Market Dynamics in India - Consumer Trends and Momentum

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS
AND MOMENTUM
June 2015
MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM
India now world's third largest economy in PPP terms

Total GDP in PPP Terms 2030
With a total GDP of Rs125 trillion (US$2.0 trillion) in

2014, India stood as the ninth largest economy
China
US
globally. Average annual real GDP growth of 7.0%

between 2000-2014 surpassed the global average of
India
Indonesia
3.8% and the Asia Pacific average of 6.3% over the
Japan
Brazil
same period. Robust growth reflects strong and rising
Russia
levels of domestic consumption, export
competitiveness and high government spending.
10,000
20,000
30,000
40,000
50,000
60,000
US$ billion
In purchasing power parity (PPP) terms, India
Russia
Brazil
Japan
Indonesia
India
US
China
overtook Japan in 2006 to become the third largest
Real GDP % CAGR 2000-2014 and 2015-2030
economy globally, after China and the US, implying

that Indian consumers have far better capacity to
The country offers both growth and volume
advantages to businesses, as its forecast annual real
GDP growth of 5.8% over 2015-2030 will be the
highest among the 10 biggest markets globally. Its
expected total GDP of US$8.8 trillion by 2030 will
make it the world's third largest economy globally, in
US$ terms - more than the expected sizes of Brazil
and Russia combined.
Euromonitor International
% real GDP CAGR
acquire goods than their Japanese counterparts.
12
10
8
6
4
2
0
India
China
2000-2014
Brazil
2015-2030
Russia
16 million more middle-class households by 2030

In 2014, Indias middle-class households numbered 74.0 million, and Euromonitor International forecasts this
number will reach 90.1 million in 2030 - more than five times the expected number of Brazils middle-class
households in 2030.
Rising income levels have particularly increased penetration of consumer durables, with mobile phones, colour
televisions, cable televisions and motorcycles being the fastest growing consumer durables since 2000. As spending
priorities shift from basic necessities to more discretionary items, industries such as leisure and travel, beauty and
personal care and do-it-for-me home improvements are expected to benefit significantly.
Number of Middle-Class Households

2014/2030
Top 10 Consumer Durables in India

(% Households) 2014/2030
Mobile Telephone
China
Colour TV Set
India
Cooker
Bicycle
US
Cable TV
Motorcycle
Indonesia
Refrigerator
Russia
Personal Computer
Internet-Enabled
Brazil
Hi-Fi Stereo
0
50,000
100,000
Middle-class households (000)

2014
2030
150,000
25
50
75
% households
2014
2030
100
Share of wallet shifts towards discretionary spending

Share of Wallet by Category
2000/2014/2030
Discretionary spending is expenditure by consumers or

households on consumer categories such as transport,
100%
leisure and eating-out, other than that of essentials such

as food and non-alcoholic beverages and housing.
90%
The shifting priorities of the Indian middle class are
80%
evident in the shift in spending habits. Consumers are

70%
now moving beyond the basic necessities.

As the modernisation of Indias agricultural sector will
grocery prices, spending on necessities is expected to fall.
Rising incomes will increase consumers appetite for
discretionary spending. This spending capacity is
Value share
create more efficient food supply chains thereby reducing
60%
50%
40%
30%
improving for rich, middle-class and poorer Indian

households alike.
In 2014, discretionary spending absorbed 41% of the
overall budgets of low-income Indian households (decile
1). This category attracted 55% of the total outgoings of
20%
10%
0%
2000
2014
2030
middle-income homes (decile 5) that year and 67% of the
Discretionary spending
total expenditure of high-income households (decile 10).
Spending on food and non-alcoholic beverages and housing
Consumers increasing spending on lifestyle products and services

Consumer Spending Fastest Growing
Categories by Total Constant Value
Growth, 2000-2014 and 2014-2030
Hotels and catering, leisure and recreation and

transport are the highest discretionary spending
categories, whereas alcoholic beverages and tobacco,
200
are the lowest.

180
Frequent business trips and holidays as well as
160
stimulate growth in hotels and catering.
140
Regular air travel and high-performance vehicles are

common features of the richest Indians lifestyles, as
are high-end home cinemas and a range of cultural
experiences. This will take up a substantial share of
consumer spending.
Indias education sector will benefit from its increasing
% constant value growth
regularly dining out at restaurants and hotels will
120
100
80
60
young population, improved affordability, government
40
support and the low gross enrolment ratio.
20
Health goods and medical services will post the
steepest rise through to 2030, on the back of the

expansion of private healthcare and the growth in
Indias ageing population.
0
Hotels and
catering
Health goods
and medical
services
2000-14
Leisure and Household

recreation goods & services
2014-30
So who are these consumers?

