Two Harvard professors penned books this year describing the rise of the non-Western world and the growing significance of megacities. These topics can spark endless debate over the potential decline of Western civilisations, but savvy investors will spot opportunities in up-and-comers like China. Western companies create powerful brands and products tailored to a rapidly urbanising world. For the food and beverage industry, overseas markets look like an international tasting menu.

The rise of the rest
In Niall Ferguson’s book Civilization: The West and the Rest, he claims the West rose to power through “killer apps,” including competition, science, property, modern medicine, consumption, and work ethic. Currently, the “rest” of the world is playing catch-up by “downloading” these apps at an astounding pace. From his perspective, globalisation and outsourcing have strengthened economies like China and India, but the book serves as awake-up call of sorts for the West.

The effects of Ferguson’s killer apps can be seen in the cities of the developing world. In Edward Glaeser’s book Triumph of the City, he concludes cities are thriving because “urban density provides the clearest path from poverty to prosperity.” This shift from remote villages to megacities shows no signs of slowing. Take a look at these statistics:

  • The World Health Organization predicts that the urban population in developing countries will double by 2050.
  • A market research firm estimates that 58% of food is consumed by developing countries currently. It expects this figure to reach 72% by 2050!

This is explosive population growth, but what does it mean for food and beverage companies? Let’s focus on four major trends:

As China prospers, Australian and American companies profit

Australia’s miners such as BHP Billiton Ltd. (ASX: BHP) and Fortescue Metals Group Ltd. (ASX: FMG) are obvious winners from the rise of Asian economies. Other slightly less obvious companies are also profiting.

Incitec Pivot Limited (ASX: IPL) is a double play on the rise of Asia. It produces the fertilizers required to increase agricultural output to feed the growing Asian middle classes as well as explosives to the miners. Cochlear Ltd. (ASX: COH) recently saw its share price slashed over the recall of its leading ear implant product. However, long term the growing Asian middle class will be a major growth driver for Cochlear.

In a recent Financial Times interview, Coca-Cola‘s (NYSE: KO) chief executive, Muhtar Kent, voiced frustration over the uncertain business climate in America, but praised the developing world:

They’re learning very fast, these countries. In the west, we’re forgetting what really worked 20 years ago. In China and other markets around the world, you see the kind of attention to detail about how business works and how business creates employment.

However, he doesn’t seem deterred by a sluggish domestic economy. Kent claims that American companies can “crack the code for growth” overseas, which ultimately benefits shareholders and creates jobs. Coke performs exceptionally in this area, capturing an estimated 21.4% of the international soft drink market. In the first six months of 2011, Coke sold more than 1 billion cases of its products in China, twice the rate of sales from five years ago.

Meat, it’s what’s for dinner
In the past 20 years, China’s appetite for meat has doubled. To feed its livestock, China has been importing crops like corn, wheat, and soybeans at a rapid rate.

China is Australia’s number one trading partner. It takes 26% of our exports and produces 19% of our imports. Though, whenever I visit a Wesfarmers Ltd. (ASX: WES) owned K-Mart, it feels more like 90% of imports.

From 2005 to 2010, China went from the fifth largest U.S. export destination to No. 1, and agricultural exports to China grew 235%. This shift from a carbohydrate diet to a protein diet will be a boon for agribusiness giants like Archer Daniels Midland (NYSE: ADM) and Bunge (NYSE: BG) . Archer Daniels noted in its recent 10-K that “Soybean protein meal demand improved, particularly in Asia.” Likewise, Bunge’s sales to Asia grew 14% from 2009 to 2010.

Show me the brands
City-dwellers with rising incomes tend to be more brand-conscious than their rural neighbours in countries like China. Fortunately, as China.org.cn pointed out, “Chinese people have grown to trust American products.” The article describes how American firms often produce better quality goods than Chinese firms. For example, when a Chinese food manufacturer added the harmful melamine substance to its infant formula in 2008, Chinese families quickly switched to trusted American brands like Enfamil, a Mead Johnson (NYSE: MJN) product, and Similac, an Abbott Laboratories (NYSE: ABT) product. China currently has some kinks in its food supply chain, and U.S. companies are taking advantage.

Food for thought
So is China eating our lunch? Perhaps. But the American food and beverage industry isn’t complaining. Ferguson’s and Glaeser’s studies could indicate a tilt in global power, but this tilt presents opportunities for competitive Australian and American businesses. The ongoing trade of high-quality Western products and raw materials with foreign consumers is a two-way street, providing benefits for all parties, including investors!

Are you looking for more quality stock ideas? Readers can click here to request a new free report titled The Motley Fool’s Top Stock For 2012.

Originally written by Isaac Pino and published at fool.com.

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