What Trends Will Ensure Growth For 3M From Developing Markets In The Future?

3M‘s (NYSE:MMM) international sales have declined over the past five years, and consequently, their share of the total net sales of the company have also been trending downwards. However, the company is focusing on both the developed and developing markets internationally to fuel growth in the future. A number of opportunities need to be identified by the company that can help the company to grow. For example, the transportation market in China is increasing at double-digit rates, and with the company supplying numerous products in this field, the company can take advantage of this sector.

Currently, the developing markets constitute 47% of the international sales for the company. 3M wants to grow this to ~50% by 2020, with international sales rising to between $21 billion and $23 billion, from the current $18 billion.

Some developing market trends that could help the company have been listed below.

1. Poor Air And Water Quality

Among the main problems facing developing countries are air and water pollution, which have been the side effect of rapid industrialization and construction growth. Furthermore, environmental factors are a root cause of numerous diseases, disabilities, and deaths in developing nations. According to WHO, these are estimated to cause 25% of death and disease globally, which can rise to as high as 35% in regions such as sub-Saharan Africa. This is one key growth area for the company, as it provides a wide range of solutions to address water quality concerns, including improving drinking water. Its portfolio also includes air quality monitors and air filters, to address such problems.

2. Increasing Food Safety Concerns

Developing countries bear the brunt of food borne diseases, with high level of hazards reported in the food available there. A number of studies have shown a higher prevalence of such diseases in developing economies, as compared to high-income countries. 3M can be considered to be a leader in developing innovative solutions to help the food and beverage industry to optimize the quality of their products. The company manufactures food and beverage testing products to ensure the achievement of the highest food safety and quality standards. It also develops environmental monitoring programs to identify and eliminate sources of potential contamination.

The company’s Health Care segment is strong and growing at a high pace, and is expected to grow at a CAGR of 5% to 8%in the international market, driven by growth in the developing economies.

We also predict the global medical supplies market to grow at an annual rate between 4% and 6% till 2023.

3. Demand For Infrastructure

In many developing economies, infrastructure needs remain large, and the expected annual investment requirements for such countries in the future is far larger than that for developed countries. One such country is China, where the infrastructure industry is expected to grow at a CAGR of 4% to 5%, between 2015 and 2020. Rising infrastructure demand also provides significant opportunities for the Safety and Security segment of 3M, wherein products are provided for worker safety, public safety, traffic safety, and public security.

4. Growing Middle Class

The developing world’s emerging middle class is a critical factor as an engine of growth, particularly in developing countries such as China and India, and in sub-Saharan Africa. OECD estimates the global middle class to increase from 1.8 billion in 2009 to 3.2 billion by 2020, and 4.9 billion by 2030, with the bulk of it coming from Asia. Asia is expected to represent 66% of the global middle class population by 2030, up from 28% in 2009.

The Consumer retail business  growth of 3M will be driven by this expanding middle class, through its brands such as Scotch Brite, Command, Nexcare, and Futuro. The international Consumer segment is expected to grow at a CAGR of 4% to 7%.

According to our Trefis estimates, the global consumer products industry should grow at an annual rate of 3% till 2023, driven by demand from the developing ecnomies.

Have more questions on 3M? Have a look at these links below:

• How Important Is The US For 3M?
• How Did 3M Perform In The Second Quarter?
• How Will 3M Perform In Q2 2016?
• Why Has 3M’s Stock Risen Over 20% Since The Beginning Of The Year?
• What Is The Growth Expected Of Markets Served By 3M’s Safety and Graphics Segment Over The Next 5 Years?
• What Is The Growth Expected Of Markets Served By 3M’s Health Care Segment Over The Next 5 Years?
• How Will 3M Perform In 2016?
• What Is The Growth Expected Of Markets Served By 3M’s Industrials Segment Over The Next 5 Years?
• What Is The Growth Expected Of Markets Served By 3M’s Electronics & Energy Segment Over The Next 5 Years?
• How Will 3M’s Strategy Of Acquisitions To Drive Growth Pan Out In The Future?
• Why Will The Health Care Segment Be A Key Growth Driver For 3M?
• What Was The Biggest Factor Which Resulted In A Change In Sales In Q1 2016 In Each Region For 3M?
• 3M Beats EPS, Revenue Estimates
• Will Organic Growth Drive 3M’s Q1 Earnings?
• What Does 3M’s Five-Year Growth Plan Entail?
• What Is 3M’s Plan With Regards To China?
• What Is The Geographic Breakdown of 3M’s Sales?
• How Does 3M Compare With Its Peers In Terms Of R&D Spending?
• What Is 3M’s Fundamental Value Based On Expected 2016 Results?
• How Will 3M’s Revenue And EBITDA Composition Change In The Next 3 Years?
• 3M: Year 2015 In Review
• What Is 3M’s Revenue And EBITDA Breakdown?

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