How are Indian consumers distributed across our five consumer
types?
Undaunted Striver (16%)
Restless Spender (16%)
Ambitious
Busy
Tech-savvy
Confident
Capable
Image-conscious
Self-assured
I want to be and have the best.
Secure Traditionalist (24%)

Content
Status-driven
My life is hectic but exciting.
Independent
Minimalistic
Comfortable
Humble Homebody (21%)
Prudent Pragmatist (23%)
Family-orientated
Cautious
Guarded
Moderate
Ambivalent
Balance-seeking
Modest
Frugal
Family matters most to me.
I do not need much to be happy
I think carefully before making decisions.
Consumers contributing the most to discretionary spending

Who enjoys shopping? Who spends their
money on brand names and luxury products?
Who is the technophile?
Undaunted Strivers and Restless

Spenders both earn high incomes,
prefer to buy brand names and enjoy
shopping.
Undaunted Strivers and Restless
Spenders are the most tech-savvy
groups. Both are highly active online
and on social media and make sure
they purchase the latest technology.
Share of Population 2011
Undaunted Striver
and Restless
Spender
32%
Prudent Pragmatist,
Secure Traditionalist and
Humble Homebody
68%
Packaged food appeals to time-starved consumers

Rapid urbanisation, rising disposable incomes and less
spare time for urban working couples are supporting
demand for prepared meals, which are more convenient
and increasingly becoming a part of their daily lives.
% share
This has raised demand for packaged food, which is

seeing faster year-on-year volume growth than fresh
food.
Age Group Purchasing Ready Meals for Own

Consumption on Weekly Basis in 2011
The average age of first marriage will increase by around

two years for both men and women over 2012-2030;
from 24.5 to 26.5 years for men and from 18.9 to 21.0
years for women.
1519
This will widen the window of opportunity for packaged

food manufacturers, as according to Euromonitor
Internationals Global Consumer Trends survey, the 2029 years age group is the biggest contributor to ready
meals sales in India.
Ready meals and snack bars will see tremendous growth

exceeding overall packaged food growth over the forecast
period.
2024
2529
35
-39
4044
4549
5054
5559
6064
65+
Packaged Food: Retail Growth Indices by

Selected Category 2009-2019
1,200
1,000
800
600
400
200
0
2009
Ready Meals
3034
Age (years)
Index 2009=100
These unmarried singles prefer packaged food over fresh

food because of its convenience in terms of preparation
time.
18
16
14
12
10
8
6
4
2
0
2012
2015
Snack Bars
2018
Packaged Food
Changing lifestyles taking their toll

However, convenience, faster-paced lives and
Diabetic Prevalence and Overweight

Population 2000-2030
mind and potentially becoming a cause of many

chronic and cardiovascular diseases.
India is witnessing a rising obesity trend. With
growing urbanisation incomes its citizens are
becoming obese. The overweight population is
Percentage of overall
population
lifestyle changes are impacting health, body and
25
20
15
10
5
expected to reach 23% of the total population by
2000
2030.
diabetes and obesity cases is an increasing
accompanied growing economic prosperity, as
pre-diabetics, a precursor to Type 2, the most

common type of the disease. The majority of
diabetes cases are in southern India and the
metros.
2020
2025
2030
170,000
Number of people
In 2015, India has an estimated 77.0 million
2015
Number of Diabetic Patients (Aged 20-79 Years)

2000-2030
tendency towards sedentary lifestyles that have
already known for its sweet tooth.
2010
% Population Aged 20-79 Years - Diabetes Prevalence

% Population Aged 15+ Years - Overweight Population (BMI 25-30kg/sq m)
Among the reasons for the growing number of
well as genetic predisposition in a country
2005
150,000
130,000
110,000
90,000
70,000
50,000
2000
2005
2010
2015
2020
2025
Number of Diabetic Patients (Aged 20-79 Years)
2030
10
and driving strong growth in health and wellness products
60
Percentage
India is now one of the worlds most dynamic

markets for weight management products. While
higher-end options, such as custom-made weight
loss programmes, are starting to make inroads,
the market for lower-priced weight management
products, such as better for you reduced fat or
reduced sugar offerings, requires significant
development.
% value growth
According to Euromonitor Internationals Global

Consumer Trends survey, a large majority of
Indian respondents expressed the high
importance of physical exercise in terms of
wellbeing.
17
15
13
11
9
7
5
3
Weight Management vs Consumer Health:

