Major consumer goods corporations facing sluggish sales in the United States are turning overseas, especially to emerging markets such as Southeast Asia and Latin America. While sales are slowing or declining in their home market, they are seeing relatively strong growth in emerging markets, prompting them to seek new breakthroughs abroad.
On the 9th (local time), the Wall Street Journal (WSJ) said Mike Hsu, CEO of Kimberly-Clark, which makes Huggies diapers and Scott paper towels, said on last week's earnings conference call that "consumers are clearly under more pressure than before." Kimberly-Clark's U.S. sales fell slightly, but overseas sales increased.
Growth was particularly strong in Vietnam and India. In Vietnam, the company is delivering results by using the social media (SNS) sales strategy that succeeded in China in the past. So far this year in Vietnam, the company's e-commerce business has doubled in size. In India, sales of premium diaper products rose 67%.
Other corporations are in a similar situation. U.S. food giant Kraft Heinz said on the 5th (local time) that net sales in emerging markets in the latest quarter rose 10% to $771 million. By contrast, sales fell in both North America and developed overseas markets, where sales are larger.
McDonald's, the leading U.S. fast-food chain, also said it is struggling in the United States, with customer visits stagnating, but sales are increasing in several overseas markets, including Japan, Germany, Australia and the United Kingdom. McDonald's also recently replaced the head of its U.S. division.
U.S. consumer goods corporations have improved profitability for years by raising prices or keeping prices steady while reducing product sizes. After the COVID-19 pandemic, stronger spending power among U.S. consumers also supported sales growth. But as fuel costs and other prices have risen recently and economic uncertainty has grown, consumers have become more cautious with expenditure, and corporations are facing sluggish sales. Starbucks, the leading U.S. coffee chain, even closed hundreds of underperforming stores in North America last year.
The WSJ said, "In the United States, sales of everyday items from napkins to salad bowls are slowing," and added, "Corporate executives say U.S. consumers, battered by inflation and worried about the economy, are becoming more cautious with expenditure."
In contrast, emerging markets are seen as having relatively greater growth potential for U.S. consumer goods corporations. In the United States, distribution and store networks are already extensively established, whereas in emerging markets, simply expanding sales networks can offer additional growth.
Steve Cahillane, CEO of Kraft Heinz, said, "In the United States, you can find Kraft Heinz products on any grocery store shelf." The explanation is that in the United States, where products are already widely distributed, additional growth potential is limited, whereas in emerging markets, increasing distribution alone can lift the growth rate.
Accordingly, U.S. consumer goods corporations are accelerating their push into overseas markets. Starbucks CEO Brian Niccol said on a recent conference call with investors that "international will make a meaningful contribution to store growth."
Chipotle is also seeking growth opportunities outside the United States. Last month, it opened its first store in Mexico in the Monterrey region of northern Mexico, and the local operator plans to open additional locations in Nuevo León by the end of this year. In 2027, it will expand into Mexico City.
Mondelez International, the global snack maker behind Oreo and Toblerone, is also seeing strong growth in emerging markets. In the latest quarter, the company's net sales in emerging markets rose 7.4%, far outpacing the growth rate in developed markets (1.9%). Dirk Van de Put, CEO of Mondelez, said on a recent conference call about overseas markets that there is still "a lot of room to get more consumers to consume more products every day."