Growing Global Consumer Class

Humans are ultimately and unwaveringly consumers - in villages, towns, and cities everywhere. No matter the circumstances, we seek enjoyment throughout our day from products and experiences that enhance our lives - trying a tasty snack, wearing a new outfit, partaking in a healthy routine. Nations around the world are hitting important inflection points indicating new consumer classes forming. People are attaining enough spending power to be meaningful participants in new consumption categories. Local entrepreneurs are building brands benefiting from this rise in spending power that can compete against global brands in powerful ways. Here lies an opportunity.

As we’ve trekked for alpha, capitalizing off this growing consumer class is a promising investment theme we’ve seen repeatedly. Below, we demonstrate the opportunities that could exist for a theoretical global consumer growth fund.

Thesis

100 million people are expected to join the “consumer class” in 2025 bringing the global total above 4 billion for the first time. This means many more people will transition from making purchases out of pure necessity to more discretionary spend in travel, health / fitness, fashion, etc. Nations in Asia, Latam, and the Middle East have been seeing this shift for some time. Korea, China, and India are obvious examples in Asia, but Indonesia, the Philippines, Pakistan, Bangladesh, Sri Lanka, and Vietnam are all seeing similar trends too. Brazil and Mexico come to mind in Latam, but Argentina is also experiencing an exciting era of liberalization bringing opportunity. The Middle East goes without saying and even Africa has pockets of middle class consumers starting to browse the aisles.  

With spending power comes flexibility to enter new consumption categories. There is a space for a fund or bank to identify high-growth local businesses in dynamic, but overlooked markets. 

Many of the risks in EM / frontier market PE could be mitigated to some extent through creating a global consumer growth fund. For example, single country risk could be avoided through geographic diversification. Exit paths in this sector also DO exist (more on this below). Imagine a fund like AF Ventures or Prelude Growth, but with an emerging / frontier market lens. That could be interesting. 

Categories / Trends

Through spending substantial time on the ground floating from market to market for the past 1.5 years, we’ve seen fast growing categories with unmet demand. Examples of these consumer / consumer-adjacent categories that appear ripe for growth are listed below. Note that some are already “hot” in developed markets (better-for-you, etc.) and are just now beginning to see growth in the developing world as consumers can afford to have preferences. Others are experiencing growth abroad due to regional dynamics. 

• Halal Products and Services

  • The halal market is massive and growing, especially among younger consumers. There is increasing demand for Halal cosmetics, fashion, F&B, and financing. This category is important in obvious regions like the Middle East, Malaysia, Indonesia, and Nigeria - all of which have large and growing populations. But it is becoming increasingly relevant in Europe and the US too.

• Consumables - F&B

  • In strolling through the aisles of grocery stores, we have seen so many exciting products fit to local tastes. Products that are traditionally homemade, but are now being mass-produced or are made of regionally sourced ingredients are hitting the shelves and make for a unique set of localized snacks, beverages, and frozen foods.

  • Coffee culture is also on the rise in consumer markets abroad - creating new cafe chains and products for consumption at home.

• Health / Fitness

  • With an increase in disposable income comes the ability to spend on health and fitness. There are countless brands taking advantage of this trend in the F&B, restaurant, gym / fitness class, and consumer healthcare spaces. We have seen this trend play out in a number of ways including:

    • Demand for lower-carb alcohol options (seltzers)

    • Focus on protein intake

    • Demand for fitness options - gyms, classes, active wear, etc.

    • Rise in local diagnostics clinics

• Pet Care

  • Less relevant for deep frontier / low income countries, but pet ownership is a rising theme in middle income countries. Pet care products and retailers appear largely fragmented still.

• Travel

  • In the middle of the Mongolian steppe, we came across a group of 20+ Vietnamese tourists on a group trip seeking adventure. No longer are these sorts of tours just for Americans or Europeans. Citizens around the world are now able to afford leisure travel and are doing so domestically and regionally. 

• Entertainment

  • As more consumers purchase televisions, log in to streaming services, attend concerts / festivals, etc. there are opportunities to invest around demand for entertainment. 

