Winning The Indian Consumer

Group 6

0 MNCs who are able to understand the need of untapped $ 400 billion consumer market will have the advantage.
0 Expanding Middle Income household 0 Rising Income 0 Spending Power 0 Youthful population 0 Rapid urbanisation 0 specialty-player strategy catering to small segment of GLOBAL INDIANS

Brief

0 Now targeting ASPIRING INDIANS the much bigger and faster growing middle-income

segment.
0 Indians demands high value at low price. 0 Two keys to serving Indias giant middle segment successfully:0 To know the consumers need. 0 To know the countrys rapidly changing consumer landscape 0 Tailoring products and pricing to the budgets and tastes of these consumers.

0 India moved from being the 10th Largest in the world 1991 to 4th Largest in 2012 (PPP)
0 Expected to grow @ 7% despite of on going challenges for 2005 -2025 0 Indias GDP growth Trajectory over past 50 years 0 GDP has grown in each successive Decade while variability of growth has reduced

Indian Economy

0 Attained the distinction of becoming the 3rd largest economy in the world (next only to United

States and China) in terms of PPP in 2011.

The Economic liberalization in 91 marked a turning point In Last 2 decades, rising income levels has given rise to famous Indian Middle Class

Expansion of economy, rising income levels Changing Consumer beliefs & behaviors led to increase in consumption

Impact of Economic Downturn of Consumer market:

0 After slowing to 6.7% in the year ended 31 March 2012, Indias economy grew 5% in the

following yearthe slowest pace in a decade.

0 Uncertainty hurt Consumer confidence: Job Insecurity, Inflation & Borrowing Cost

0 Sales of durables such as electronics and automobiles have declined for eight months in a

row.

Contrary Report :
0 Crisil Ltd :The retail market is estimated to grow 14-15% this year, higher than the 10%

growth seen in 2012-13.

0 Close to 20% Indians are expected to increase their discretionary spending in the next 12

months (BCG).
0 Some 34% of Indian consumers are expected to trade upBCG study.
0 Over the past few years, they have stepped up the pace of launches, added more premium

products to their range and expanded deeper into the hinterland. They are also offering more discounts and freebies.

Classic approach by companies :

Segmenting consumer by income

Consumer buying behavior is not only impacted by Its level of income but also where they live, education, occupation their exposure to the world, languages they speak Its important to understand how they consume and shop.

So companies selling in India need to ans many questions: how to segment consumer ? What is the size of these segments? What do people

consume? How do buying preference vary across segments? how do people

shop today? How is this to evolve in future

Why India Matters

The Indian Opportunity
0 Unpredictable growth in Middle Class

0 A Golden period for a number of economies

0 China & India develop their potential as economic powerhouses of Future 0 Rising average income level among the Indian middle class are driving

aspirational consumer behavior

0 Seek out Higher quality products, better healthcare & more sophisticated

services.
0 By 2030 India is projected to the house the worlds largest middle class

consumer market Surpassing both china & US.

Indias Income Pyramid

0 The Affluents : Income above $18,500 , well educated, mid to large business or good jobs.

Sufficient to allow significant indulgence

0 The Aspirer's Income btw $ 7400 - $18500,educated , mid sixe or stable jobs. Sufficient to live

comfortably as well as indulge a little

0 Next billion income between $3300 - $7400, have basic education, small business low paying

jobs. Income level allows to sustain a basic lifestyle

0 Strugglers income less than $3300, illiterate with limited education, manual labor jobs based

on wages.

Rurbanization:
0 The distinction between rural and urban consumers is blurring. 0 Rural consumers have aspirations similar to their urban counterparts and,

hence, the term Rurbanization, according to BCG.

0 Past three years, Marico, has seen its revenue from the rural markets

increase from 34% to 38% of overall revenue.

0 It plans to expand rural coverage by 40-45% in the next year and drive

higher growth from these markets, said by Sameer Satpathy, executive vicepresident and business head, consumer product business at Marico Ltd.

Educating The Consumer

0 There are barriers to build these markets 0 The lack of knowledge & awareness as to what are these products and what do they

do.
0 Indians respond to a brand with a strong shelf presence and bold graphics. 0 Kelloggs has made such an impact with its packaging that other cereal brands have

repackaged their products to achieve a similar look and strengthen their own shelf

presence.
0 The detergent Tide and personal care brand Dove have also been agents of change

in retailing.
0 Indeed, this is a country of change, whose manufacturing base now extends to China

and where use of new media and out-of-home advertising is on the increase.
0 Eg: Washing machine, beauty care products,

What India Spends on ?