Forecast Value Growth 2014-2019
Survey 2013 :When thinking about health, how

important is regular exercise to you?
40
20
0
India
China
US
UK
Japan
Very Important
Neither Important nor Unimportant
Not at all Important
France Germany Russia
Important
Unimportant
While India has not fully adopted the cult of thinness,

there is certainly pressure to be slim and this promotes
growth of weight management products.
The strong growth of weight management has been
driven by the emergence of a consumer type that
Euromonitor refers to as the undaunted striver.
2014-2015
2015-2016
Consumer Health
Weight Loss Supplements
2016-2017
2017-2018
2018-2019
Weight Management
Undaunted strivers are also highly likely to go to the

gym, and therefore consume protein supplements and
sports nutrition.
11
All that glitters: The luxury wave

Value Growth Across Various Consumer Goods Categories 2008-2018
25%
Luxury Goods
% value CAGR 2008-2018
Soft Drinks
20%
Pet Care
Toys and Games
15%
Tissue and Hygiene

Eyewear
Personal Accessories
10%
Packaged Food
Beauty and Personal Care
5%
Consumer Health
Apparel and Footwear
0%
Alcoholic Drinks
As the economy has shown signs of recovery, consumers have started indulging themselves by spending on luxury
goods.
Increasing retail presence of luxury players across the country and higher numbers of luxury brands entering the
country have resulted in strong performance of luxury goods over the review period.
Luxury brands such as Louis Vuitton are holding art shows and exhibitions to drive sales in second- and third-tier
cities, while Jimmy Choo has set up coffee morning events for its patrons.
12
Share of annual disposable

income per capita
The Indian consumer is not just about spending

Consumer Savings and Expenditure as Share of Annual Disposable Income per
Capita 1990-2030
100%
80%
60%
40%
20%
0%
1990
1995
2000
2005
2010
2011
2012
Consumer Expenditure
In 2014, Indias savings ratio stood at 31% of total disposable

income - ranking the third highest globally, after Chinas 39%
and Irans 33%. Indian consumers saving and wealth
2013
2014
India
such as real estate and gold over their working lives. Both of
these are seen as secure investments and contribute towards
improving their social status.
2025
2030
China
social and cultural traits, where debt is typically perceived as
proportion of their savings towards acquiring physical assets
2020
Countries with Highest Savings Ratios

2014
Iran
Family-orientated Indian consumers direct a significant
2016
Annual Savings
accumulation patterns are largely influenced by the countrys
an avoidable luxury.
2015
Singapore
Hong Kong
0
10
20
30
40
50
% disposable income
Hong Kong
Singapore
India
Iran
China
13
Gold and real estate remain top priorities among savers

Gold connection
JEWELLERY: Dual commodity

A constant value CAGR of 7% in Indias annual
30
savings over 2000-2014 has led to an 11% constant
15
20
value CAGR in retail sales of real jewellery. Real
10
10
-10
Real Jewellery - Retail Value RSP
% y-o-y growth
20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% y-o-y growth
Real Jewellery vs Annual Savings:

% Y-o-Y Growth 2000-2018
jewellery is not only considered a personal accessory

in India, but is also valued as a secure investment.
The personal accessories category therefore
registered the second highest retail value sales after
apparel and footwear in India in 2014.
Annual Savings
HOME OWNERSHIP: An outright purchase
Real purchase
Home Ownership by Tenure (000) 2014
Home Owners Without Mortgage
Home Owners With Mortgage
A significant proportion of total household savings in

India are directed towards home purchases, as the
penetration of mortgage products in India remains

low.
Indeed, some 93% of homeowners in India in 2014
Rented
did not have a mortgage. This is significantly higher
Others
than China (77% in 2014) and the Asia Pacific
average of 84% in the same year.

14
Over 1/3rd of Indias richest households will reside in 41 major cities

Population and Disposable Income
Split 2025
Megacities,2025
Delhi
Kolkata
Mumbai
Bangalore
Outer circle: Population

Inner circle: Disposable Income
Indias urban landscape will be primarily defined by 41

major cities that will surpass one million in population by
2025. These cities will drive demand for products and
services.
Per capita income levels in these 41 cities will be
significantly higher. Approximately 36% of households
with over US$15K in disposable income will be from these
cities while only 13% of Indias total population will live in
these 41 cities.
The population of six mega cities will surpass 10 million by
2025.
Hyderabad
Chennai
Megacities: Cities with

population >10 million
Cities with population between 1 and 10 million by 2025

Dhanbad
Patna
Jaipur
Amritsar
Bhopal
Pune
Allahabad
Thriruvanthapuram
Surat
Asansol
Thrissur
Ahmedabad
Jabalpur
Malappuram
Nasik
Jamshedpur
Kozhikode
Visakhapatnam
Varanasi
Coimbatore
Vadodara
Madurai
Nagpur
Kannur
Meerut
Kochi
Agra
Ludhiana
Indore
Ghaziabad
Faridabad
Kanpur
Lucknow
Rajkot
Vijayawada
15
The rise of the mega region

