Indianconsumers

Consumer India The Changing Face

Scope of today’s discussion • Consumer India shining – Why we’re feeling good about Consumer India. • A closer look at the consuming class – Influence of primal Indian passions – Role of Family as unit of change – Consumption patterns – Changing role of women – Role of children – Cultural diversity as a key influencer for consumption • Cracking the Indian consumer’s code – The need for India-specific strategy • Who’s done what – Minimum requirements of success • What it takes

Consumer India Shining!! A good time to be Indian

Specifically, what are we feeling so good about??

One of the fastest growing economies India 8.4% China 9.1% Hong Kong 4% Indonesia 3.9% Malaysia 3.5% Singapore 1.7% Thailand 5.8% GDP ranked 7th in the World in the year 2000, will be 3rd by 2040

Balanced Picture of Growth Economic Growth 8.4% Agricultural growth 7.4% Manufacturing 7.3% Construction sector growth 6.4% Trade, Hotels, Transport 11.9% Services sector growth 9.9% Last two quarters of ’03: Crisil Estimates

Climate of Business Growth • Foreign exchange reserves exceed $ 102 billion, – 6th largest in the world (increased 5 times in 9 years) • 220 of the global fortune 500 companies source IT from India

Regular policy changes encouraging business • Customs duty of cell phones halved to 5% • Excise on computers halved to 8% • In-land air-travel tax of 15% abolished • Excise on aviation fuel dropped by half to 9% • Laptop as a part of personal baggage exempted from customs duty Contrastingly, a few years back, such goods invited 125% customs duty

Young country that is getting younger • India is a young country. 40% of India’s 1 billion population is under the age of 20 • Number of teenagers – 160 million • India’s young (under the age of 20 years) consumer’s annual pocket money is an estimated at US $6.5 billion • By 2015 Indians under 20 will make 55 percent of the population

Rapidly increasing spending power • The average Indian spent Rs. 14396 in 2001-02 compared to Rs. 5213 in 1991-91 • This shows a CAGR OF 9.7% • Thus several consumer markets are large in size…

The Growing Economy 90 80 80 69 70 60 Source 50 1999 36 : IRS 34 40 2002 31 30 20 20 10 0 Telephone Refrigerator House Ownership Ownership Ownesrship Lowest ever housing credit costs are showing their effect

The Growing Industries • Detergent industry: about US $ 700 million – Organized sector grew by 11% in volume, but only 7% in value terms • Shampoo category: US $ 210 million - growing at 15% annually • Biscuits: US $ 700 million – 1.1mn tonnes per annum – Value growth – 10.3 – Volume growth –11.6 Average prices significantly lower than developed countries India Infoline 2002

Large, growing markets- but call for India specific strategies • Cellphones: subscribers crossed 23 million – More than 1.7 million new additions in Dec ’03, against 0.5 million in Dec ’02. – ARPU declined, from US $ 18 two years back to US $ 11 / month • Motorbikes: US $ 3.3 billion – Volume: 5mn units growing at more than 10% – Market demands extreme fuel efficiencies, ruggedness & low prices and style. India Infoline 2002

A closer look at Consuming class – Influence of primal Indian passions – Role of Family as unit of change – Consumption patterns – Changing role of women :Savvy Home Manager – Role of children:Party time – Cultural diversity as a key influencer for consumption

A closer look at the consuming class

The Consuming Class Usage Consuming Class Others Internet access at home 100 0 Personal computer 100 0 Ketchup / sauce usage 97 3 Telephone ownership 96 4 Motorcycles ownership 96 4 Refrigerator ownership 95 5 Branded shampoos 82 18 Skin Cream 81 19 The total consuming class 40 million homes The core consuming class or “Creamy layer” is (Sec A & B1) is about 10 million homes

What drives India??

Bollywood: Celluloid Dreams • Most Indian's are fanatic movie watchers • The world’s most prolific movie industry, more than 900 films produced / year • Estimated to grow at 19% annually to £1.3 billion by 2007 • Several actors have turned into successful politicians • The export of Indian films earned in excess of £ 0.16 billion in 2003

A Cricket crazy nation.. ..although officially, ‘Hockey’ is our national game! • Indians eat cricket, drink cricket, sleep cricket • Over 1bn people participate in unison • Cricket fans following exceeds that of even the biggest film stars • Cricket in India cuts across age, income, geographical and religious barriers • Highest single program viewer-ship was recorded (in the last 10 years) when India defeated Pakistan in the last cricket world cup

Music in every soul.. • Song & dance sequences are a very important constituent of any Indian movie • Indian music industry is US $ 250 million annually in size • 5th in the world in volume, the 19th in value • The important genres Indipop, film music, devotionals, re- mixes, international music & poetic ghazals • International music: around £ 10 million, mostly rock, pop and world music

