Before the pandemic, I unwittingly became part of a social experiment in
an almost-laboratory setting. Over one weekend, I watch the remake of a
classic play and a stand-up comedy show. Both were in Marathi. Same
venue. Same time of the day. Same ticket price. Same weekend. At the play,
I was one of the youngest members of the audience. For the stand-up
comedy, I was (by far) the oldest. My first thought was, how lucrative
would it be if I could make this into a pair trade. Long stand-up; short
plays.
AsI thought more about it, I realised this applies to several other walks of
life.
‘There are ‘Demographically Advantaged’ or DA categories and there are
‘Demographically Challenged’ or DC categories.
Cryptocurrencies are DA; Gold is DC. Haiku poetry is DA; ballads are
DC. Wearables are DA; Stationery is DC. Joggers are DA; Formal shirts
are DC. Spirituality is DA; Religion is DC. The reason this doesn’t get
talked about enough is that the shift is gradual.
Things don’t get disrupted in DA-DC tug-of-war; they get sandpapered.
Most consumer categories aren’t on the extremes of the DA-DC
continuum, which makes the change hardet to notice. But I worry when
corporates pay scant attention to this or worse, dismiss all new things as a
fad.
L asked a senior media executive what she thought of over 10 million
users attending a virtual concert by DJ Matshmello, hosted inside the
popular game Fortnite. “It’s just some pipe music these kids are listening
to,” she said. It may well be that but as somebody vying for the same shareof time and attention, wouldn’t it be worthwhile speaking to one of those
10 million?
Tyler Blevins, with DJ Christopher Comstock, known as Marshmello, after
winning the Fortnite: Battle Royale Celebrity Pro Am in 2018.
(Photographer: Patrick T. Fallon/Bloomberg)
Lask consumer companies for a demographic split of their consumers and if
they have any time-series data on it. They generally give me anecdotal
answers or point me to their ‘youth portfolio’ which has Malaika Arora
Khan as brand ambassador.
Not everybody is behaving like ostriches though. Former chief executive
officer of Unilever, Paul Polman hit the nail on the head “Mybiggest fear for this company, of which I have very few, is that we lose the
connection with millennials”.
Investors tend to sniff out demographically challenged companies much
before the business fundamentals start to wane and a swift de-rating ensues.
Ask any listed newspaper publisher.
The real stimulation is not in enumerating DA and DC categories that
have become consensus but to wonder what categories would go into these
buckets in the future. Aversion to asset ownership amongst the younger
generation is well known. That includes homes, cars, and even furniture.
The pandemic may be bucking this trend in the short-term in India, but if
it were to become pervasive and hold, one has to wonder whether a housing
loan is DC. Today it’s a bread-and-butter product in the financial services
industry that gives most loan books girth and stability. If as a consumer, I
do not buy a house at all or buy it much later in life, my attractiveness as an
asset-side customer goes down. Ticket sizes in credit card and personal
loans cannot match up to housing or car loans.
By the same token, is there a juicy internal rate of return opportunity for
entities with access to low-cost capital to benefit from this aversion? Think
residential real estate investment trust or even REIT equivalents for cars
and furniture. Are cigarettes and alcohol DC? They already are in some
developed countries. Is health and fitness DA? Think of the athletic skills of
the Indian cricket team today versus twenty years ago. Is environment-
consciousness and hence products that genuinely work towards it DA?A man jogs along Rajpath, as Rashtrapati Bhavan sits in the background in
in New Delhi. (Photographer: Ruhani Kaur/Bloomberg)
The status quo-ist pushback for any such musing is, there is still a lot of
‘penetration-led upside’ for traditional products in India. I thought the
same way too till I had to sit through a painful de-rating of a television
company in our portfolio. And that happened with less than three
million here. Once the market decides that a category or
company is DC, no amount of cross-country comparison of per capita
consumption can convince it otherwise.
Every consumer-facing corporate should do a periodic health-check up for
this ie., get consistent and reliable data. I would love to see a slide that
shows ‘What percentage of our consumers are less than 25 years of age?”and then be able to see this percentage for the past ten or twenty years. I
realise it is difficult to get actual data for this given India’s layered
consumer distribution system but a robust survey should do. Or put
differently, ‘What volume of my product does an average 30-year-old
consume today? What was the comparable number over last ten years?”
That would help companies place themselves on the demographic
continuum and help investors make an informed judgment.
also think ‘reverse mentoring’ especially for senior leaders and C-Suite
should be mandatory.
Spend an hour every month with the management trainee in sales and do it
with genuine curiosity. Within the first few meetings, try to create a pie-
chart of your mentor’s time and money spent. Get as granular as you can.
Try and break down screen time by apps or content. Compare the pie
charts to yours at the same age; compare them to what you thought they
would look like and let that become the starting point of questions,
observations, and insights. Sample some of their experiences to see what
makes them tick. Make a fantasy-league team, figure out how Twitch
works and watch a tournament or read Rupi Kaur with an open mind. You
might abhor the poetry and that’s fine but judge after giving it a fair trial.
Ac Family gatherings, rather than boring people with the umpteenth
repetition of your teenage struggles, ask the young ones what their struggles
are. If not anything else, listen to this Fortnite Marshmello concert from
two years ago. I think it’s pretty cool. You will find it here.
Swanand Kelkar is an investor and former Managing Director at Morgan
Stanley. Views are personal.