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MARKET DYNAMICS IN INDIA: CONSUMER TRENDS

AND MOMENTUM
June 2015

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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

0

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

with mobile phones. As spending priorities shift from basic necessities to more discretionary items. colour televisions. industries such as leisure and travel.000 Middle-class households (‘000) 2014 © Euromonitor International 2030 150. 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 0 25 50 75 % households 2014 2030 100 .1 million in 2030 . cable televisions and motorcycles being the fastest growing consumer durables since 2000. and Euromonitor International forecasts this number will reach 90.000 100. India’s middle-class households numbered 74.3 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 16 million more middle-class households by 2030  In 2014.0 million.more than five times the expected number of Brazil’s middle-class households in 2030. beauty and personal care and do-it-for-me home improvements are expected to benefit significantly.  Rising income levels have particularly increased penetration of consumer durables.

 Rising incomes will increase consumers’ appetite for discretionary spending. 90%  The shifting priorities of the Indian middle class are 80% evident in the shift in spending habits. middle-class and poorer Indian households alike. discretionary spending absorbed 41% of the overall budgets of low-income Indian households (decile 1). 100% leisure and eating-out. 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).  In 2014.4 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 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. Spending on food and non-alcoholic beverages and housing © Euromonitor International . spending on necessities is expected to fall.  As the modernisation of India’s agricultural sector will grocery prices. Consumers are 70% now moving beyond the basic necessities. This spending capacity is Value share create more efficient food supply chains thereby reducing 60% 50% 40% 30% improving for rich. other than that of essentials such as food and non-alcoholic beverages and housing.

This will take up a substantial share of consumer spending. on the back of the expansion of private healthcare and the growth in India’s ageing population. 140  Regular air travel and high-performance vehicles are common features of the richest Indians’ lifestyles. government 40 support and the low gross enrolment ratio. 20  Health goods and medical services will post the steepest rise through to 2030. 200 are the lowest. © Euromonitor International 0 Hotels and catering Health goods and medical services 2000-14 Leisure and Household recreation goods & services 2014-30 . whereas alcoholic beverages and tobacco. leisure and recreation and transport are the highest discretionary spending categories.5 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 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. 180  Frequent business trips and holidays as well as 160 stimulate growth in hotels and catering. as are high-end home cinemas and a range of cultural experiences. improved affordability.  India’s education sector will benefit from its increasing % constant value growth regularly dining out at restaurants and hotels will 120 100 80 60 young population.

” © Euromonitor International “I do not need much to be happy” “I think carefully before making decisions.” • Independent • Minimalistic • Comfortable Humble Homebody (21%) Prudent Pragmatist (23%) • Family-orientated • Cautious • Guarded • Moderate • Ambivalent • Balance-seeking • Modest • Frugal “Family matters most to me.6 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 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.” .

Both are highly active online and on social media and make sure they purchase the latest technology. Secure Traditionalist and Humble Homebody 68% © Euromonitor International . prefer to buy brand names and enjoy shopping. Undaunted Strivers and Restless Spenders are the most tech-savvy groups. Share of Population 2011 Undaunted Striver and Restless Spender 32% Prudent Pragmatist.7 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 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.

0 years for women. 2024 2529 35 -39 4044 4549 5054 5559 6064 65+ Packaged Food: Retail Growth Indices by Selected Category 2009-2019 1.  Ready meals and snack bars will see tremendous growth exceeding overall packaged food growth over the forecast period. as according to Euromonitor International’s Global Consumer Trends survey.000 800 600 400 200 0 2009 Ready Meals © Euromonitor International 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 . 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 2012-2030.200 1. rising disposable incomes and less spare time for urban working couples are supporting demand for prepared meals. from 24.8 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Packaged food appeals to time-starved consumers  Rapid urbanisation. 1519  This will widen the window of opportunity for packaged food manufacturers. which are more convenient and increasingly becoming a part of their daily lives.5 years for men and from 18.5 to 26. the 2029 years age group is the biggest contributor to ready meals sales in India.9 to 21. % share  This has raised demand for packaged food. which is seeing faster year-on-year volume growth than fresh food.

as pre-diabetics. 2010 % Population Aged 20-79 Years . the most common type of the disease. With growing urbanisation incomes its citizens are becoming obese. © Euromonitor International 2020 2025 2030 170.000 70. faster-paced lives and Diabetic Prevalence and Overweight Population 2000-2030 mind and potentially becoming a cause of many chronic and cardiovascular diseases.Overweight Population (BMI 25-30kg/sq m)  Among the reasons for the growing number of well as genetic predisposition in a country 2005 150.000 110.0 million 2015 Number of Diabetic Patients (Aged 20-79 Years) 2000-2030 tendency towards sedentary lifestyles that have already known for its sweet tooth.000 90. The overweight population is Percentage of overall population lifestyle changes are impacting health.  India is witnessing a rising obesity trend.000 2000 2005 2010 2015 2020 2025 Number of Diabetic Patients (Aged 20-79 Years) 2030 . India has an estimated 77.9 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Changing lifestyles taking their toll…  However. convenience.000 50. diabetes and obesity cases is an increasing accompanied growing economic prosperity. The majority of diabetes cases are in southern India and the metros. a precursor to Type 2. body and 25 20 15 10 5 expected to reach 23% of the total population by 2000 2030.000 Number of people  In 2015.Diabetes Prevalence % Population Aged 15+ Years .000 130.