All these passions spawn their own massive media opportunities. • Cricket matches -Live telecasts – Celebrity interviews • Movies and Cinema related programming – Award shows – Film telecasts on TV • Music based programming – Countdowns – Antaksharis Have to participate in these , for visibility to align ourselves with these passions

The Fourth passion : Food • Everyday meal would include lentils ,rice, Indian bread, curried vegetables, curd, papad, pickle, salad, chutney: several courses • Indian house wife spends several hours in the kitchen and with pride • This leaves the working women in guilt, encourages ‘ready to cook’ & ‘ready to eat’ food industries • Cross -regional cuisine dominates eating out

But the Indian Palette has to be catered to… • A KSA Technopak estimate that over 70 per cent Indian consumers prefer traditional Indian meals rather than `Western' • Indiginisation of toppings to suit Indian palates is a given in fast foods. – Region-specific toppings also appear. – Up to 35 per cent of the pizza toppings at Domino's are `Indian.‘ • People carry local delicacies like 'theplas' and 'khakras' with them on their trips abroad

Indian middle class is proving Shaw’s definition of the middle-class person false……. “a moderately useful education, with a moderately decent job, with a moderately beautiful wife and leading a moderately honest life and whose overall numbers remained moderately even.”

Family: The basic unit of culture & change • Divorce rates less than 8% • Young generation doesn’t leave home till 22 – 23 years of age • Cohesive family, provides strong cultural grounding

Culture promotes stability of the family • Parents even in bigger cities don't allow their daughters to go out for a movie with guys – even if there are other girls in the group • In most Indian families, daughters are not comfortable watching even remotely sensuous scenes in films when their father or other male relatives are around .

“The new-age Indian family is entrepreneurial, likes speed in all aspects, believes in the `nowness' of life, works hard and plays hard, is not averse to positive manipulation and leans towards religion and spirituality for physical and mental health” Business Line article on conspicuous consumption.

“Earlier conspicuous consumption was a `no-no' for most average Indians, and thriftiness the norm in social and personal lifestyle” Business Line article on conspicuous consumption But today…. Affordable indulgence is the motto

Far beyond the traditional “Roti, Kapada aur Makaan”

The major reason Family structure in India has shifted • – Joint family to a Nuclear Urban Family.

Family Structure Metro Mini Metro Others All Urban Nuclear 74 70 68 70 Nuclear with Elders 12 15 15 14 Overwhelmingly nuclear in composition, change can be rapid

Shift from a strict, authoritarian structure to a more democratic family set-up • Pocket money • TV watching • Entertainment • Toy market • Snacks

The consumer’s shopping basket in 1999 Personal Care items Home Appliances 6% 3% Home Tex tile 1% Sav ings & Inv estment 14% Grocery 43% Clothing 5% Consumer Durables 6% Vacation Books & Music 4% 5% Eating out Footw ear Entertainment Mov ies & Theatre 8% 1% 3% 1% No more a food spending dominated poor economy

The role of consumer finance has helped here • Retail loans have witnessed a total growth of 27% in the past three years – as compared to 13.6% growth in commercial credit. • Interest rates are the lowest in 30 years • Banks are flush with liquidity

The Changing Role of Women

The NUF generation has seen the woman graduate from a house-frau to a home – manager (CEO + nurturer)

Women’s Education SEC A B C D Avg MHI 206 120 83 59 100 Women iIliterate 2 8 17 31 18 Under Matric 13 29 44 53 39 Matric 34 41 35 14 29 Graduate & More 51 21 4 1 13

Very involved with their home • Most Indian housewives get their kick out of the fact that 'the house would not run without me' • Many women spend considerable time, effort and often money travelling to some far away place to get vegetables at wholesale prices. • Many Indian women voluntarily leave their job when their child is born to be with him in his formative years

The new Icons.. • Even as the Indian woman matures into a savvy consumer,she is not rejecting basic societal values • Tulsi, the icon for this new Indian woman ,is traditional but at the same time ,very capable of participating in the modern world Striking the balance

Women wanting to spend more time out of the kitchen I love going out with my family…shopping with friends is a lot of fun “Movies,shoppi ng,kitty parties keep me quite busy socially”

Women’s values within the consuming classes Seeking Luxury er p Outgoing Up ass cl Fashion conscious Bolder & Liberated dle id M Seeking equality Quality conscious Disturbed by vulgarity and western influence ally Prefers to work hard themselves c mi r ono we Seeking economy Ec lo Social conservatism

