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This is the new reality in emerging markets

Sandi Peterson, global worldwide chairman of Johnson & JohnsonSandi Peterson, global worldwide chairman of Johnson & Johnson
Sandi Peterson, global worldwide chairman of Johnson & JohnsonPhotograph by Stuart Isett

For years, emerging markets spoiled global businesses. They behaved relatively predictably and provided dynamite, double-digit growth. “The last 10 years was a golden age for low volatility in emerging markets,” said Sandi Peterson, global worldwide chairman of Johnson & Johnson (JNJ), speaking in a panel discussion at Fortune’s Most Powerful Women summit in Washington, D.C. Tuesday. “The reality is back to the future,” she added. “People need to go back and remember what it was once like to lead businesses in emerging markets.”

What happened?

Jane Fraser, CEO of Latin America for Citigroup (C), chalks it up to the “convergence of the three C’s”: the commodity super cycle going bust, the slowing of China (which many countries had come to depend on), and a capital exodus from emerging markets (which has led to $800 billion in outflows this year). “That’s one hell of a cocktail,” said Fraser.

For dealing with this newly tumultuous environment, Peterson believes companies need to diversify geographical risk and think long term.

Denise Morrison, CEO and president of Campbell Soup Co. (CPB) recommends a strategy that her company has implemented in recent years to better manage its business in foreign markets: hiring global talent and forming partnerships—the food company struck a joint-venture in China, for example—that provide companies a base of knowledge in foreign markets.

Despite the volatility, Morrison remains convinced emerging economies are a good bet given their burgeoning middle classes—and that those in the developing world are shrinking. She points out while growth in developing countries has slowed, it’s still relatively robust. (She expects these markets will deliver 70% of the food industry’s growth over the next decade.) She too stresses the long term and encourages a more expansive outlook. “We think in quarters. The Chinese think in dynasties.”