there is certainly pressure to be slim and this promotes growth of weight management products. such as better for you reduced fat or reduced sugar offerings. % value growth  According to Euromonitor International’s Global Consumer Trends survey.” 2014-2015 2015-2016 Consumer Health Weight Loss Supplements © Euromonitor International 2016-2017 2017-2018 2018-2019 Weight Management  “Undaunted strivers” are also highly likely to go to the gym. 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”. . 17 15 13 11 9 7 5 3 Weight Management vs Consumer Health: Forecast Value Growth 2014-2019 Survey 2013 :When thinking about health. are starting to make inroads. and therefore consume protein supplements and sports nutrition. While higher-end options.  The strong growth of weight management has been driven by the emergence of a consumer type that Euromonitor refers to as the “undaunted striver. such as custom-made weight loss programmes.10 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM …and driving strong growth in health and wellness products 60 Percentage  India is now one of the world’s most dynamic markets for weight management products. the market for lower-priced weight management products. requires significant development. a large majority of Indian respondents expressed the high importance of physical exercise in terms of wellbeing.

consumers have started indulging themselves by spending on luxury goods.  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.11 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 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. © Euromonitor International .  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.

India’s savings ratio stood at 31% of total disposable income . © Euromonitor International 2025 2030 China social and cultural traits. 2015 Singapore Hong Kong 0 10 20 30 40 50 % disposable income Hong Kong Singapore India Iran China .12 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 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. Both of these are seen as secure investments and contribute towards improving their social status. 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 country’s an avoidable luxury.ranking the third highest globally. after China’s 39% and Iran’s 33%. Indian consumers’ saving and wealth 2013 2014 India such as real estate and gold over their working lives.

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. 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. some 93% of homeowners in India in 2014 Rented did not have a mortgage.  Indeed.13 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Gold and real estate remain top priorities among savers Gold connection JEWELLERY: Dual commodity  A constant value CAGR of 7% in India’s annual 30 savings over 2000-2014 has led to an 11% constant 15 20 value CAGR in retail sales of real jewellery. but is also valued as a secure investment. Real 10 10 5 0 0 -10 Real Jewellery . as the penetration of mortgage products in India remains low. This is significantly higher Others than China (77% in 2014) and the Asia Pacific average of 84% in the same year. © Euromonitor International .  The personal accessories category therefore registered the second highest retail value sales after apparel and footwear in India in 2014.

14 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Over 1/3rd of India’s richest households will reside in 41 major cities Population and Disposable Income Split 2025 Megacities. These cities will drive demand for products and services.2025 Delhi Kolkata Mumbai Bangalore Outer circle: Population Inner circle: Disposable Income  India’s urban landscape will be primarily defined by 41 major cities that will surpass one million in population by 2025. Approximately 36% of households with over US$15K in disposable income will be from these cities while only 13% of India’s total population will live in these 41 cities.  Per capita income levels in these 41 cities will be significantly higher. © Euromonitor International 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 .  The population of six mega cities will surpass 10 million by 2025.

such developments are expected to present complex social concerns such as issues of huge land acquisition. There is also an urgent need to focus on social developments along the corridors between cities. Delhi-Mumbai Mehsana-Valsa  However.  Another obstacle that might lead to delay is India’s complex bureaucracy. making India a global manufacturing hub.will be the largest infrastructure project in India's history. © Euromonitor International Mumbai-Nagpur Hyderabad-Hindupur Bangalore-Belgaum Srikakulam-Nellore .  Another such project under consideration is a new industrial corridor between Mumbai and Bangalore. This will be a 920 mile dedicated freight corridor and will feature dozens of brand new cities along with new ports and airports.at a cost of US$90 billion .15 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM 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 . It is designed to cut the logistical costs of manufacturing goods.