Growing number of working women • 22 % homes have working women • That has reduced the family size from 5.5 in ’96 to 5 in 2001 • Late marriage, fewer children per family increases attention to children’ & their rearing • There are close to 8 million working women in India and the number is growing • You come across 'east meets west' combinations like girls matching a western outfit with a bindi on the forehead

Desire for quality time • With both the members of the family often working, there is a constraint on time. • gives rise to a unique need for quality time, translates into demand for convenience products and services . Crèches Ready to eat foods Anytime money

Ready to eat foods small but growing rapidly • Share of processed foods have increased over 37% in the last 7- 8 years • Ready-to-eat (RTE) foods market, grow by a heady 35% every year • KSA Technopak adds that the RTE market in India is currently estimated at about Rs 50 crore (US$ 11mn)and expected to grow to about Rs 250 crore(US $55 MN) in the next five years time • RTC segment at least 10 times bigger • 1 US $= 45

Children: The Changing Times

Rapidly affected by the consumerism • As images of colas, burgers, fancy cars, motorbikes and mobile phones flicker on the small screen, kids are growing up chanting the feel-good mantra: Yeh Dil Maange more.

Aspirations and Career choices 34 r c to Do 21 r nee ngi Computer 11 E lic e Engineer rPo 5 e ac h an Te ssm 4 e s in t P i lo Bu 4 c es i erv 3 S n s e v ic e s fe De r 3 Se iv i l ts por C 2 rS the er et/ O t/ Writ ck C ri l/ Artis 0 10 20 30 40 ode /M iz b ow Sh Academics still rules the roost, however, other careers have made their appearance

Very strong Mom involvement with kids development • In the average Indian household, the mother works with her kids' on their school homework • If a student scores 90% in his exams, his parents start asking him where he lost marks • At the same time, Indian parents want their children to learn as many things as possible along with excelling in studies Children caught between pressure to perform & indulgence

Pester Power:Role in Durable purchase 100 90 80 70 60 50 40 30 20 10 0 or C ar r n le ild stem pute erat isio yc r ch B ic v Sy rig C om Tele fo Ref en's sic atch Mu ldr W C hi rist W Parents (in %) of 7-14 yr olds who say kids would accompany them

Where kids reign supreme :Role in FMCG purchase 80 71 70 59 60 52 49 47 50 42 37 36 40 32 31 30 20 10 0 es its e e s te h s p p scu & pizza ruit juic S hoe additiv C hees K etchu othpas S oa e P olis Bi s To S ho F to lk rger t Mi oma Bu Ho T Figure indicates % of kids who influence what FMCG brand their family buys

Some more vignettes • Most Indians don't believe in keeping their children away from them in boarding schools • Most working women voluntarily leave their job when their child is born to be with him in his formative years

The cultural diversity • Punjabi: love socially visible consumption, novelty physical enjoyment seekers,enjoy non –veg food • Tamil: functional value seekers, academics is highly valued, taboo against conspicuous consumption, snack cnetre of Indiaprefer veg,but certain sections extremely carnivorous • Bengali: progressive thinking, cultural & literary liking,famous for sweets and river-fish • Gujarati: business & value for money savvy, more joint families, love veg food, gregarious fun loving

Region wise differences in– Refrigerator ownership 80% 69% 60% 43% Refrigerator 29% 40% 23% ownership 20% 0% Gujarat Punjab Tamil West Nadu Bengal Durables may find a very visible spots in a Punjabi home

Region wise –Washing Machine ownership 30 25 25 20 Washing Machine 11 15 10 Ownership 10 4 5 0 Gujarat Punjab Tamil West Nadu Bengal

Region-wise skin cream usage 70.0 60.6 60.0 50.0 38.9 40.0 Skin Cream - 26.3 30.0 Usage 17.1 20.0 10.0 0.0 Bengali Gujarati Punjabi Tamil Tamil women try to avoid spending money for themselves

Region wise Lipstick usage 25.0 21.8 21.7 20.0 16.0 15.0 11.1 Lipstick Usage 10.0 5.0 0.0 Bengali Gujarati Punjabi Tamil Traditional Indian values don’t encourage visible make-up Tamilians have stayed close to them

Region wise noodle usage 53.3 60.0 50.0 40.0 30.7 30.0 Noodles 21.3 17.5 20.0 10.0 0.0 Bengali Gujarati Punjabi Tamil Indian spicy snacks are a rage in Gujarat The Eastern parts have some population of Chinese origin

Region-wise Car Ownership 7 8 5 6 Automobile 3 4 ownership 2 2 0 Gujarat Punjab Tamil West Nadu Bengal

