Despite having the world’s eighth-largest population, Bangladesh has been one of the least-noticed economic-growth stories, overshadowed by its giant neighbor, India, which surrounds it on three sides. Bangladesh’s economy is perhaps best known outside Asia for microcredit, pioneered by Grameen Bank, which dispenses small loans to village entrepreneurs. Its nominal per capita income, estimated by the World Bank at around $1,100, places Bangladesh on a level with much of sub-Saharan Africa.
Over the past decade, however, Bangladesh’s economy has been growing at an annual rate of 6 to 7 percent. Inflation has been moderate, and public debt levels low by world standards. Leveraging its huge, low-cost workforce at a time when costs in China have soared, Bangladesh has emerged as the world’s third-largest exporter of apparel, and exports of footwear, pharmaceuticals, and IT services are growing fast. Foreign direct investment is flowing into the manufacturing sector, while the government is stepping up investment in physical infrastructure. The economy is also benefiting from strong growth in remittances from Bangladeshis who work abroad, particularly in Persian Gulf economies and Southeast Asia. Moreover, Bangladesh also has a young and growing working-age population—the median age in the country is 24—that will provide a strong base for rising consumption in the coming decades.
Bangladesh’s strong and stable growth is fueling tremendous upward mobility. Tens of millions of Bangladeshis have been lifted out of poverty and propelled into the ranks of the middle class and affluent.
To measure this upward mobility, we segmented Bangladeshi consumers into five basic income brackets: bottom of the pyramid, which refers to five-member households subsisting on incomes of less than $150 a month; aspirant, $151 to $250; emerging middle, $251 to $400; established, $401 to $650; and affluent, more than $650. For the purposes of this study, we regard the last two income segments—established and affluent—as constituting Bangladesh’s MAC population, because they have attained the purchasing power to buy a broad variety of consumer goods and services and have acquired middle-class purchasing traits, such as buying goods that offer convenience and luxury in addition to basic necessities.
Bangladesh’s current MAC population, estimated to be around 12 million, is still small by Asian standards, accounting for only 7 percent of the country’s population, compared with 21 percent in Vietnam, 38 percent in Indonesia, and 59 percent in Thailand. This MAC population already represents a significant market for many global companies. These consumers also live in close proximity: Bangladesh has one of the world’s densest populations. Its 160 million people are packed into a territory roughly one-quarter the size of Thailand and one-third the size of Sweden.
What is even more important for consumer product companies is that Bangladesh’s MAC population is expanding rapidly—by an average 10.5 percent annually. That compares with 7.8 percent annual growth in Indonesia, 7.9 percent in Myanmar, and 4.9 percent in Thailand. (See Exhibit 1.) If Bangladesh can maintain this pace, its MAC population will grow by 65 percent over the next five years. By 2025, it is expected to nearly triple, to about 34 million.
Massive upward mobility among households at the lower rungs of the economy is likely to assure that growth in Bangladesh’s consumer class will remain robust for decades. Currently, some 84 million people—more than half of Bangladesh’s population—have incomes that classify them as being at the bottom of the pyramid. By 2025, however, we project that this group will shrink to 48 million. The aspirant income segment, meanwhile, will swell from 44 million people now to 64 million in 2020 and to nearly 92 million in 2025. The population of the next rung, the emerging middle, will increase from 17 million to 27 million in a decade.
At the same time, buying power will quickly spread through more of the country. Currently, around 80 percent of Bangladesh’s MAC population is concentrated in two cities—Dhaka and the eastern port city of Chittagong. We see the dispersion of wealth unfolding in two waves. In the first wave, most of the MAC population growth will occur in Dhaka and Chittagong and will begin to take off in smaller cities in the eastern half of Bangladesh. This development will have significant implications for business. For the next few years, consumer product companies will need to focus on scaling up their operations and service capabilities in Dhaka and Chittagong to meet surging demand and to attain economies of scale.
In the second wave, major concentrations of buying power will emerge in other places across most of the country. The MAC population will more than double in Dhaka over the next decade, and it will more than triple by 2025 in Rajshahi, an industrial center in North Bengal, and in Barisal, a southern port city. We project that the MAC population will increase sixfold in Khulna, an important, fast-growing industrial hub in southwest Bangladesh. In all, we project that by 2025, compared with only 36 today, 61 cities in Bangladesh will have MAC populations of 100,000 or more—a market big enough to be firmly on the radar of a global company. The number of cities with clusters of more than 300,000 such consumers will more than triple, to 33, by that time. (See Exhibit 2.) At first, growth will occur most rapidly in eastern cities such as Lakshmipur, Gazipur, and Brahmanbaria and then in such western cities as Jessore, Tangail, and Jhenaidah. This second wave of regional dispersion will require many companies to expand their infrastructure, distribution, financial management, and capabilities to many more cities in order to serve important new markets.
To capture the opportunities and establish a leadership position in Bangladesh, companies cannot simply transplant brand, product, and go-to-market strategies that have worked in other emerging markets. A number of traits differentiate the Bangladeshi consumer culture even from nearby Asian emerging markets. These traits are likely to influence purchasing priorities and preferences as households grow more prosperous. Even many multinational corporations with considerable emerging-market experience will need to treat Bangladesh as a new frontier.