Sales of Packaged Food in Rural Areas 2000-2014 30 Share of rural population 72% 25 71% 20 70% 69% 15 68% 10 67% 5 66% 65% 0 2000 2001 2002 2003 2004 2005 2006 2007 Share of Rural Population in Total Population © Euromonitor International 2008 2009 2010 2011 2012 Share of Packaged food in Rural areas 2013 2014 Share of package food value sales in rural areas 73% . making rural and urban India more homogeneous in terms of consumer behaviour. packaged food consumption is rising faster in rural areas than in cities.  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. There is likely to be an acceleration in the “rurbanisation” trend.16 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Yet India’s “soul” remains in its villages  While the proportion of the rural population has been falling over the last two decades.  This process has accelerated the convergence in consumer habits between urban and rural India. while the differences that exist within individual cities are expected to increase. In fact. Rural Population vs. This has the potential to raise rural prosperity and bring down the burden on large cities and towns facing overcrowding. India remains a predominantly rural country with over 66% of households still living in rural areas.

Unilever focused on empowering women. hence having a solid presence in this channel is key to success.  Correspondingly. lack access to modern retailing formats and still shop in them because kiranas give credit and are prepared to deliver even the smallest orders. Courtesy of Hindustan Unilever Ltd © Euromonitor International .17 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Focus on traditional channels key to success in rural markets  Traditional retailers such as kiranas (local independent retailers). Other Grocery Retailers Traditional Grocery Retailers  The majority of Indians. packaging is an area of key focus for manufacturers. such as sweet and savoury snacks and confectionery. 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. haats (open markets) and melas (fairs) play a vital role in the distribution of many goods in India. and flexible packaging improves the affordability of such products. Small pack sizes help boost sales in impulse categories. Packaged Food Distribution Breakdown 2014  Although the share of traditional retailers has declined slightly. particularly in rural areas. who act as distributors and brand-builders for Unilever. known as Shakti Ammas.  Similarly. the majority of packaged food in India is sold through kiranas.

GCT Survey 2013 Note: Showing percentage of respondents who indicated that they were interested in spending ion new technologies © Euromonitor International All demographics . a large majority of respondents under the age of 45 expressed an intention to increase their spending on new technology. making them a prime target for companies seeking to grow their technology sales.  Indian men. Interest in Spending on New Technologies.  Interestingly. are eager to increase their technology purchases.500 and US$10. in particular. even low-income Indian men are increasing spending .000 a year plan to increase their spending on new technology.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$2.18 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Young consumers plan to further increase tech spending  According to the latest survey on future spending priorities conducted by Euromonitor International in 2014. 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.

Indonesia (114th) as well as Pakistan (128th). notably China (90th). India lags behind many of its Asia Pacific counterparts. India’s India’s Ranking in Doing Business Index 2015 tough business environment remains a major discouragement for investors. as businesses struggle with the country’s complex start-up procedures. difficulties in obtaining electricity connection and construction permits and enforcing contracts. inadequate transport networks in cities and rural areas and low mobile telephone and internet Starting a Business Paying Taxes penetration rates. India ranked 142nd out of 189 countries. © Euromonitor International Protecting Minority Investors 0 50 100 150 Out of 189 Countries 200 . complex regulatory frameworks. At 142nd. business environment remains difficult  Despite India’s huge growth potential.  The dearth of investments and slow regulatory Enforcing Contracts Dealing with Construction Permits approvals have led to unstable electricity supply. Meanwhile. stringent red tape.  In the World Bank’s Ease of Doing Business (Doing Business) 2015 report. lack of governance and rigid labour market result in higher costs for businesses. Resolving Insolvency Getting Electricity Trading Across Borders Registering Property Getting Credit relatively high taxes.19 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Despite reforms.

31% of total annual disposable income accrued to India’s richest 10% of households (decile 10). while the decile 1 share will drop further to just 1.000 0 Decile 1 © Euromonitor International Decile 2 Decile 3 Decile 4 Decile 5 2014 Decile 6 2030 Decile 7 Decile 8 Decile 9 Decile 10 .20 MARKET DYNAMICS IN INDIA: CONSUMER TRENDS AND MOMENTUM Marketplace is set to fragment further  India’s widening of socioeconomic inequality will further fragment the marketplace.000 15. pension increases and a cash transfer programme in a bid to reverse the widening wealth gap in both rural and urban areas.000 30. Growing income disparities impede the growth of the middle class.000 5. Likewise. decile 10’s consumer spending was over six times the level of decile 1’s outlay in the same year. In 2014. decile 10’s slice of total annual disposable income is expected to rise to 33%.8%. Average Household Annual Disposable Income by Decile 2014/2030 Average household annual disposable income (US$) 45. while the poorest 10% (decile 1) claimed 1. which in turn limits growth of consumer discretionary spending. such efforts have been partly undermined by corruption and poor management in aid programmes and partly due to imbalances in its regional growth.  India has adopted several poverty reduction measures such as the National Rural Employment Guarantee Scheme.7% by 2030.000 35. As such.000 25.000 20.000 40. However.000 10.

THANK YOU FOR READING This is an extract from the full Euromonitor International report Mega to Micro: Trends Shaping India’s Consumers. .