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Passage to India: 7 insights into India's changing consumer market


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A series of macro insights into India's consumer market.

Given recent elections, there is optimism that a more business friendly government can help the country fulfil its economic potential. As new opportunities start to open up, this document outlines opportunities and challenges for brands.

'Passage to India' completes our series on the BRICs: documents are also available on Brazil, Russia and China

Published in: Marketing

Passage to India: 7 insights into India's changing consumer market

  1. 1. PASSAGE TO INDIA! 7 Insights into the Indian Consumer Market
  2. 2. A FRESH START? Only a decade ago India’s future looked assured. But recent years have been disappointing: growth halved, the rupee slumped, inflation and borrowing ballooned. But two things remain certain – India is a country of huge potential and also vast complexity. By 2030 India is forecast to have the world’s largest middle class consumer market (surpassing China and the US), alongside a youthful population and fast rising disposable income – by 2020 India is forecast to make up 5.8% of global consumer spending (up from 2.7% in 2012). Alongside this there is the challenge of how to make sense of India’s huge diversity: more than 1.2 billion people, spread over 3.2mil square km, with 23 official languages and 8 major religions! To help you tap into India’s potential we have highlighted 7 insights we see as key opportunities in India’s fascinating consumer culture. While there are levels of complexity and nuance we cannot capture here, we hope they give you a sense of some of the shifts shaping India’s future.
  3. 3. 7 INSIGHTS – WITH IMPLICATIONS FOR BRANDS – TO HELP YOU SUCCEED IN INDIA:! 1. Bright, Young Future 2. Generation ‘I’ 3. Changing Mindset 4. She-Economy 5. Top of the Pyramid 6. Rural Transition 7. Connected Revolution
  4. 4. 1. BRIGHT, YOUNG FUTURE India has a fifth of the world’s young people and is set to become the youngest country in the world by 2020. This youthful generation share much of the confidence and optimism of other global Millennials: as they hit prime consumption years they will significantly reorient the market. This new generation is increasingly globally aware – since 1990 the number travelling abroad has risen sixfold – and no longer mimic their elders: in an Economist poll of Indian youth, 74% said they would vote differently from their parents. However, they still respect many traditions: 64% of Millennial consumers in India are keen to maintain their religious observations. IMPLICATIONS! Understanding the values, mindset and needs of young Indian consumers will not only open up new opportunities for brands, but will lead to a better understanding of the India of tomorrow. This is an increasingly globally aware generation, which expects to have wide choice and brands that match their high standards.
  5. 5. 2. GENERATION ‘I’ Whilst family remains a key part of Indian culture, there seems little doubt India is becoming more individualistic in its shopping habits. According to BCG, discretionary spending on beauty, travel and social events (weddings / parties) means these are among the categories that will grow fastest. For example, we’ve observed changing aspirations and attitudes in India to ideas of beauty (which had centered on the face, but now encompasses the whole body); health (which is becoming more about being toned & slim than rounded & well fed); and fashion (with the middle class seeing looking good as important, rather than frivolous). The focus is on helping individuals make the most of themselves. IMPLICATIONS! India is seeing a shift from household family purchases to more individual, indulgent shopping; the number of single-member households has more than doubled in the last 10 years to 4%. As India moves towards the levels of China and Brazil (c. 9%) expect to see an increasing consumer focus on categories that promise personal fulfillment.
  6. 6. 3. CHANGING MINDSET Indian culture traditionally valued the intrinsic qualities of knowledge, simplicity & restraint. With economic liberalisation this mindset began to shift – especially amongst the younger generation – to more extrinsic values like action, winning and glory. According to Dheeraj Sinha, author of ‘Consumer India’, this shift from a spritual (Brahminical) approach to the more warrior (Kshatriya) approach is ‘the cultural engine of India’s economic charge’. It is exhibiting itself in the rapid growth of categories like popular culture (X Factor and India’s Got Talent are hugely popular), sports (IPL cricket is a star-studded short version of the game) and even academia (where JNU’s crown as most prestigious place of learning has been stolen by the IIM’s promise of high earnings). IMPLICATIONS! This shift has changed what is culturally desirable – consumers’ aspirations, behaviour and everyday choices are shifting. Brands must understand how to help consumers express these more externally focused values – celebrating dynamism & success.
