Female economy: A phenomenon that consumer brands cannot miss
As a market, women represent an opportunity larger than the economies of China and the United States. Women effectively control roughly US$31.8 trillion in annual consumer spending, with the figure set to increase as more women enter the workforce globally1. In contrast, China and the United States’ nominal GDPs in 2020 were $14.7 trillion and $20.9 trillion respectively. By 2030, there will be 100 million more women in the global labour force, which translates to an average participation rate of more than 40%, lowering the gender gap in participation by 25% by 20252.
Importantly, this is a global phenomenon. With the swelling middle class in emerging markets, young women already play a pivotal role in shaping consumer markets. In China, for example, women are responsible for three-quarters of household purchasing decisions and their annual spending is set to increase to RMB 8.6 trillion by 2022, a 160% increase from 20173. Improved education also facilitates further financial autonomy.
This trend creates a huge opportunity across all sectors, ranging from nutrition to fitness and beauty (as women spend relatively more on themselves and their wellbeing), apparel, financial services and healthcare - the latter two having lagged for years in catering for the female audience. As an investor, this is a trend I follow closely and as I assess a brands’ strength, I pay attention to their ability to serve women and draw on this multi-year economic opportunity.
A constant focus on assessing management teams
I was fortunate to be exposed to strong women since a young age, starting with my mum who has now run a bank for over 40 years, which has returns so stable and defaults so low that even Jamie Diamon, head of JP Morgan, would be jealous. Through my own investment career, I became attuned to the quality of managers and spend considerable time in company meetings assessing not only the prospects of the business but also the motivation and ability of the people who run it. This has given me the opportunity to meet many female leaders while also noticing the changes still needed to advance gender equality.
There are many impressive female CFOs of the companies in the portfolio. One such being Tracey Tavis at Estee Lauder who has been a great partner to Fabrizio Freda in the successful turnaround we have benefited from as investors. She understands the capital markets well and is very good at managing our expectations. Others include Ruth Porat at Alphabet and Amy Weaver at Salesforce, who are examples of great leaders I’ve had the pleasure to interact with in my career.
A long road to close the equality gap
While I am grateful for having encountered so many inspiring women, it is clear that the road towards equality is still long. According to the 2021 Women CEOs in America Report, only 8.2% of Fortune 500 CEOs are women; 7.3% in the Fortune 1000; 6% in the S&P 500; 5.6% in the Russell 3000; and 7.4% at private companies with revenue over US$1 billion. These numbers are too low and progress is too slow. Beyond being a pressing moral and social issue, gender inequality is also a critical economic challenge. A McKinsey Global Institute report found that US$12 trillion could be added to global GDP by 2025 if all countries matched the progress toward gender parity of the fastest-improving country in their region4.
Diversity and inclusion considerations are key when I assess companies. Stocks within the Fidelity Global Demographics (Managed Fund) are exceeding their broader industries’ score. For example L’Oréal has 50% female representation at the board and senior management level versus 27.4% reported by its MSCI sub-industry group.
I believe Fidelity’s Voting Policy - voting against companies in developed markets with less than 30% female representation, in other markets with less than 15%, and against all male boards - will be extremely helpful in driving further progress. Women have consistently proved that they can make a positive impact at the highest level - we need to ensure that they get that opportunity.
1 Catalyst Research, April 2020: https://www.catalyst.org/research/buying-power/
2 Frost & Sullivan, Global Mega Trends to 2030, March 2020: https://www.prnewswire.com/in/news-releases/global-female-income-to-reach-24-trillion-in-2020-says-frost-amp-sullivan-846488109.html
3 HSBC Research, March 2020: https://www.hsbc.com/insight/topics/the-rise-of-chinas-female-consumers
(Managed Fund)
4 McKinsey Global Institute, 2015: https://www.mckinsey.com/featured-insights/employment-and-growth/how-advancing-womens-equality-can-add-12-trillion-to-global-growth; fastest-improving countries identified by the report are as follows: Spain for Europe, Chile for Latin America, and Singapore for Asia/South-East Asia.