  • For example, one fun part of living abroad has been coming across shows that are popular in the US being licensed for production elsewhere - The Apprentice: Mongolia and Shark Tank: Nepal come to mind. We've seen posters for large regional music festivals popping up from Bulgaria to Riyadh. Could there be other entertainment / licensing opportunities in this vein?

• Fintech

  • While not a “consumer” category in the traditional sense, fintech companies have been an important enabling factor for global consumption. These companies will continue to be recipients of growth as consumers spend and save and look for tools to help them do so.

Growth Paths

Growth can come from multiple avenues:

• Grow locally in domestic markets 

  • Growing domestic spending power is fueling this avenue. A category leader in a reasonably sized market should still be an attractive asset to a multinational strategic.

  • Note that sometimes, domestic growth is not independently interesting due to small market size…

• Expand into markets regionally where consumers have similar taste

  • This feels obvious, but it is no easy feat without a capable team and the right resources. We have noticed entrepreneurs and investors abroad often include this lever as THE selling point, but then do not have the skillset or experience to execute. This is how an experienced partner could create much value.

• Expansion into developed markets 

  • We have tried some exceptional concepts on the road that we WISH existed back home…

  • New categories based on foreign products do abound in the states - think Icelandic yogurt and South African Biltong… could Ethiopian teff products join this list of foreign health foods that take off? Korean beauty also comes to mind.

• General improvements from having support from a sophisticated investor / advisor 

  • Business education is less mainstream among entrepreneurs in the developing world. There are many businesses abroad with great products, but also a whole slew of low hanging areas for improvement. The right support from an investor could unlock massive growth.

Example Businesses 

We’ve seen exciting consumer businesses abroad that stand out as interesting for many different reasons. Some are businesses serving their local markets very efficiently, still in growth mode. Others are businesses with local products we love that have successfully expanded - acting as a beacon of what other concepts could become. Below, we list a few of these businesses we have come across that we find worth mentioning:

• Komari Beverages - Ethiopian business that produces Arada Hard Seltzer as an alternative in a beer heavy market. Acquired by Heineken in 2024.

• Lovegrass - Ethiopian producer of teff based products (gluten-free, whole grain)

• Push30 - Azerbaijani corporate benefit provider giving employees access to 250+ fitness venues in Baku and beyond

• Foodmandu - Nepali local food delivery service in the Kathmandu Valley that has already received investment from local PE firms

• Khan Al-Saboun - Lebanese natural soap / beauty business that successfully expanded globally (yet still remains under the radar in our opinion)

• Badagi - High-quality Georgian producer of churchkela, an all-natural, vegan "energy snack" made of nuts and grape juice, as well as fruit leathers and dried fruits

• Hijra - Indonesian sharia fintech platform

• HBAF - Korean branded nut company

• Al Abdalla - Lebanese fast-food chain expanding across the Middle East and into Germany

• Dormans Coffee - Kenyan coffee company that is a large exporter, but also a producer of quality products in formats that are not yet popular in the West (truly exceptional instant coffee and impressive Drip Coffee Bags that brew over a mug)

• Java House - large, PE-backed Kenyan cafe chain with 73 locations in 3 countries and products sold in grocers

• Arabian Oud - This Saudi brand is massive, already global, and potentially IPOing this year. It serves as evidence of the huge demand for Halal products and demonstrates how a historic, regionally-strong brand can have global reach. Is there demand for a Le Labo-esque competitor in this category?

Exits

There are multiple groups of active investors in the consumer space globally, but they are focused on larger businesses for obvious reasons. A growth fund in this space could invest early and prepare businesses for potential investment by these larger players. Active investors in this sector that could see value in a portfolio of growing brands in dynamic developing economies include:

• Multinational strategics like Mondelez, AB InBev, L’Oreal, Unilever, Pepsi, etc. who already are combing the globe for these sorts of opportunities, but at scale

• Larger consumer PE / growth funds like General Atlantic, TSG, and L Catterton who already invest in scaled opportunities abroad or more US-focused consumer buyout or growth funds that see value in a more global portfolio

• Foreign conglomerates