  7. 7. 4. SHE-ECONOMY India continues to be a patriarchal society, with women’s role often still restricted to the home due to social customs and low female education levels. The WorldBank shows that India has the lowest workforce participation rate of women amongst the BRICs at only 29% (Russia is 57%; Brazil 60%; & China 65%). However, changes are happening and positive signs are emerging. The working woman rate is set to increase 40% by 2020, there has been a 33% jump in the number of women who have a savings bank account in the last decade and income has doubled. At the same time, the government is expanding educational coverage, and more women are taking on professional jobs, leading organisations and starting businesses than ever before. IMPLICATIONS! The growing aspirations and financial independence of women – not only in urban India but in Tier II and III cities – mean brands must increasingly look to understand and target women. Men may have ‘power of veto’ over larger purchases, but many everyday purchase decisions are already in female hands.
  8. 8. 5. TOP OF THE PYRAMID The number of ultra-high net worth households in India is expected to triple in the next 5 years (Mumbai is among the top 5 ‘billionaire cities’ globally). Although global luxury brands have been cautious about entering India, Bain estimates the country’s luxury sector to be close to $6 billion a year with growth rates of 15-20% a year. But a recent report identified a new generation of ‘closet consumers’. This substantial segment of newly wealthy retain a more ‘middle-class mindset’: they are price-conscious and seek value even when buying luxury products. Equally, BCG defines affluent as having a household income of $18,500 or more pa – still relatively limited. IMPLICATIONS! It is important to understand the different attitudes of the traditional & professionally wealthy; for example, the latter are often more comfortable with credit. Equally, there is a big opportunity with affluent consumers, but brands should recognize even those near the top of the pyramid have incomes far below their Western equivalents.
  9. 9. 6. RURAL TRANSITION Rural India accounts for nearly 70% of the country’s population, but has traditionally been seen as too poor and too difficult to reach for many companies. However, incomes and aspirations are growing as consumption habits increasingly mirror those in urban areas. Nielsen estimates that rural India’s FMCG market will touch $100 billion by 2025. This shift, and its sheer scale, means rural India is a tremendous opportunity: it already accounts for 40% of Hindustan Unilever’s business, 30% of Coca-Cola, and Amul has opened parlours in rural areas which seem to be outperforming those in urban areas. IMPLICATIONS! Rural consumption patterns and aspirations are changing: brands and premium products are no longer a novelty. Equally, as ownership of items like refrigerators grows, new opportunities will open up, with what were traditionally urban products (such as chocolates, cheese and pizzas) becoming more relevant. Companies need to understand how to penetrate and win in this complex market.
  10. 10. 7. CONNECTED REVOLUTION The number of Internet users in India is expected to grow from 125 million in 2011 to 330 million by 2016, according to BCG; by 2020, there will be 1.5 billion connected devices and mobile data traffic will increase twenty fold, helping overcome many of India’s geographical barriers. Alongside this, e-commerce in India is expected to reach around $50-70 billion by 2020. BCG calculates digitally influenced purchases already represent $30 billion of consumer spending. This growth is increasingly fueled by women, who appreciate the convenience and option to indulge in more recreational, relaxed shopping. IMPLICATIONS! Brands must tap into this connectivity in ways that are meaningful for Indians and ensure they are optimised for mobile access. Although e- commerce accounts for less than 1% of India’s shopping total, this is growing rapidly – especially as payment and delivery infrastructure improves. Brands should explore the opportunities this new channel offers to influence consumers.
  11. 11. 11 Brand Genetics – uncovering next generation opportunities We work with international brands to understand how markets are evolving & what this means for their business. By identifying the insights & implications, we help brands clarify, cut through & capture new growth opportunities Our work takes us from Mumbai to Manhattan, Sao Paulo to Shanghai, Lagos to London: our trusted local partners give us global reach, our experienced central team ensures consistent excellence Argentina • Australia • Brazil • Canada • China • Egypt • France • Germany • India • Indonesia • Italy • Japan • Saudi Arabia! Mexico • Nigeria • Poland • RSA • Russia • South Korea • Spain • Thailand • Turkey • United States • United Kingdom 11
  12. 12. 12 If you're interested in how we can help you understand how global markets are changing, and what this means for your brands, we'd be delighted to talk further. If you’d like to receive our other BRIC ‘Speed Briefings’, or future market updates, just let us know Tom Ellis +44 (0) 7815 896 098 Andrew Christophers +44 (0) 7967 175 623 With thanks to our Indian partners Vox Populi for their support & collaboration 12