Anglo-Dutch consumer goods giant Unilever (UL) has reportedly inked a joint venture with local rival Europe & Asia Commercial Company (EAC) in Myanmar as it bets on the “fast-opening country.” Despite a decline in both economic growth and the local currency, the consumer producer maker is bullish on the growth opportunity after trade restrictions have been lifted.
Most international sanctions were removed in response to Myanmar’s political transition in which once-exiled dissident Aung San Suu Kyi took power in 2016. A top executive at Unilever says the country is now entering a “land-grabbing phase” for consumer goods groups, as major global brands gain access to a market of more than 50 million people.
Unilever’s Myanmar unit hopes to triple sales in three years, foreseeing upside from the country’s relatively young population, high growth and limited exposure to large multinational brands. The new partnership with EAC is intended to increase manufacturing capacity and boost distribution into Myanmar’s more rural areas.
Looking to Emerging Markets for Growth
Unilever follows other large consumer groups such as the Coca-Cola Co. (KO) and Japan’s Kirin as they bet on the frontier market. Emerging markets contribute almost 60% of Unilever’s total revenues, with Southeast Asia as the most profitable and fastest growing region in Asia. Earlier this year, Unilever announced a partnership with Southeast Asia’s Lazada, owned by China’s Alibaba Group (BABA), in order to build out its ecommerce presence in the target market.
While Myanmar’s economic growth slowed from 7.3% in 2015 to 6.4% last year, according to the Asian Development Bank, it is expected to rev back to 7.7% in 2017. Further, Unilever hopes the country will serve as a base to continue expanding its Southeast Asian operations.
“We have the potential also to export out of Myanmar into Southeast Asia,” the Financial Times quoted Pier Luigi Sigismondi, Unilever’s head for Southeast Asia. “This is something to explore in years to come. The labour cost is low and they have a strong manufacturing base,” he told the newspaper. (See also: Goodbye, Margarine: Unilever Done With Spreads.)