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

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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.

3M- International

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.

3M- International Sales

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.

WHO- Food Borne Illnesses

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.

3M- Health Care

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.

World Bank- Investment Requirement

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.

OECD- Middle Class

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%.

3M- Consumer

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.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for 3M.
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