice hoarders.

The crisis, however, provides some unique opportunities for governments. Food subsidies in the west are currently hurting millions of farmers in developing countries while benefiting a few. By reducing food subsidies, millions of consumers across the globe will benefit. After all, poor emerging market consumers are currently hurting the most. Unfortunately, recent food scares in China have played into the hands of the farm lobbies and protectionist groups. Action is needed and the recent World Bank measures will not go far enough.

Asia’s rising inflation

Rising costs for food and fuel are now sending prices higher across Asia. China, Vietnam and Indonesia have all been affected. NYTimes 11/12/07

China food safety

Food safety remains a major concern for consumers and manufacturers as fake and substandard food are on the increase. China regulators closed more than 47,000 food factories that were operating illegally. China producers and suppliers are increasingly in the spotlight. NYTimes 06/12/07

The informal market

Robert Neuwirth writes (PDF) about the informal economy in Lagos, Nigeria, and its importance to the local economy. Local governments mostly view these informal markets in a negative way, even though they contribute significantly to the economy.

Some interesting points:

The demand for economic activities takes over everything as bridges are transformed into informal markets. The informal sector is the most dynamic and fastest growing segment of the economy. With very high unemployment, it is the informal sector that holds the country together. Cities need to be designed to accommodate street traders. This works a lot better that expecting traders to obey some sort of government rules.

The not so joined ventures

Danone and Wahaha’s two month old dispute in China has taken another turn, with Danone filling a law suite against one of Wahaha’s subsidiaries. The case once again demonstrates the challenges faced by multi-nationals and local companies, with regard to joined ventures and strategic alliances in emerging markets. What ever the outcome, local companies and multi-nationals will take note.

The new globalization

The economist reports on the new face of globalization and the emergence of multi-nationals from the developing world. While the article focuses mainly on the IT and petroleum superstars, the CPG market can not be overlooked.

SABMiller’s aggressive expansion and the emergence of regional players in St Miguel and Asian Pacific Breweries, are just some examples of companies on the move. Furthermore, India’s United Breweries acquisition of Glasgow based distiller Whyte & Mackay, raised quite a few eyebrows. It seems that no brand and country are safe from these predators. Even if you were founded in 1844 in Scotland.

Of Chips and Dhaka

I am off to Bangladesh next week, and still have a couple of stops to make, before I hit the streets of Dhaka. I am working on a Due Diligence project for a Consumer Goods company, and Bangladesh is an exiting place, always full of surprises. In the world of business, sometimes too many surprises.

Unfortunately I require yet another passport, and need to fly to Hanoi to get the necessary paperwork done. I can’t believe in this modern age we are still applying for passports and visas. I am more than happy to implant a chip, if it safes me time.

Internet Cafe

I was very impressed in India with Reliance’s (the giant Indian telecom company) internet cafés all over the country. The seating is comfortable, nice coffee shop, and the staff friendly. Moreover your work station is big enough not just for the mouse, but also for books and documents. The price- cheap $ 10 for 20 hours. Now why do you have to go all the way to India to find a good internet café?!

Day trip

Day trip to Dankuni (Kolkata outskirts) and to the Engineering college (University). The University needs a serious paint job and facilities are well not really world class.

Impressive though is the people you meet and the excitement in the air. India is on the move and West Bengal is tired of being left behind. No disrespect, but Kolkata is so much more than Mother Teresa. See “Mother” is both a curse and a blessing, and locals would like to move far beyond images of starving street kids.