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Trading demand seen rising

Manufacturers and brand owners are increasingly using distribution and marketing services from well-established trading firms to ensure early market entry success, says DKSH Group, the Swiss trading giant.

Producers have found that they may not be able to do a good job themselves and require the specialised services and infrastructure that trading companies have.

DKSH distributes a wide range of products from dairy foods and beverages to new categories such as Sino NGV trucks from China.

According to a study by Roland Berger Strategy Consultants, the global market expansion services (MES) business is expected to grow to US$3 trillion by 2015 from $2 trillion currently, equivalent to annual growth of around 7%. Hence, MES demand in both developed and emerging countries offers tremendous growth opportunities for providers.

In 2010, most of the revenues of MES providers were generated from Europe, followed by Asia-Pacific, and North America. However, the growth potential is now shifting toward the emerging markets.

Roland Berger predicted that by 2015, MES will have average annual growth exceeding 11% in Asia-Pacific (excluding Japan), almost 13% in Latin America, and at least 10% in Africa and the Middle East.

Emerging economies are investing heavily in infrastructure and facilities to meet the needs of their rapidly growing middle classes. To achieve these aims, they require technologies and ingredients that often cannot be found in their local markets. This situation presents substantial opportunities for well-established MES providers, particularly since entry barriers to newcomers are high.

“The growth of the middle classes in emerging markets, particularly in Asia-Pacific, is leading to higher purchasing power and demand for consumer and industrial goods,” said Joerg Wolle, president and CEO of DKSH Group.

“These markets are becoming increasingly attractive for many Western companies to sell their products, which in turn are driving growing demand for MES.”

Key drivers of MES growth in Asia will be increasing affluence and aspirations of middle-class customers and a tendency for companies to outsource services, said Charles Toomey, executive vice-president for the Global Business Unit of DKSH Hong Kong.

The economic slump in the US and Europe is expected to encourage more small and medium enterprises to enter the Asian markets to secure better growth. Larger multinational companies will try to bring more of their products to Asia and will thus utilise the skills of MES companies to maximise the growth potential of their brands.

To respond to the huge demand, DKSH plans to invest more in developing staff and upgrading its logistics and information technology through DKSH networks in this region.

DKSH (Thailand) has received an extra investment budget of 400 million baht to set up its new warehouse with 26,000 square metres in Bangkok to cash in on the demand for its services.

Source: Bangkok Post

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