Indian Consumption to Grow 14% in Three Years: Study

Global consumer products makers relying on Asia Pacific and Latin America to make up for flat sales in US and Europe

RATNA BHUSHAN NEW DELHI

    Consumer durables, automobiles, food and personal-care products have the maximum growth potential in the country as multinationals shift focus to Asia Pacific and Latin America to drive sales, says a study.
And Indian consumers will maintain their spending spree despite challenges such as rising prices and higher interest rates, according to an Ambit Capital Research report, ‘The Indian Consumer: a robust operator in an uncertain world’. “Despite being impacted by several challenges, we expect India’s consumption growth story to maintain its course of about 14% rise over the next three years, driven by three factors — inclusiveness, mix changes and specific consumption categories,” senior analysts Vijay Chugh, Ashvin Shetty and Shariq Merchant wrote in the report.
“Reasonable valuations will keep acquisition interest by global midcap firms alive,” they added.
The $473-billion processed dairy category could grow at 15% in the next four years, while the $340-billion personal-care products category would grow a tad lower at 14%. Multinationals are aware of the potential in India.
“I am hopeful that McDonald’s India will contribute half a per cent to the global sales in the next fiveseven years,” McDonald’s India (North & East) MD Vikram Bakshi said. India currently accounts for just 0.37% of the US fast food giant’s $24-billion global business. Last week, at the Cannes advertising festival, Unilever CEO Paul Polman was categorical when he said “We have to shift our thinking to New Delhi, not New York.”
Calling Unilever an ‘emerging markets company’, Polman said the “shift of economic power to the East and the South” was forcing the world’s second-largest consumer products firm to make extraordinary changes. He said while about 56% of Unilever’s revenues come from outside North America and Europe, by 2020, Unilever expected this to be 70-75%.
At the same venue, Paul Bulcke, CEO of the world’s largest foods maker Nestle, said that the most important global economic difference over the last few decades was that “emerging markets are emerging”. As sales flatten in mature markets such as the US and Europe, consumer products makers are relying on Asia Pacific and Latin America for growth.
Multinationals are committing resources to India not only for manufacturing but also for innovation. “Both traditional names such as Nestle and contemporary ones like Yum Brands and Google have committed to setting up local innovation centres here,” the report said. And Indian managers are being given positions of power to steer growth in emerging markets. Late last month, Unilever elevated Harish Manwani, currently chairman of its India arm Hindustan Unilever, to become the global giant’s chief operating officer, second only to CEO Paul Polman.
Three months back, British consumer goods giant Reckitt Benckiser named India-born Rakesh Kapoor as its CEO to succeed Bart Becht, who had spent a decade at the firm. Earlier this year, GlaxoSmithKline Consumer Healthcare, maker of Horlicks milk drink and Crocin antipyretic drug, elevated its subsidiaries in India and China to report directly to the company’s global headquarters instead of its international division that excludes the US and Europe.
India and China are now a part of the company’s global consumer healthcare leadership team, with India among the fastest-growing regions of GSK Consumer. “A combination of good GDP growth, India being a nutrition deficient geography and an emerging consumer class are contributing to the growth,” GlaxoSmithKline Consumer Healthcare MD Zubair Ahmed said.