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Increased income and awareness, today are leading to higher consumption and consumers, in the present day and age, are mixing and matching to suit their individual needs. Consumption is set to grow in India and it is expected that 80% of the incremental spends will be led by the middle-income consumers by 2030.
This upward trend will be seen across all sectors of high consumption categories and this will give rise to a dynamic consumption environment and gradually pave the way for new business models that will take consumption models to the next level.
In light of such a scenario, corporates would have to cater to the rising demand, through innovation and providing the last mile assistance. To discuss how brands, can focus and how consumption is set to go up, considering it’s an election year, KPMG in India, held a discussion titled ‘Consumer Insights 2019’, wherein experts, from diverse industries shared their journeys and deed dived into the future outlook for the market.
Experts- Harsha Razdan, Partner & Head, Consumer Markets, KPMG in India; Sadashiv Nayak, CEO, Big Bazaar-Future Retail; Samir Jain, Managing Director, Bunge India ; TR Maheshwari, CEO, Somany Ceramics and Kamal Nandi, Business Head & Executive Vice President, Godrej Appliances sat down to discuss how the consumption trend has shaped up in election year and how growth will pan out.
“Eventually there is a silver lining which we are seeing over the last three-four quarters, we are seeing increased momentum around agriculture and rural both. The government has been spending huge amounts of money around programmes of electrification, there are things around, MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), things around, Pradhan Mantri Kisan Saman Nidhi which augurs well .Overall there’s going to be a huge amount of continued momentum in these sectors. We did an analysis of the interim budget this year and we could calculate around Rs 100,000 crore going in the hands of “aam aadmi”, primarily in the rural and agriculture space this year. This is a good amount of money for all of us,” said Razdan.”
Moving forward, besides this being an election year, consumption has finally started to pick up post-demonetisation and GST (Goods and Services Tax).
“For the very first time we are putting the power of money in the hands of the farmer. Earlier, it was subsidies which were given basically for electricity, for fertilizers etc., but this kind of money going into the hands of a farmer, is a significant boost in the consumption going forward. We can expect more buoyancy across rural spending patterns,” said Jain
“See if you see, the Government of India, has brought in a few big initiatives like Swachh Bharat and affordable housing – i. e. A house for everybody for 2022. This has given a big boost to our products viz - sanitary ware and tiles. Secondly, if you see out of the total population, around six lakh and fifty thousand are the villages and out of those, if you see around 70 per cent of the population is again in the rural areas. So, all this is going to give a big boost to our products plus (affordable housing),” said Maheshwari.”
Meanwhile, consumption is set to go up in Tier-II and Tier-III cities as well as small towns.
“Coming to our business, if you see consumption of appliances in FY18, I think urban has been higher than rural. So, if you take town population more than one lakh, it will be about 9 per cent, if you take town population less than one lakh, it’ll be around 3 per cent. Going forward, given all these sops that are coming from the government, I think consumption of rural will go up significantly for appliances,” said Nandi.”
Talking about opportunities for corporates to maximise rural opportunities and giving details out on-ground analysis on consumption, Sadashiv Nayak said there’s a huge shift and companies will have to target their consumers with increased focus.
“I see two new currencies getting developed- one is aspiration and the other is empowerment. Frankly, these two currencies, I don’t see them being any different from any small town. If there is a kid who is based in a small town, I don’t see his aspirations for stuff, being any different, from say a kid in Mumbai and when it comes to empowerment, we are amazed at the way women are accepting and adopting, let’s say wallet payments. One of our highest acceptance of wallet payments, is from a place called Sri Ganga Nagar in Rajasthan. That I think opens up a very different space to say, modern trade, in whichever way it is present, is bringing out the best. Everyone seems to consume,” said Nayak.”
The discussion also touched upon services to customers, innovation in business, the advent of e-commerce, consumer loyalty and consumer expectations, etc. To get a detailed perspective on these insights you can watch the full episode here.Watch out for more action about KPMG in India- #KPMGJosh