The Indian consumer market is poised to grow 3.6 times between 2010 and 2020, faster than most other emerging markets.

Food, housing, transport are 3 top categories in India, accounting for 65% of consumption
Education & leisure, apparel, consumer durables, communication & health are other major categories 25%. Change in income leads to change in consumption.
Significant variation in consumption basket across markets

Global Brand in India at Indian Price

0 In spite of the volatility, the bumps, the India growth story is still heading in the right direction. 0 The opportunity is clear and it is a market where everyone wants to win. 0 It is the uniqueness of this market that makes it stand out and organizations have to adapt to this

uncommon India in order to make a mark.

Coca Cola India's Rural Strategy - Based on Availability, Affordability, Acceptability

0 Availability: - Hub and spoke distribution: hubs to small towns to villages 0 Affordability : - 300 ml bottle often shared by 2 people, 20 cent price too high 0 200 ml bottle introduced at Rs. 5 (10 cents) per bottle

0 Acceptability: - Extensive marketing efforts tailored to village culture (participation in weekly

markets, etc.) Result: in 2 years (2001-2003): - Rural penetration: 9% " 25% 35% volume from rural market

Design To Cost
0 In market where demand exist selling an appealing product is not difficult 0 Instead of C + P = P

C=PP E.g. : Wespa - Piaggio

0 Reflects the Trade off by Consumer between the Product Performance & Price. 0 Benefits Both Sides :

Consumer: Better Price utility equation Company: Better Cost margin

0 Other way : using Indian contract manufacturers.
0 Manage there product quality 0 Capital spending costs at Indian levels 0 Setting up their plants

Traditional Trade vs. Modern trade

Share from next billion consumer is very low due to lack of sufficient access in tier 3 & 4
These consumer have shown high levels of modern trade adoption in categories such as apparels Mom n pop stores for grocery shopping. Traditional Trade :High on trust worthiness, credit facilities offered, can bargain and believed more

reasonably priced.
Modern trade : high on product freshness, product quality, product range & ease of locating

products.
Consumers prefer traditional trade for more frequent purchases, modern trade preferences increase

with increase in income.

The distribution push story

In addition to the surging demand for consumer products in Middle India, marketers are extending

their reach in the 1-10 Lac population towns through a constantly expanding distribution network.
Last 3 years FMCG Stores have increase of 250+per town Modern trade Stores have increased to37%

Shopping Behavior
0 Food and Groceries
0 Trading up tendency increases with rising income levels, especially in food 0 Purchase frequency drives format preference, not product freshness 0 Shopping is often a group activity, not limited to only the housewife 0 Brands are critical till the consideration stage, but reduce in importance for actual purchase 0 The last three feet at the store is the moment of truth: Key purchase decisions are taken at the

store.

0 Consumer Durables
0 Desire to keep pace with changing lifestyles is the key trigger for purchase decision 0 Brand predecision varies across product categories 0 Purchase is a highly planned and researched decision, the primary objective of the store visit is to

execute the purchase

0 Organized retail is preferred for more expensive product categories 0 Online shopping still at a nascent stage lack of awareness is the key barrier

Apparels
Apparel constitutes 47 percent of the consumption basket for aspirers, Next Billion and Strugglers.
0 Affluent consumers tend to spend twice as much, in percentage terms. 0 Driven by occasion, rather than functional need 0 Quality & brand image are key criteria 0 Large opportunity for private store labels 0 Stores need to tailor value proposition to focus on specific consumer segment

Fabric Quality and Brand Image are Key Criteria in Driving Consumer Choice
0

Professional affluent, aspirers and small town Next Billion segments show similar preferences and consider fit as an important criterion in selection.

In contrast, Traditional Affluent and Large Town Next Billion segments give greater
importance to durability.

Not surprisingly, lower income segments are more price conscious. Comfort to be less

important in the purchase decision.

Indian apparel market to grow over 4-fold to $200 billion: Report

0 The Indian apparel market will grow over four-fold to attain a staggering size of $ 200 billion by 2025 0 The combined size of Chinese and Indian apparel markets will become bigger than that of the US and European Union 0 As the per capita spend on apparel in these two developed markets will rise at a much slower rate

Content Source: www.investmentcommission.in

Conclusion: reaching the market

0 The India market is brand conscious and ready to purchase

products that meet both consumer needs and aspirations.

0 Local companies are as yet better placed to understand their

consumers but global brands with an Indian presence are in no way

disadvantaged.
0 Indians appreciate the quality and prestige of international brands

but it is down to those brands to hone their product offers to the

complex diversity of Indian consumers.

0 If this is achieved, brands and retailers can flourish in this fertile

market