A few years ago, emerging markets were all the rage. However, during the past two years, some of the most promising emerging markets have stumbled, and investors have retreated.
Despite these slip-ups, emerging markets remain attractive. As consumers in emerging and developing economies become wealthier, they're more likely to want Western goods, and as disposable income grows, emerging market consumers become more likely to spend.
Unilever(LSE: ULVR) is perhaps the best stock to play this trend. The Anglo-Dutch company has made emerging markets growth a key part of its strategy over the past decade. They now account for nearly 60% of sales. For the third quarter, the company reported overall emerging markets sales growth of 5.6%, with sales in developed markets broadly flat.
It's how Unilever operates in emerging markets that sets the company apart from its peers.
Unilever has always had a hands-on approach to its emerging markets operations. For example, in order to get products to the biggest audience possible, it sells smaller, cheaper versions of its products that lower income consumers can actually afford, in addition to higher-end, more profitable items targeting the growing middle class.
Aggressive marketing campaigns and retailer support have also helped. When the company launched TRESemmé shampoo in Brazil, it flooded the market with 10m free samples along with traditional adverts. In several markets, the company gives discounts to shop owners to put its products in the best position in-store then sends sales representatives to check that goods are always in stock and neatly displayed.
But it's in India where Unilever excels. Through its Indian unit, Hindustan Unilever, the company is bringing its products to the country's rapidly growing consumer base via a network of last-mile distributors called Shaktiammas and Shaktimaans in the rural areas. This army of employees is being presented by the company as a means to empower rural people through an alternate source of income and rural outreach programmes, and thanks to this comparison the number of representatives has steadily grown in the last few years.
What's more, Shaktiammas and Shaktimaans are able to provide feedback to Unilever's management as to which products consumers do and don't like as well as the products consumers would like to see. Unilever's Indian distributor network makes the company about as customer-focused as it's possible to be.
The best pick
With this customer-focused business model, Unilever is probably the best company to play emerging markets growth and the increasing wealth of the emerging markets consumer.
Unlike other Western companies that have tried and failed to crack these markets with their products, Unilever is aware of what its customers on the ground want and has adapted to meet their demands. As long as the company continues on this path, it has a bright future globally ahead of it.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.