Most of my inspiration for specific blog topics comes from current news items. And often, I discover those when traveling on long haul flights– one of the few times when my addiction to all things in print and some quiet downtime without interruptions intersect perfectly. June 17 was such an occasion. Two different papers ran a total of three stories with similar content. The Financial Times reports that European carmakers fear that the “China cash cow is dying”. Mercedes, BMW and their peers had such high hopes to be milking that cow for years to come, but recent developments have triggered a change of perspective. A slowing economy, rising global and domestic competition and limits of car ownership have led to anything from revised growth predictions for some to actual year-on-year declines in car sales for others. With similar declines in Brazil and Russia, this could end not so pretty for the automotive industry. Which leads me to an article the Wall Street Journal ran on the same day. Real estate developers, retailers, and consumer goods manufacturers alike have long predicted a gold rush in India – a market with a growing middle class. Or so, they thought. Over the last decade approximately 250 new shopping malls have been developed and it seems that many of them are struggling with weak sales. By now, so the paper, India’s middle class should have grown to approximately 400 million, but recent estimates by McKinsey count it at a meager 10 million. And, finally, the Financial Times also reports on Swiss food giant Nestlé’s recent decision to cut their African workforce in 21 different African countries by 15 %. At first glance, the reasons seem similar. Only four years ago, in 2011, the African Development Bank had estimated the African middle class at 330 million. A 2014 survey by Standard Bank, however, concluded that the middle was only approximately 15 million across 11 of Africa’s most important countries. On the other hand, however, that may not be the full story as the continued growth in Africa of retailers such as Wal-Mart or Carrefour suggests. Nestlé may simply have misjudged the demand for its highly standardized product offerings and it may have underestimated the challenges coming from poor logistics infrastructure. The truth probably lies in the middle, and that leaves us with a generally bad aftertaste: the promise that the BRIC countries held just a few years ago seems to be fading quickly. And if not even emerging markets hold any more promise, what does?
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