CONSUMER SECTOR

• Fast Moving Consumer Goods (FMCG)
• Consumer Durables
• Retail, Luxury, Wholesale, Cash & Carry
• Digital Devices
• Garments, Textiles, Fashion,
• Gems & Jewelry
• Travel, Leisure, Hospitality, Restaurants, Cafes
• Media , Publication, Entertainment, Education
• E Commerce

Introduction: India has been a consumption-driven economy for the last many decades; and the consumer goods industry has been growing fast in recent years on the back of Favorable demography – large young working age, middle class population; Economic growth; Rising disposable income and growing affordability; Rising rural income; Rapid urbanisation; Evolving consumer lifestyle; Emergence of modern trade; New product launches and aggressive promotions by consumer product companies. Consumer spending in India may increase ~ 2.5 times by 2025. India’s strong domestic consumption story is attracting global MNCs to Indian markets, as they see India as one of the key markets for future growth. Average household incomes can triple over the next two decades and the country may become the world’s 5^th largest consumer economy by 2025, up from 12th now; and India may emerge as the world’s largest middle-class consumer market with an aggregated consumer spends of ~US$ 13 trillion by 2030. Tremendous growth opportunities exist for FMCG, Consumer Durable, and Retail (both offline & online) players.

FMCG: Being items of daily consumption (e.g. food items), FMCG’s demand is insulated from economic slowdown, and remains strong. Competition is from the domestic unorganised players, and among the established MNC’s. Price wars and value for money schemes for consumers are common occurrences. Retailers’ private labels at a discount prices offer competition to weak brands. The industry is urban-centric. Rural India, home to 70% of the population, offers the biggest future market potential for the industry – Rural FMCG market may grow to US$ 100 Bn by 2025.

Consumer Durables: With the rising incomes and growing affordability, Consumer durables market doubled from US$3.8 Bn to US$7.3 Bn during FY03-12 (10.8% CAGR); and may grow to US$ 12.5 Bn by FY15 (14.8% CAGR).

Retail – Offline and Online: Of the total Indian retail business of ~ US$490 Bn in 2013, both organized offline retail and online shopping formed less than 10% or ~US$ 34-40 Bn. In a decade organized retail – both online and offline – could grow to ~US$200 Bn (organized retail US$147 Bn and Online retail US$5.6 Bn) by 2023. Online retail, which is new to India, can grow phenomenally from a modest base of US$ 1 Bn (in 2010) to US$5.6 Bn by 2023. [Technopak]

Growth Prospects:  With the favourable demography, higher purchasing power will promote consumerism; and deeper penetration and evolving consumption pattern will continue to drive rural demand in India. Thus, the long term prospects of consumer goods companies are strong. Further liberalisation of FDI in multi-brand retail and e-commerce by government will attract huge investment in India; and the implementation of the Goods and Services Tax (GST), will greatly benefit consumer sector by reducing the overall tax incidence, and enable companies to optimize their logistics and distribution costs.

KLS& Advantage:

We understand the Consumers sector very well; and our team has plenty of experience in hiring leadership and human talent for large MNCs and reputed Indian companies in this sector. We shall welcome an opportunity to partner with you to help you in your quest for high quality talent acquisition. We have identified Consumers sector as the new focus area; and are further strengthening our resources and capabilities to effectively serve our clients in this sector.

(References: Various media reports, press clippings, articles, and research reports, including from IBEF, EM, McKinsey, Deloitte,  ILO, Technopak, etc.).

[Disclaimer: This general note which has very broad, indicative & unverified information of the industry sector has been compiled through secondary research from multiple sources; and so, is not meant to be relied on by anyone for any purpose. KLS&A is not responsible for any errors or shortcomings in the same. You should consult your own experts and do your own independent homework & research before acting in any way. ]

CONSUMERS SECTOR IN INDIA

Introduction: India has been a consumption-driven economy for the last many decades; and the consumer goods industry has been growing fast in recent years. The key growth drivers being:  Favorable demography – large  young working age, middle class population; Economic growth; Rising disposable income and growing affordability;  Rising rural income; Rapid Urbanisation; Evolving consumer lifestyle; Emergence of modern trade; New product launches and aggressive promotions by consumer product companies. Consumer spending in India may increase about 2.5 times by 2025. India’s strong domestic consumption story is attracting global MNCs to Indian markets, as they see India as one of the key markets for future growth. As per a study by the McKinsey Global Institute (MGI), if India continues to grow at the current pace, average household incomes will triple over the next two decades and the country will become the world’s fifth largest consumer economy by 2025, up from 12th now. As per a Deloitte’s report, India is likely to emerge as the world’s largest middle-class consumer market with an aggregated consumer spends of ~ US$ 13 trillion by 2030. There are tremendous growth opportunities for FMCG, Consumer Durable, and Retail (both offline and online) players.

