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How Canadian companies can tap into Asia’s consumer boom

By 2025, the Asian consuming class will swell to more than two billion people and spend an estimated $22-trillion.


Asia is changing beyond all recognition. At the heart of the most sweeping social and economic transformation the world has seen is the rise of a powerful new, largely urban, consuming class. Asia is home to more than 800 million middle-class consumers who aspire to the same lifestyle as we do: owning a car and a smartphone; having time to travel; enjoying dinners out. China's urban middle-class alone is almost seven times the size of Canada's population.

By 2025, the Asian consuming class will swell to more than two billion people and spend an estimated $22-trillion – nearly one-third of global consumption. Five years later, Asia's consuming class will comprise 2.7 billion people. This is not just a story of China and India. In Indonesia, 90 million people – 2.5 times Canada's current population – will join the consuming class.

The rise of Asia's middle class has enormous significance for Canadian businesses. The growing consumption creates markets for food, products and services, fuelling a rapacious appetite for energy and natural resources.

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To capture this opportunity, Canadian companies need an intimate understanding of the new Asian consumers. First, on the consumption and services front, they need to locate these consumers, with forensic precision. Asia is a very diverse market and the consumer profile of its cities varies widely. To build an effective strategy, Canadian companies need to go beyond national plans and look at the opportunities city by city.

For a medical products company looking for places with a growing number of older, upper middle-class consumers, five of the world's top 10 growth cities are in China: Beijing, Shanghai, Tianjin, Chongqing and Nanjing. A company selling diapers or baby food will find the Asian cities with the largest opportunities are Mumbai and Delhi. For providers of financial products and services, Indonesia offers an important market, not only in Jakarta but in rapidly expanding cities such as Balikpapan and Samarinda.

Next, Canadian companies need to understand the diverse and evolving tastes of Asian consumers. Across the region, the number of higher income households is rapidly expanding. These consumers are often young, are more international in their outlook, and are more willing to pay a premium for quality products. They consume more services, from education and health care to foreign travel. Last year, 80 million Chinese tourists travelled abroad, and the number is growing quickly. Canada, with its natural beauty and diverse population, is well positioned to become a top destination for Asian tourists and students.

Another significant opportunity for Canada is the provision and delivery of food, energy, and natural resources. By 2030, global demand for food is expected to rise by more than 25 per cent, mostly in Asia, and fertilizer demand will grow by 50 per cent. Global steel demand is poised to rise by 80 per cent; energy demand by one-third. Canada has an opportunity to have some of the first liquefied natural gas export terminals ready to meet the rising demand in Asia.

Canada should also capture its share in satisfying the enormous need for infrastructure in Asian cities, which need to more than triple annual physical capital investment from about $4-trillion today to almost $13-trillion by 2025. Across Asia, the investment for municipal water infrastructure alone is an estimated cumulative $190-billion by 2025. Asia's port container handling capacity needs to more than double by 2025 to handle the rising volume of consumer goods and their supply chain logistics. British Columbia, in particular, is well positioned to benefit as a North American entry point.

Asian middle-class consumers are transforming not only their region's economies, but also world markets. Canadian businesses that identify where those consumers are, their impact on the demand for natural resources, and what infrastructure is required to meet their needs, will be able to carve out lucrative new opportunities. During important discussions at this week's Canada-Asia 2013 conference in Vancouver, hosted by the Asia Pacific Foundation of Canada, leaders from industry and government will have an opportunity to strategize toward effective Canadian solutions to capitalize on Asia's booming middle class.

Dominic Barton is the global managing director of McKinsey & Co. He is also on the board of the Asia Pacific Foundation of Canada.

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