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Dr. Mark Lyons: Meeting the demands of the rising billions

August 13, 2017

Luther:                        I’m joined by Dr. Mark Lyons, global vice president and head of Greater China at Alltech. He received his master’s degree in brewing and distilling and a Ph.D. in solid state fermentation at Heriot-Watt University in Edinburgh, Scotland. Thank you for joining us.

Mark:                          Thank you.

Luther:                        What are your thoughts on the rising billion?

Mark:                          I think it’s really the “rising billions” because, as we delved into this, we really started to see what is transpiring in the world and how, from my perspective living in China for the last five years, we’re only at the start of a major change.

                                    We think about the transformation of China in the last 30 years, and what’s taking place is that only 10 percent of the Chinese population has about $10,000 of disposable income in their pocket. By 2030, that will increase to 35 percent of the population. That 25 percent increase is bigger than the American population. So, if we think about that and then we think about India, we think about many other developing nations, we think about the continent of Africa, and to a certain degree we even think about the transformation through technology of our own population and millennial spending and the next generation coming after them — there’s an absolute transformation in terms of the way our economy is going to work and the way our companies need to respond.

Luther:                        How do you define the rising billions in terms of that group of people?

Mark:                          By 2022, there will actually be more people in the middle class than the poor class. So, I think we’re starting to see that there’s a group of people who have money to spend and who are interested in different types of products. Their access to technology and the transparency that that brings is extraordinary, and some of the platforms they’re using, particularly “fintech,” or financial technology, are really transforming these individuals. So, these are people for whom there’s an aspirational element. There’s a yearning to have certain types of products. And so, I think we need to market to these individuals in a different way than we traditionally do and realize that the market is much, much bigger than our traditional market or our domestic market. This is going to take different types of thinking. It’s also going to take different ways of transacting.

Luther:                        So, how are we going to connect these people to the internet? What technologies are going to be used?

Mark:                          Yes, there are some really exciting projects. There’s Project Loon, which is essentially launching a bunch of mini satellites and ways for people to be connected. Just the emergence of accessible smartphones, so people are able to get access to the internet. Some of the estimates are that by 2030 we’ll have about 50 percent of the global population connected to the internet. I think that’s probably conservative. I think this is all going to happen a lot faster.

                                    Some of the projects that people are looking at — you’ll virtually be able to access the internet anywhere in the world at low cost. Already in China we’re using social media to pay, so Alipay, or a lot of other pay programs through WeChat, through social media. That’s transforming things, because people who don’t even have a computer are accessing information, but they’re also paying for products. In Africa, we’re already seeing that just through text messages people are paying for products, and that’s been in place for over five years.

Luther:                        How will the rising billions disrupt the global economy?

Mark:                          Look at the approximately 325 million Americans and the position of the number one economy globally. I think we have to accept the fact that there are countries that obviously have much bigger populations than us that are going to be — even if they’re half as affluent — their economies are going to be bigger. Obviously, there’s a lot of focus on China — but all the ASEAN countries, India, again Africa as a region — you’re talking about populations that dwarf ours. So, we have to start to switch our mindset from being so focused on our domestic market to start to think like these more nimble, smaller countries that are really export-focused.

                                    We’re originally from Ireland. Everything is about export. Everything is about the global network and being connected. I think, as a country, America needs to reposition itself to being a leader in technology, perhaps being a leader in innovations, and that those are the types of things that we’re going to lead the way in.

Luther:                        What should businesses be doing to prepare for the arrival of these additional billions of people coming online?

Mark:                          I think it’s really a way of seeing these as market opportunities and getting out there, visiting. Educate yourself, educate your people, start to think globally, and not in the closed mindset that we have.

                                    Unfortunately, I think politically and globally right now, there’s a lot of pullback. There are a lot of people pushing against globalization, but I think it’s just something that’s inevitable. Once that door opens, and how connected people are, if we don’t get involved in that, we’re going to be sitting on the sidelines.  As a very global company operating in almost 130 countries, we can’t think any other way. I always encourage people: Get out there. See what these markets are like. Find the ones that you think fit you, and your business, and your culture, and go there and make it happen.

Luther:                        What about in a local economy? You’re a global company. What about for a business that may be more local? Do you see an effect on that from the billions coming online? Is there something they should be doing?

Mark:                          I think the other aspect of it is that you see some of these markets, and you see similar challenges that they’re going through. I think there’s often a lot that can be learned.

                                    It really is incredible to see in China people going to Starbucks with no money — they get 10 people in line and no money changing hands. Isn’t that amazing? China’s probably going to be the first cashless society and also the largest country in the world.

                                    Are there things like that that maybe we could bring back here and we could innovate? Are there new technologies? Are there new ways that we could do things? I think that’s probably one of the parts that we find most interesting traveling around the world. You see something in some place, and you see applications for it in another.