Consumer Markets & Sales Channels: The Indian consumer segments are categorised as ‘Urban markets’ and ‘Rural markets’. Consumer goods are primarily sold through the channels of ‘General Trade’ and ‘Modern Trade’. General trade consisting of the kirana stores is the largest sales channel (~8 Mn stores) forming 95% of overall retail sales. But, growth of consumer goods retailed through modern trade channel is outpacing the general trade in India, though modern trade is still an urban phenomenon here. Modern trade will gain more importance with opening up of foreign direct investment in multi-brand retail. Competition is from the domestic unorganised players, and also among the established MNC’s. Price wars and value for money schemes for consumers are a common occurrence. Retailers’ private labels at a discount prices offer competition to weak brands. The Goods and Services Tax (GST), whenever implemented, will benefit consumer sector by reducing the overall tax incidence, and the companies will also be able to optimize their logistics and distribution costs.

FMCG: Being items of daily consumption (e.g. food items), FMCG’s demand is normally not affected by economic slowdown, and remains strong, except in certain categories of discretionary spends (e.g., lifestyle and personal grooming). The industry is urban-centric as most of the goods are consumed by people in metro cities and small towns (1-10 lakh population) that have been driving the FMCG consumption during last decade. In fact, FMCG consumption in middle-India (small towns) have been growing the fastest across rural and urban segments; and the market size of middle India will  expand rapidly in coming two decades, with low unit packs and aggressive distribution reach. Rural India, home to 70% of the population, offers the biggest market potential for the industry. Rural FMCG market may grow to US$ 100 Bn by 2025. Most FMCG companies have posted decent revenue and profit growth in last couple of years, with higher volumes, price-increases, softer commodity prices. Though corporate tax incidence has been rising for some, with the tax holiday on plants in tax-free zones will expire in coming years. Even then, many companies have improved their net margins.

Consumer Durables: With the rising incomes and growing affordability, Consumer durables market grew at a CAGR of 10.8% during FY06-12, doubling from US$3.8 Bn to US$7.3 Bn; and is expected to grow  to US$ 12.5 billion by FY15 (CAGR of 14.8%).   Urban markets represent major share ~ 65% of total revenues in the consumer durables sector; and Rural markets ~35%. Refrigerators and consumer electronic goods are likely to see growing demand in rural markets, in coming years. The rural market is expected to grow from US$ 2.1 Bn in FY 2010 to US$ 6.4 Bn in FY 2015 (25% CAGR).

Retail – Offline and Online: Of the total Indian retail business of ~ US$490 Bn in 2013, both organized brick and mortar retail and online shopping form less than 10% or about US$ 34-40 Bn. Online buyers in India are estimated to be 18 Mn. In a decade organized retail – both online and offline – could grow to ~US$200 Bn (organized retail US$147 Bn and Online retail US$5.6 Bn) by 2023. Size of organized retail is estimated to grow from US$34 Bn (in 2013) to US$147 Bn by 2023. Online retail can grow phenomenally from a modest base of US$ 1 Bn (in 2010) to US$5.6 Bn by 2023. Globally, traditional retailing is more than online shopping – e.g., in the US, China, South Korea online selling is less than 15% of the total retail business [China 8%, US 10%, South Korea 14%.]. Online marketplaces are new to India, the trend having picked up just recently.  In India, the present e-commerce being just a miniscule 0.2% of the organized retail, there a huge untapped potential for growth, and the online retail which is expected to grow at 50% p.a., will still account for just about or under 5% of the organised retail by 2023, leaving further room for growth until it reaches about 10-11% as in mature economies. [Technopak]

Government Initiatives: The Indian government has been playing a catalytic role in the growth of Indian consumer sector by easing FDI – allowing 100% FDI in the electronics hardware-manufacturing under the automatic route; 51% FDI in Multi-Brand Retail Trading (MBRT); and 100% in Single-Brand Retail Trading (SBRT). National Institute for Footwear Design and Development has been planned at Hyderabad at an investment of Rs100 crore (US$ 16.68 Mn.).

Growth Prospects:  As per a study by International Labour Organisation (ILO), India will have the highest working age population in the world by 2020. The favourable demography in the form of the increase in working-age population and rising middle class will result into higher purchasing power which in turn will promote consumerism. Also, deeper penetration and evolving consumption pattern will continue to drive rural demand in India. Thus, the long term prospects of consumer goods companies are strong. No wonders, we are seeing major investments in the Indian consumer markets sector. Also, India is emerging as a manufacturing and R&D hub for global MNCs who are launching their high technology products and devices almost simultaneously with their global launches.

(References: Various media reports, press clippings, articles, and research reports, including from IBEF, EM, McKinsey, Deloitte, ILO, Technopak, etc.).

[Disclaimer: This general note which has very broad, indicative & unverified information of the industry sector has been compiled through secondary research from multiple sources; and so, is not meant to be relied on by anyone for any purpose. KLS&A is not responsible for any errors or shortcomings in the same. You should consult your own experts and do your own independent homework & research before acting in any way. ]