The prominent urban regions of India are
expected to be connected by urban corridor
projects linking Indian megacities across the
country
Major Industrial Corridors in India by 2025
The current largest corridor under development the Delhi-Mumbai Industrial Corridor - at a cost
of US$90 billion - will be the largest
infrastructure project in India's history. This will
be a 920 mile dedicated freight corridor and will
feature dozens of brand new cities along with new
ports and airports. It is designed to cut the
logistical costs of manufacturing goods, making
India a global manufacturing hub.
Another such project under consideration is a
new industrial corridor between Mumbai and
Bangalore.
Delhi-Mumbai
Mehsana-Valsa
However, such developments are expected to

present complex social concerns such as issues of
huge land acquisition.
Another obstacle that might lead to delay is
Indias complex bureaucracy. There is also an
urgent need to focus on social developments along
the corridors between cities.
Mumbai-Nagpur
Hyderabad-Hindupur
Bangalore-Belgaum
Srikakulam-Nellore
16
Yet Indias soul remains in its villages

While the proportion of the rural population has been falling over the last two decades, India remains a
predominantly rural country with over 66% of households still living in rural areas.
A model for rural development called "rurbanisation" has been adopted that has focused on providing all the civic
and infrastructure facilities available in big towns and cities to arrest migration. This has the potential to raise rural
prosperity and bring down the burden on large cities and towns facing overcrowding.
This process has accelerated the convergence in consumer habits between urban and rural India. In fact, packaged
food consumption is rising faster in rural areas than in cities. There is likely to be an acceleration in the
rurbanisation trend, making rural and urban India more homogeneous in terms of consumer behaviour, while the
differences that exist within individual cities are expected to increase.
Rural Population vs. Sales of Packaged Food in Rural Areas 2000-2014

30
Share of rural population
72%
25
71%
20
70%
69%
15
68%
10
67%
66%
65%
0
2000
2001
2002
2003
2004
2005
2006
2007
Share of Rural Population in Total Population
2008
2009
2010
2011
2012
Share of Packaged food in Rural areas
2013
2014
Share of package food

value sales in rural areas
73%
17
Focus on traditional channels key to success in rural markets

Traditional retailers such as kiranas (local independent retailers),
haats (open markets) and melas (fairs) play a vital role in the
distribution of many goods in India.
Packaged Food Distribution

Breakdown 2014
Although the share of traditional retailers has declined slightly, the

majority of packaged food in India is sold through kiranas, hence
having a solid presence in this channel is key to success.
Other Grocery
Retailers
Traditional
Grocery Retailers
The majority of Indians, particularly in rural areas, lack access to

modern retailing formats and still shop in them because kiranas
give credit and are prepared to deliver even the smallest orders.
Correspondingly, companies need to design strategies that meet the
needs of the rural population and are designing new products and
tools to tap into the rural market.
An interesting example is Project Shakti launched by Unilever in
2000. Unilever focused on empowering women, known as Shakti
Ammas, who act as distributors and brand-builders for Unilever.
Similarly, packaging is an area of key focus for manufacturers.
Small pack sizes help boost sales in impulse categories, such as
sweet and savoury snacks and confectionery, and flexible packaging
improves the affordability of such products.
Courtesy of Hindustan Unilever Ltd
18
Young consumers plan to further increase tech spending

According to the latest survey on future spending priorities conducted by Euromonitor International in 2014, a large
majority of respondents under the age of 45 expressed an intention to increase their spending on new technology.
Indian men, in particular, are eager to increase their technology purchases, making them a prime target for
companies seeking to grow their technology sales.
Interestingly, even low-income Indian men are increasing spending - close to half of Indian male respondents under
24 who earn less than US$2,500 a year and over half of those earning between US$2,500 and US$10,000 a year plan
to increase their spending on new technology.
Interest in Spending on New Technologies, 2013

55
% of respondents
50
45
40
35
30
25
20
15
10
5
0
15-29
30-44
45-59
60+
Source: Euromonitor International consumer survey, GCT Survey 2013

Note: Showing percentage of respondents who indicated that they were interested in spending ion new technologies
All demographics
19
Despite reforms, business environment remains difficult

