31st July 2015
Sir Martin Sorrell, as we all know, likes to expand into new and growth territories: Asia-Pacific of course, but also India, South America, southern Africa, the old Communist bloc countries of Eastern Europe and Turkey.
But I wonder what Sir Martin will be thinking about Iran. I suspect he and other ambitious figures in the marcomms industry have done recently.
The thing about Iran is, it’s a very young country – two-thirds of the population weren’t even born when the Ayatollah Khomeni returned from exile and sparked the revolution in 1979 (and 56 per cent are aged under 25).
This population is, by the standards of the region, very well educated, tech and media savvy and – despite the impression given by their more conservative elders, their religious leaders and a sometimes belligerent faction within the leadership – rather enamoured of the west.
I haven’t been there personally (yet), but I have relatives there and know people who have, and who know the country and its people well. What they’re telling me is this: here is a nation that’s seen the rest of the world, via satellite TV and the internet, and wants to join in. Not everyone, certainly, but a good proportion. Many of the rising middle classes long to have a better standard of life, and enjoy the fruits of modernity.
Of course, the whole deal could yet be scuppered – there is opposition to it within the US, and certainly from Israel – but it is in America and the west’s long-term interests to have Iran within the fold. I suspect there will be factions within the government wanting to give their people a better standard of life as they know it is key to their own survival.
The structures for a modern, prosperous state are all there: lots of oil and gas (the world’s fourth and second-biggest respectively), a young population, reasonably developed infrastructure, good communications (there is, as of 2012, now more than one mobile phone per head of population and there are some 45 million internet users – much higher than Egypt or Saudi Arabia; telecoms employs more than 150,000 people), and according to the UN, economic growth rates in some areas of 20 per cent. The country has a lot of digital talent: IT and software is big business – even with the constraints placed upon it, Iran exported $50m of software in 2008 and there are more than 1,200 registered IT companies.
Add in some other interesting facts: Iranian women spend more on make-up per head than any other nation; the young are very fashion-conscious (young women often wear short skirts and fashionable clothes underneath their robes, and the men are fans of Western clothing brands); eating out is big business; consumer electronics and gadgets are popular.
Already, according to the BBC’s Persian Service, there are pockets of the super-rich in Tehran: they even have their own Instagram site, Rich Kids of Tehran, on which they celebrate their lavish lifestyles and designer labels, much to the fury of the country’s conservative elements. There’s even one photo of a pumped-up young Iranian wearing an “I Love America” T-shirt…
“Iranians love to eat, consume and shop, and they have continued to surprise domestic and international brands with their resilience,” Ali Borhani, the founder of Incubeemea, a Dubai-based advisory firm that works with multinationals looking at Iran, told the Wall Street Journal recently. “In a post-sanctions world, on the back of a multifaceted economy beyond hydrocarbons and oil and gas, Iran can be the most exciting frontier market.”
Bohrani belives European companies may have an edge on US competitors at first, lawyers say, because the European Union sanctions regime hasn’t been as restrictive, and US companies tend to be more wary.
But he added that Iranians are nostalgic for American products, which may give US multinationals an edge in the longer term. Many older Iranians remember driving Chevys, Cadillacs, Buicks and Mustangs before the 1979 revolution. And in the year to March 2015, cosmetics made up 0.1 per cent of the country’s $52bn (£32.8bn) total imports – many of them big name brands snapped up by increasingly image-conscious consumers.
Adding to the potential, Iranian consumers have very low levels of personal debt, Borhani told the WSJ. Some wealthier people have debit cards, but there is no MasterCard, Visa or American Express in Iran and few foreign banks are active there.
Even under sanctions, Iranians spent $77bn on food, $22bn on clothes and $18.5bn on outbound tourism in 2012. Imagine the spending power that could be unleashed if sanctions were lifted, and the estimated $150bn of assets frozen for decades were released!
Already there are rumours of hotel chains and airlines (as well, intriguingly, Hewlett Packard) heading out there, and I wonder if it will be long – again, assuming everything goes to plan and Iran meets its obligations and targets – before the ad agencies start moving in.
Most likely first moves would be in the form of joint ventures (Danone and Nestlé already have JVs there, and Mango, Benneton and Escada have all recently opened outlets in Tehran’s shiny new US-style malls); and WPP, Publicis and Dentsu Aegis Network or ambitious smaller European or Asian companies would possibly be more likely to take a punt than IPG or Omnicom, but who knows? One of the problems that companies like Nestlé have faced when doing business in Iran is that under the current sanctions regime, it’s very difficult to get money out of the country. Under the new deal, that’s less likely to be a problem.
There is already a thriving advertising scene in Iran – agencies include Badkoobeh, Kasra and Kanoon Iran Novin – but an injection of western investment cash, tech and know-how, coupled with local talent and knowledge, could make the country a real marcomms powerhouse.
Despite years of sanctions, the International Monetary Fund puts Iran’s per capita GDP at $16,500. That means Iranian consumers on average have more money to spend than their counterparts in emerging markets like Brazil, China, India and South Africa.
Looking at those figures, you’d want to give it a go, wouldn’t you? I wonder who will make the first move?