With a surging middle class population, soaring foreign direct investment and a booming stock market, there is good reason why India features so prominently in the global growth plans of so many Fortune 500 corporations. But for companies attracted by India’s 9.3 percent GDP growth economy in 2010, the ground reality is much different.
Overall, GDP growth in 2012’s second quarter was 5.5 percent and year-over-year sales growth in fast-moving consumer goods (FMCG) categories fell from 19 percent in 2010 to 15 percent in 2011. Is this the new normal or just another trough as the market matures and stabilizes?
Speaking at Nielsen’s India Consumer 360 Conference in Mumbai, Ranjeet Laungani, vice president, Nielsen India, reveals how demand is changing—where it is strongest, how it will evolve and what marketers need to do to mine the substantial untapped demand among Indian consumers.
India offers huge upside opportunity. Compared to regional counterparts, FMCG spending in India is far below peers on a per capita basis. In 2011, Indian consumers spent just $31 (USD) per capita on FMCG products, significantly less than consumers in Thailand ($214), Philippines ($161), and China ($128). Even among urban Indians, where income is higher, FMCG spending reached just $65 per capita.
Benchmarking to China alone pegs the FMCG upside at 12 billion dollars—or an additional dollar for every three dollars in FMCG sales today. But macro-economic, demographic, societal and lifestyle shifts are re-shaping the bedrock of demand in India, with huge implications on how we frame the India retail opportunity.
"What makes the India story truly uncommon is the diversity within the opportunity," said Laungani. "There is adequate demand potential both at the top and bottom of the pyramid. The aspirational Indian consumer is willing to premiumize and wants to partake in the best the market has to offer and at the same time there is enough volume at the bottom thanks to the value-conscious Indian."
Additionally, the continued blurring of retail channel lines further contributes to the evolving consumer demand landscape and overall retail marketplace. Traditional retailers are seeing increased sales for product categories not generally associated with their store format (e.g., baby foods), while modern retail outlets and pharmacies are increasing sales in products often associated with their traditional counterparts (e.g., teas, beverages).
When demand of all shapes and sizes is omnipresent, how do you stay focused on the most profitable demand? Innovation and creativity are at the forefront.
Laungani was then joined by a panel of business leaders who shared their thoughts on the evolving demand story. Prakash Nedungadi, head of consumer insights and brand development at Aditya Birla Group of Companies, singled out the growth in smartphone adoption as an opportunity for marketers. More smartphones give consumers greater opportunities to engage in social media via mobile devices, “enabling companies to listen to a greater share of what consumers are saying on the Internet,” said Nedungadi.
As for the future, Nandini Sethuraman, CMO of Walmart India, encouraged manufacturers to plan further in advance. “The pace of change will continue to accelerate. Marketers must begin to think two to three steps ahead,” said Sethuraman.
How to get ahead of consumer demand was addressed by Charulata Ravi Kumar, CEO of Product of the Year and a business columnist. Companies “must focus more on early adopters in market – they are the ones driving demand and the ones who marketers must profile further to see success in the general market,” said Ravi Kumar.