Consuming Class to Rapidly Expand and Shift Markets by 2025

A new report by the McKinsey Global Institute finds that the global consuming class will grow by 1 billion people by 2025, and undergo a profound geographic shift. Cities and businesses should prepare for this shift with targeted investments.
July 11, 2012, 1pm PDT | Akemi Leung
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What do Shanghai, Lagos, Sao Paulo, and Istanbul have in common? According to a new report [PDF] from the McKinsey Global Institute (MGI), these cities and 436 others, dubbed the Emerging 440, will be responsible for contributing to nearly half of the growth in global GDP by 2025. This percentage roughly translates to $23 trillion.

MGI's recent report, Urban world: Cities and the rise of the consuming class, shows that "one billion people will enter the global consuming class by 2025," meaning that businesses should be aware of where new economic markets will form. According to the report, the world will see a profound shift in its center of economic gravity from the United States and Europe toward Asia and Africa.

MGI believes that analyzing the potential for a market at a regional or country level is not focused enough. Instead, companies should take a close look at individual cities because the markets are different even within regions. For example, both Sao Paulo and Rio de Janeiro are in the top 3 cities for growth in laundry care products by 2025. However, Sao Paulo is ranked 15th for potential growth in municipal water demand and is the only Brazilian city in that top 20 list.

The "tectonic shift" in consumption will demand a corresponding investment in buildings and infrastructure to cater to "the burgeoning urban consumer classes." The Urban world report states that, "cities will need annual physical capital investment to more than double from nearly $10 trillion today to more than $20 trillion by 2015." MGI suggests that this money go to bolstering the cities' infrastructure with more buildings, larger port capacity, and more available municipal water. These changes will hopefully allow the cities to grow with, and take advantage of, the emerging markets.

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Published on Sunday, July 1, 2012 in McKinsey & Company
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