China's emerging consumer class

A recent article in the Economist pulls together CPG industry data to produce an interesting snapshot of the emerging consumer class in China.

The authors found consumer tastes in China are changing as the country's economy shifts from one predicated on industry to a more service-driven model. As the ranks of blue-collar workers shrink, the growing urban middle class is seeking out more premium goods and brands. For example, the sales volume for instant noodles - long an indicator of consumer growth - fell by 12% last year, while sales of makeup grew by over 15% and skin care products went up by 13%. Some other consumer trends include:

  • Chinese travelers are taking more trips abroad, spending about $1,200 each time on shopping;
  • Chinese tourists return home with a taste for cosmetics brands based in South Korea, whose cosmetics exports to China surged by 250% last year;
  • Brands promoting healthy lifestyles are also thriving, including restaurants and supermarkets. As well, fitness is becoming more popular;
  • Functional drinks favored by the health-conscious are going down well, as is yogurt and soup that's MSG-free; and
  • Sales of pet food rose by nearly 12% in 2015, a reflection of a softening of Chinese attitudes toward animals.

These trends can give us insight into the evolution of the consumer goods marketplace as more people in the middle of the economic diamond enter the consumer class.

-- Catalysts


Business-NGO partnerships and a call for a more systemic approach

Darian Stibbe, executive director of The Partnering Initiative, says the NGO-business collaborative model has already progressed from the transactional (fee-for-service) to the transformational. Using the example of drug maker GSK and the NGO Save the Children to illustrate the latter model, Stibbe notes that the partners combine capabilities, resources and influence over the long-term to increase value. However, he adds a transformational approach is limited in that scaling requires greater financial inputs, which may not be sustainable from a donor's point-of-view.

In a recent article for Business Fights Poverty, Stibbe contends a more systemic approach can increase the reach of business-NGO collaborations. In this model, the partners integrate with the governmental sectors that offer relevant infrastructure and local expertise (bearing in mind the introduction of more partners inevitably leads to greater complexity of the model, sometimes creating issues surrounding the process and accountability).

To avoid getting bogged down, Stibbe recommends collaborators choose soft ties (i.e., ongoing communication, sharing current and future activities and plans, exchanging knowledge and experience), which encourage organic, integrative activity, over hard ties (i.e., formal MoUs, clearly defined partnerships with specific goals). We're interested to know what you think about how partnerships can be most effective -- please share your thoughts!

-- Catalysts


Alibaba, rural consumers and the last mile

China's leading ecommerce company, Alibaba, may be dealing with some growing pains, but there is no question that it has been successful in expanding its size and reach.

One factor in this success is Alibaba’s Taobao Village project, which is bringing rural areas of the country access to online shopping. In October 2014, Alibaba announced plans to invest 10 billion yuan in logistics, hardware, and training to push its e-commerce model into 100,000 villages in the next three to five years. It’s opening warehouses and working with delivery companies and local officials.

A Bloomberg article from last August profiles how the project works in Yunnan. The project is centered on the Taobao rural service center -- often located in local convenience stores -- where villagers can access a computer and Internet connection to browse and order goods. Their purchases are then delivered through the same service center, a convenience for the customer, and a benefit to the shop owners. Alibaba provides computers and monitors, ensures timely delivery of purchases, and trains villagers to serve as its representatives in the centers.

This is happening against a backdrop of shifting demographics and economics in China. More Internet-savvy migrant workers are returning home, and Alibaba's success is even attracting competition. planned to open more than 500 rural service centers by the end of 2015.

According to Bloomberg, the companies’ rural forays fit in with government policy. Beijing wants to boost household consumption as a share of gross domestic product, so China’s government will “support migrant workers, college graduates, and army veterans who wish to return to their rural home towns to start new businesses” and “encourage e-commerce in rural areas” the Xinhua News Agency reported last June.

We are interested in how Alibaba and its competitors are trying to solve the last mile infrastructure and talent issue in the countryside by working with local businesses and government, while attracting Internet-savvy migrant workers to return to their homeland.

Image source:

-- Yichen Rao 饶一晨



Impact investment and a measuring the higher purpose

An upcoming conference on impact investing at the Vatican highlights just one aspect of the growing interest in the intersection between financial capital performance and human, social and environmental performance, according to a recent article in the Financial Times.

Impact investing has been gaining traction in mainstream wealth management circles, generating both funding and attention to the issue of how to measure the social impact -- as well as the financial returns -- of a given investment. Exactly how much capital is invested in this manner is a point of some discussion: the Global Impact Investing Network (GIIN) has identified about $75 billion in total, while BlackRock -- one of the world's largest investment firms -- states that it alone manages $200 billion in impact investments. Still, there is clearly momentum behind the idea of doing well by doing good in the capital markets.

The requirement to measure social impact is what differentiates impact investing from other types of investment activity, such as socially responsible investing (SRI), or environmental, social and governance (ESG) investing, which apply various levels of screening up front to weed out certain industries or invest in companies that exhibit certain characteristics.

As expected, there is an active debate about what the right metrics for impact investments should be, and how they should be calculated. These are the same questions we addressed in developing the economics of mutuality, and we are very interested in the evolution of the answers.

-- Clara Shen


A transparent approach to AI

Artificial intelligence is considered by many tech industry leaders to be the most significant computing area currently under development, with the power to transform and disrupt business models, labor markets, marketing and customer engagement.

Facebook’s approach to AI seems to be fundamentally different from its giant competitors in this field (Google, Microsoft, Apple), not in the fields they research, but in the way the company goes about it. In a word, that approach is “open."

Instead of hiding its R&D, Facebook publishes its code online on open source platforms, engages the scientific and external communities through sharing instead of protecting its knowledge, and tries to take advantage of the intrinsically "anti-rival” property of knowledge. It is their way as latecomers to the AI party to catch up to rivals, and they seem to be picking up some momentum (check out this article Fast Company)

-- Yassine El Ouarzazi