Despite Indias huge growth potential, Indias
Indias Ranking in Doing Business Index 2015
tough business environment remains a major

discouragement for investors.
The dearth of investments and slow regulatory
Enforcing Contracts
Dealing with Construction Permits
approvals have led to unstable electricity supply,

inadequate transport networks in cities and rural
areas and low mobile telephone and internet
Starting a Business
Paying Taxes
penetration rates. Meanwhile, complex regulatory

frameworks, stringent red tape, lack of
governance and rigid labour market result in
higher costs for businesses.
In the World Banks Ease of Doing Business
(Doing Business) 2015 report, India ranked
142nd out of 189 countries, as businesses struggle
with the countrys complex start-up procedures,
Resolving Insolvency
Getting Electricity
Trading Across Borders
Registering Property
Getting Credit
relatively high taxes, difficulties in obtaining

electricity connection and construction permits
and enforcing contracts. At 142nd, India lags
behind many of its Asia Pacific counterparts,
notably China (90th), Indonesia (114th) as well as
Pakistan (128th).
Protecting Minority Investors

0
50
100
150
Out of 189 Countries
200
20
Marketplace is set to fragment further

Indias widening of socioeconomic inequality will further fragment the marketplace. In 2014, 31% of total annual
disposable income accrued to Indias richest 10% of households (decile 10), while the poorest 10% (decile 1) claimed
1.8%. Likewise, decile 10s consumer spending was over six times the level of decile 1s outlay in the same year.
Growing income disparities impede the growth of the middle class, which in turn limits growth of consumer
discretionary spending.
India has adopted several poverty reduction measures such as the National Rural Employment Guarantee Scheme,
pension increases and a cash transfer programme in a bid to reverse the widening wealth gap in both rural and urban
areas. However, such efforts have been partly undermined by corruption and poor management in aid programmes
and partly due to imbalances in its regional growth. As such, decile 10s slice of total annual disposable income is
expected to rise to 33%, while the decile 1 share will drop further to just 1.7% by 2030.
Average Household Annual Disposable Income by Decile 2014/2030

Average household annual disposable
income (US$)
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Decile 1
Decile 2
Decile 3
Decile 4
Decile 5
2014
Decile 6
2030
Decile 7
Decile 8
Decile 9
Decile 10
THANK YOU FOR READING

This is an extract from the full Euromonitor International report Mega to Micro: Trends
Shaping Indias Consumers.

Market Dynamics in India - Consumer Trends and Momentum

Uploaded by

Copyright:

Available Formats

Market Dynamics in India - Consumer Trends and Momentum

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Market Dynamics in India - Consumer Trends and Momentum

Uploaded by

Copyright:

Available Formats

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM

India now world's third largest economy in PPP terms

With a total GDP of Rs125 trillion (US$2.0 trillion) in

globally. Average annual real GDP growth of 7.0%

3.8% and the Asia Pacific average of 6.3% over the

same period. Robust growth reflects strong and rising

levels of domestic consumption, export

competitiveness and high government spending.

In purchasing power parity (PPP) terms, India

overtook Japan in 2006 to become the third largest

Real GDP % CAGR 2000-2014 and 2015-2030

economy globally, after China and the US, implying

% real GDP CAGR

acquire goods than their Japanese counterparts.

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM

16 million more middle-class households by 2030

Number of Middle-Class Households

Top 10 Consumer Durables in India

Middle-class households (000)

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM

Share of wallet shifts towards discretionary spending

Discretionary spending is expenditure by consumers or

leisure and eating-out, other than that of essentials such

The shifting priorities of the Indian middle class are

evident in the shift in spending habits. Consumers are

now moving beyond the basic necessities.

discretionary spending. This spending capacity is

create more efficient food supply chains thereby reducing

improving for rich, middle-class and poorer Indian

1). This category attracted 55% of the total outgoings of

middle-income homes (decile 5) that year and 67% of the

total expenditure of high-income households (decile 10).

Spending on food and non-alcoholic beverages and housing

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM

Consumers increasing spending on lifestyle products and services

Hotels and catering, leisure and recreation and

are the lowest.

Frequent business trips and holidays as well as

stimulate growth in hotels and catering.

Regular air travel and high-performance vehicles are

% constant value growth

regularly dining out at restaurants and hotels will

young population, improved affordability, government

support and the low gross enrolment ratio.

Health goods and medical services will post the

steepest rise through to 2030, on the back of the

Leisure and Household

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM

So who are these consumers?

Restless Spender (16%)

Secure Traditionalist (24%)

Humble Homebody (21%)

Prudent Pragmatist (23%)

Family matters most to me.

I do not need much to be happy

I think carefully before making decisions.

MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM

Consumers contributing the most to discretionary spending

Undaunted Strivers and Restless