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These 4 Brands Are Surprise Winners in Emerging Markets


Some familiar brands are making big strides by focusing on a different kind of consumer. Plus, Dr. Roubini issues a prognosis on Indonesia, and more in this week's look at CIVETS emerging economies.

When you start looking at emerging markets for investment potential, one thing becomes clear: Many consumer truisms here are not so true elsewhere. They're particularly not-so-true in emerging markets.

Consumers there may more closely resemble our parents' or grandparents' generations. They're the first in their families to get a higher education, wear a suit, and live in the big city. They're finally ready to buy a car. They're getting a phone for the first time, but of course it's going to be shared by the whole family.

As a result, the brands they buy may be different, too. The companies that recognize this are flourishing -- maybe not in the US, but in Indonesia or Turkey or South Africa.

Here's a look at a few of the brands that are not so hot here, but are very hot in emerging markets. This should by no means be considered a recommendation to buy any of these stocks, or not. But it helps illustrate how some companies are adapting to a changing global marketplace.

Volkswagen is expected to become the world's top automaker soon, passing Toyota (TM) and General Motors (GM). But it's already the top-selling brand in China.

Its focus on emerging markets doesn't stop there. It has also become the top brand in South Africa, taking a market share above 22% with a new model called Polo Vivo, a kind of redo of the Golf.

As in all emerging markets, the key is what VW calls "affordable and accessible mobility" for people who aspire to car ownership. At a starting price of about $13,500, the Vivo passed competitors including Toyota, Ford Motors (F), and Renault in the category.

Yum! Brands
If you think your town has plenty of KFC outlets, you ought to see Jakarta. Yum! Brands (YUM) just opened its 400th fried chicken joint in Indonesia, most of them in and around the capital city.

Its international division, based in China, has 14,300 company-owned or franchised restaurants in 110 countries, and is adding more at a rate of 700 a year. Most of them are KFC or Pizza Hut outlets, but Taco Bell is about to go global, too.

Its biggest push is within China, which already has 3,300 KFC stores. The company is even testing Chinese fast-food in China, with a new chain called East Dawning.

KFC also has a big presence in South Africa, where its 700 restaurants represent a 44% share of the fast-food market. The company just announced a plan to bring KFC to the entire African continent. It hopes to have 1,100 outlets there by 2020.

It beat McDonald's (MCD) to Vietnam, too, opening 38 KFC stores, mostly in Ho Chi Minh City and Hanoi. Vietnam's politics aren't at fault. Mickey D's reportedly is wary of Vietnam's legendary red tape.

It's not much good pointing out that Nokia (NOK) is still the top-selling mobile phone maker in the world, largely because of its strength in emerging markets. When smart phones started taking off, Nokia was looking the other way.

Nokia still leads, but only by the sheer volume of its low-end and low-margin not-so-smart phones, which still are popular in emerging markets. Its best-selling models have two SIM cards so that family members can share them.

We just got an idea whether and when Nokia can make a comeback, from this week's Nokia World in London. The company unveiled its new line of smartphones based on the latest version of Microsoft (MSFT) Windows software, which will replace its own outdated Symbian.

Interestingly, the company also is working on new and inexpensive phones for what it calls "the other billion," those first-time mobile phone buyers in emerging markets.

Then again, as Forbes points out, if Apple (AAPL) comes out with a cheaper iPhone, things could get ugly for Nokia.

Apparently nobody has told the emerging nations that the PC is dead. At least that's the explanation for the sixth consecutive record quarter from Intel (INTC). The company cited strong PC sales to corporations and emerging markets for the quarter, which saw net income rise 17%.

Double-digit sales growth in China, India, Indonesia, and Turkey were noted. A total 57% of the company's sales in the quarter were in the Asia-Pacific region.

In fact, CEO Paul Otellini said in the conference call that China is now the world's top computer market. Chinese buyers tend to go for the high-end PC, while lower-priced notebooks are popular in other emerging markets.

CIVETS In Brief:

Dr. Doom Visits Indonesia
The man known as the "Dr. Doom" of economics came to Indonesia and, to the evident relief of the populace, he liked what he saw. Nouriel Roubini, chairman of Roubini Global Economics and a professor at New York University, told The Jakarta Globe he was bullish on the nation's economy, based on its policy framework and commitment to reform.

Roubini said he expects Indonesia's economy to grow by 6.5% to 8% annually if it makes needed investments in infrastructure and "human capital," and continues its reforms.

Roubini got his awesome nickname by predicting the collapse of the US housing market and the global recession. He prefers "Dr. Realist."

Vietnam Cuts Growth Forecast
Vietnam has cut its 2012 economic growth forecast to between 6% and 6.5%, saying it would miss some major goals as it tackles fast-growing inflation. Its previous forecast was for growth between 7% and 7.5%.

Consumer price inflation in the country slowed for a second month in October, but at 21.59% year over year, it is still the worst in Asia.

Positions in MSFT and NOK.
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