Region wise attitudinal differences East -Religious -Discontented - Nostalgic -Anxious about future -Imressionable -Bolder,more North -Consumerist West liberated -Quality conscious -Guilt about spending on Oneself -Optimistic South -Accepting society as it is

Cracking the Indian Consumer’s code • The need for India-specific strategy • Minimum requirements of success

Need for India Specific Innovation • Sec C & D amongst the consuming classes typically look for low cash ring packs • ‘Small grocer’ dominated distribution • Demanding consumer,wide variety of products, need for up-to- date quality at low pricing • Complex culture that the consumer is unwilling to abandon

The economic divide among the consuming classes ..1 Internet Usage 20.0 Percent Using Internet 16.1 15.0 10.0 Internet Usage 6.1 5.0 2.7 0.9 0.0 A B C D (once a month or more) Socio Economic Class

The economic divide among the consuming classes ..2 Credit card ownerhip 5.6 Percent owning atleast 6.0 5.0 one card 4.0 3.0 Credit card ownerhip 2.0 1.3 0.5 1.0 0.1 0.0 A B C D Socio Economic Class

The economic divide among the consuming classes ..3 Instant Noodles - Packaged 60.0 50.4 Percent consuming 50.0 40.0 30.4 Instant Noodles - 30.0 Packaged 18.6 20.0 9.9 10.0 0.0 (once a month or more) A B C D Socio Economic Classes

The economic divide among the consuming classes ..4 Chocolate - Consumed 28.5 30.0 Percent consuming 25.0 19.4 chocolate 20.0 14.0 15.0 Chocolate - Consumed 8.2 10.0 5.0 0.0 A B C D (once a month or more) Socio Economic Class

Durable penetration- within consuming class A B C D All Satellite TV 78 65 54 40 55 Telephone 74 45 25 9 31 Refrigerators 78 52 31 13 36 2 Wheeler 64 46 27 12 32 4 Wheeler 22 5 1 0 4 Expectedly, the durable ownership is higher in the core consuming classes

Lower economic classes consume low cash-ring packs • Candies boom in US c 1-2 packs • 70% of the shampoos sell in single use sachet packs • Cadbury growth in last 2 years… US c 10 packs • Maggie has launched US c 10 pack that is most rapidly growing • Rapid detergent growth in US c 2 packs

Surprising pricing… • HLL is charging 87% premium on 500 gm of Surf Excel family pack, compared to the same amount in sachets. • P&G is selling 500 gm of Tide at 80% premium to sachets on a comparable basis. Economic Times 26th of Jan, ‘04

Price Comparisons India USA Pantene 6.6 cents(for 7.5 ml) 31 cents(for 7.5 ml) Head & Shoulders 6.6 cents(for 7.5 ml) 28.8 cents(for 7.5 ml) Sunscreen Lotion $ 1.1 (for 60ml) $5.2 (for 60 ml) P&G & many other multi-national invested in India specific innovations to offer up-to-date quality at market friendly prices Net based comparison of quotes

Maggi • Maggi is the market leader in the noodles (45% market share) and the ketchup (43% market share) categories • Largest volume business of Maggi noodles in the world • Many years of aggressive brand investments. – Launched in the 80's, today, close to 10% of Nestle India's turnover • Strong brand extended to soups, sauces, macaroni and pickles • Chinese noodles introduced last year, as a snack for adults, has evoked good response • However, the largest selling variant is ‘masala’ or ‘Indian spice’

McDonald’s • McDonald's India opened its doors to India in October 1996 • More than 50 outlets already • More than US $ 100 million in investment • Introduced ‘McAloo Tikki’, ‘maharaja burger’ & even have ‘vegetarian menu only’ outlet in Ahmedabad

The success of Hyundai • Hyundai rolled out their half millionth car in 5 years • World class product ,India specific pricing before others.(Santro at Rs 3 lakhs) • Planning to roll-out the millionth car in just 3 more years • Opel & Ford are struggling • Using international know-how, for India specific innovation & early to move

India specific innovations • P&G adjusted detergent formulations for hard water, hand- wash & cost • Kellogg’s launched ‘Basmati flakes with dry fruit’ • Cars have rugged suspension & ability to take occasional petrol adulteration

The Indian consumer does reward real innovators who provide -

Unexpected answers to the Arithmetic of • (large size of consumer base) x (medium penetration) x (low price willingness to pay) x (modest per capita consumption) x (cultural diversity factor) x (high benefit expectations)

Peshwa Acharya Email : peshwa.acharya@gmail.com Cell-9867641038/9820641038

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Indianconsumers

by PESHWA ACHARYA on Dec 25, 2008

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Indianconsumers — Presentation Transcript