The pandemic and geopolitics have complicated European firm’s expansion plans in Asia. China, long a source of demand for European products ranging from Italian foods to German manufactured goods, has also become a source of risk. What can European firms do in Asia? Diversify. The rest of Asia should not be overlooked.
Japan & South Korea
Japan and Korea are among the largest wealthy markets in Asia. Consumers in these countries are continuing their switch to healthier and high-quality options with an increased openness to new, novel, and foreign brands. South Korea’s wine market is set to grow by over 6% annually through 2025, a trend likely to accelerate as both preference for and familiarity with wine increases.
Asia’s Wealthiest Markets
Asia’s global cities—Singapore, Hong Kong, and Macau—punch far above their weight in economic and trade terms. Singaporeans are the wealthiest consumers in Asia. Rules are clear, consumers keen, and growth strong and sustained. Demand for coffee in Singapore alone continues to increase by 5-7% annually. Growth in Hong Kong’s food and beverage sector is set to grow by nearly 11% annually through 2025.
Taiwan, a cosmopolitan, wealthy, and open market is busy negotiating new trade deals and making itself and ever more welcoming place to export to and do business in. The European Union is Taiwan’s 4th largest trading partner with high volume of cross-border trade in both goods and services. Already wealthy, Taiwanese consumers are increasingly looking for healthier, more premium, and novel food and beverage options. Demand for these is set to grow for years to come.
Malaysia—larger than Taiwan and with incomes similar to those in China—benefits from its proximity to Singapore next door, English being widely spoken, and fast-growing incomes. Beer consumption alone will increase by over 40% over the next 5 years, meat and dairy by over 30%.
Asia’s third most populous country, Indonesia, is similarly fast-growing with consumers looking to upgrade their lifestyle with modern conveniences, new foods, quality beverages and much else that Europe offers in spades.
Across these and other markets in Asia consumer incomes are rising and demand for much of what European brands can produce best—high quality meat, coffee, alcohol, juices, soft drinks, healthy and organic products and much more.
Outlook and Emerging Opportunities
Even as animal protein consumption increases, a large minority of Asian consumers are opting for vegetarian, vegan, and environmentally-conscious food and beverage options. With many European companies being on the cutting edge of these food and beverage product segments and the continent as a whole viewed as a source of high-quality products in general, they are well positioned to tap into this large and growing demand in Asia.
China will remain a large source of demand in Asia and sales for European companies, yet the case for diversification—and the untapped opportunities on offer—is clear. Diversifying into other promising markets in Asia will allow Europe Inc to benefit from this while reducing risks, taking advantage of otherwise missed opportunities, and generating balanced and sustainable growth in the region.