Insights into the changing Indian consumer .....helpful across category and verticals ..

1. Consumer India
The Changing Face

2. 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

3. Consumer India Shining!!
A good time to be Indian

4. Specifically, what are we feeling so
good about??

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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…

11. 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

12. 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

13. 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

14. 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

15. A closer look at the consuming class

16. 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

17. What drives India??

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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.”

25. 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

26. 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 .

27. “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.

28. “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

29. Far beyond the traditional
“Roti, Kapada aur Makaan”

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

31. 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

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

33. 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

34. 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

35. The Changing Role of Women

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

37. 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

38. 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

39. 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

40. 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”

41. 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

42. 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

43. 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

44. 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

45. Children: The Changing Times

46. 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.

47. 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

48. 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

49. 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

50. 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

51. 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

52. 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

53. 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

54. 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

55. 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

56. 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

57. 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

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

59. 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

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

61. 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

62. 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

63. 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

64. 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

65. 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

66. 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

67. 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

68. 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

69. 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

70. 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’

71. 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

72. 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

73. 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

74. The Indian consumer does reward
real innovators who provide -

75. 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)

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