                                    I think the local part is going to be critical because people are searching for — Europeans call it “provenance.” We call it “origin” or “traceability.” People want authentic products. They want local products. So, all of that is very, very important.

                                    Yesterday, we had a beer festival. Five thousand people came through. More than 5,000 people. What were they looking for? They were looking for beers that were local. They were looking for products that were local. That’s the real draw. The story…and that traceability is something that local companies will have as an advantage over global big brands, and that’s something they need to exploit.

Luther:                        You addressed the fact that in China they are exchanging currencies cashless. In what ways are the rising billions coming online that are different than the Western world?

Mark:                          I think that there’s obviously this whole discussion around leapfrogging, and the fact that they’re not having to go through all the steps. So many countries have just forgone having phone lines and all these networks that are very expensive and expensive to maintain. They’re skipping a lot of those infrastructure steps because they’re just able to go straight to cellular. Leapfrogging brings a certain expectation of speed, an expectation of change.

                                    The biggest difference is that they’re so much more open to change and anticipating change, whereas we’re often pushing back against change and wanting to have things stay the same. That’s something that concerns me, because I think that if you’re anticipating change, then you’re much more innovative. You’re much more likely to come up with new ideas. That’s something that I think we need to be aware of — that change is a good thing. Change is something that we should want, and we should be driving it forward.

Luther:                        Are there potential negative consequences to the rising billions coming online?

Mark:                          I think that geopolitical shifts and power shifts in the economy will cause eruptions. They’ll cause confusion. I think there’s a big feeling in this country of people who feel like America is number one. Wait a minute, what if we’re number two?

                                    Number one in what, and what is it that we’re really after here? I think repositioning America as a leader is really important. Are there negatives? I think that’s going to be down to how we handle the situation. There are incredible positives. The number of people that are going to be lifted out of poverty, and poverty being something that is of the past is very much an idea that we can be thinking about and realize is going to happen. That’s a tremendous positive; that can’t be a negative.

Luther:                        How will the rise in billions affect the average consumer?

Mark:                          I think that we’re going to see a total transformation in terms of the number of people in this middle class. In Asia today, about half a billion people would be considered in the middle class. By 2030, we’re talking about 3.2 billion.

                                    For the average consumer, I think that just transforms everything. We’re going to live in a world that’s totally different. The communication we’re going to have with these individuals around the world is going to be extraordinary. And so, I think for the average consumer, and we’re definitely going to see it in the next generations coming through, they’re going to grow up with a totally different mindset. I think that’s supposed to be the exciting part for us, but also maybe one of the challenges.

Luther:                        Amazon is always referenced for having taken advantage of the long tail effect. Do you see the rising billions as a similar effect to the long tail, maybe not as high in income, but because of the quantity that are coming online, the opportunity there for disruption and for profitability and companies that take advantage of it?

Mark:                          Absolutely. I think we’ve seen this now with companies that are operating in these very large markets. The population is so big that you can come up with something, make not that much money on it, and you’ve got such a scale that once you start to get out of your own country, your competitiveness is just off the charts. Certainly we’re seeing that in China. I think we’re already seeing that in India with some of the domestic companies. Once they start to step out of their own markets, they can really take a dominant position. That’s going to be something to keep an eye on.

                                    Already we’re facing a situation that seems like we don’t have that many companies that are really dominating the space, and that may even become fewer when we look at it globally. So, I think that’s something that many, many companies are seeing as a big opportunity.

                                    On the other side, I think back to the local idea, how do we come up with ways that we can play in those niche spaces that could be much more profitable? So, I think that in certain regards there are going to be dominant players, but sometimes those spaces are not that profitable. We’ve seen in many cases that, in certain niche areas that are very specialized, you can be making far less revenue and similar profits.

Luther:                        What other facts about the rising billions do you find surprising or intriguing or that you’re seeing that the average person in America or in the Western world may not realize?

Mark:                          I think the big message is that these individuals have the same types of desires and interests and want experiences and products that are probably not dissimilar to what we would want.

                                    I think their spending patterns are quite different than ours. I’m amazed in China. Beijing is such an expensive city. I look at the salaries that my colleagues make and the salaries that friends make, thinking, “How are people living on this?” You realize it’s because they’re not buying a lot of the types of things we’re buying. They don’t have two, three, four cars. They don’t have a television in every room. They think of debt in a very different way. And so, there’s a whole array of surprising things about these individuals and their spending patterns, but I think there’s opportunities within that.

                                    At the end of the day, I think our similarities are much greater than people anticipate. People care about the same types of things. Their family, certain interests, feeling important, feeling recognized. Those things are fairly universal.

Luther:                        Dr. Mark Lyons is the global vice president and head of Greater China at Alltech. Thank you for joining us.

Dr. Mark Lyons spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab. For access, click on the button below.

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