Which companies will gain as women’s financial power grows?

From The Times, August 8, 2009

Harriet Harman has extolled the strengths of women as political leaders, the London School of Economics has flagged the autonomy of women as public company directors, and now Goldman Sachs has highlighted the rising spending power of women in the world’s fastest-growing economies, while considering what this could mean for the stock market.

The US investment bank’s take is engagingly straightforward: a narrowing of gender inequalities and a widening of the middle classes in countries ranging from Brazil to Bangladesh will have profound effects on global patterns of consumption and saving over the next decade or so. It claims that women are increasingly wielding the purse rather than just carrying it — and that means households will not only spend more, they will also spend differently.

So what’s the evidence? Goldman contends that most of the key indicators in the so-called Bric nations (Brazil, Russia, India and China) and the 11 next-most important emerging economies point towards increasing parity between the sexes.

In education, girls now fare nearly as well as boys in primary and secondary school enrolment, with China, Egypt, India and Iran having made especially strong gains over the past decade.
In employment, the number of countries where more women are participating in the labour force now exceeds those where their proportion is declining. In Pakistan, for example, females aged between 15 and 64 make up 21 per cent of the working population, against 11 per cent in 1990. Equally, women are working less in the lower-paying and less productive parts of the economy, like subsistence-level agriculture, where they once dominated. Agriculture now accounts for half of female employment in Turkey, for example, against three quarters in 1990.
In terms of health, female life expectancy has improved dramatically: women born today in Bangladesh, Egypt and Indonesia can expect to live ten years longer than those born in the same countries in 1990. Conversely, fertility rates have tumbled: the average number of children born per woman has fallen by 30 per cent or more in most of these countries in the past 20 years, and by nearly 60 per cent in the case of Iran.

In politics, 20 per cent or more of parliamentary seats in China, Mexico, Pakistan, the Philippines and Vietnam are now held by women — more than in the US and much more than in Japan.

Further, Goldman finds encouragement in a range of legal and cultural changes. Women’s standing in property and inheritance laws, divorce rights and access to capital is steadily improving. The age at first marriage is rising, especially in India, while adolescent fertility rates are falling, reflecting the impact of girls’ education. Meanwhile, female-headed households are becoming more prevalent.

So how does this progress translate into purchasing power? For a start, says Goldman, the sexes tend to spend differently. Whereas men use up more of their income on their own consumption — alcohol, cigarettes and high-status consumer goods — women are more likely to buy products and services for their families, including food, healthcare, education, clothing and personal-care items.

In the UK, for example, women are responsible for more than three-quarters of household spending on childcare, food and education, but less than half the spending on tobacco and about one-quarter on alcohol — and what applies in developed countries holds true in their developing peers.

But women also tend to save more than men — a precautionary measure that Goldman in part attributes to their higher economic vulnerability. On average, every one percentage point increase in a woman’s share of household wages boosts aggregate savings by one quarter of that amount.

The broader picture is that the global “middle class” — defined as annual income of between $6,000 (£3,600) and $30,000 — is set to grow from 1.7 billion people today to about 3.6 billion by 2030, around 85 per cent of whom will live in the 15 countries that Goldman has tracked.
Critically, given that women account for three-quarters of all spending in consumer markets, their growing independence is likely to produce incremental growth in consumption on top of the increased demand that can be pinned on rising income alone.

What will women buy? Higher-quality and protein-intensive food; healthcare, which will benefit spending on diagnostic technology, therapeutic equipment and private health insurance; other financial products, such as credit cards and savings vehicles; education, which augurs well for textbook publishers; and consumer durables and clothing. According to Goldman, those London-listed companies most exposed to growing gender equality include HSBC, Prudential, Standard Chartered, Cadbury, Kingfisher, Tesco, Unilever and GlaxoSmithKline.

But the bank also suggests that women’s negative influence on alcohol expenditure will be more than offset by the broader trend of rising incomes — which means Diageo makes the list, too.