leveraging the india opportunity in consumer markets · b. india: a background 5 c. the india...

Mai 2010

Leveraging the India Opportunity in Consumer Market s

Contents Page

A. India – Urgency to act now! 3

B. India: A background 5

C. The India opportunity 13

D. Key factors for success in India 26

2AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptx

This document was created for our client. The client is entitled to use it for its own internal purposes. It must not be passed on to third parties except with the explicit prior consent of Roland Berger Strategy Consultants. This document is not complete unless supported by the underlying detailed analyses and oral presentation.

© 2010 Roland Berger Strategy Consultants GmbH

D. Key factors for success in India 26

E. How Roland Berger and TSMG can help you to succeed 36

A. India – Urgency to act now!


Companies should plan to enter the Indian Consumer markets in the near term to leverage the India market opportun ity

Urgency for India Entry

1The

Large, fast growing markets present an attractive market opportunity


Companies should target a strong market positionin 5-6 years in the Indian market to be a long term successful player in their respective segment

TheIndia

opportunity

3

Increased competition

in future

2

Organized retail as

facilitator

Key Factors

• Going ahead, organized retail to provide access to

~25% share of business in the larger cities (metros)

• Organized retail expected to grow @20-25% in the next 5-6 years

• Most global majors already in India / retailers in tie ups with Indian firms

• Indian companies expanding into newer categories / multiple retail segments

• Mid sized foreign companies entering India fast in last 3 years

B. India: A Background


India: A land of contrasts

Many achievements – World's largest democracy


~700 m registered voters with a free press and medi a


Many achievements – 4th largest economy (PPP), fast growing – 2009

[All fig. in ~USD Trillion] Expected real GDP growth 2010 [%]

14.3US 3.1%


India expected to become the third largest economy by 2030

Source: IMF

8.7China

4.2

Germany 2.8

India 3.5

Japan

10%

8.3%

1.9%

1.2%


Many achievements

Amongst 3 countries to have built a supercomputer

Amongst 7 countries to have built a car indigenously

Amongst 6 countries having conducting a moon mission


EKA: No. 18th amongst super computers (132 TF speed)

Cars: Indica, Nano. MUVs: Scorpio, Xylo, SafariEV: Reva

Spacecraft in lunar Orbit –Chandrayaan 1 (2008)


Many achievements – Global hub for R&D


Used by One fifth of Fortune 500 companies


Many achievements – Global source of Software services


For 220 of Fortune 500 companies


Also, numerous challenges

• Average per capita GDP $1,032 p.a. ($ 2,932 pa PPP)

• Significant proportion of population below poverty line


• Inadequate infrastructure: Roads, airports, seaports, power, mass transit

• Multiple local/state taxes and regulations. Entrenched bureaucracy

• Rank 133 in "Ease of Doing Business 2010" (World Bank)

72% population is rural. Urban comprises ~5,000 ci ties

Numerous challenges

India population [m] 2008 Urban population spread 1)

1,147

1,147

Total

4,240

47% 20% 10% 23%


1) Urban split based on 2001 census data

Source: Census India, Analysis by Tata Strategic

28% of urbanpopulation

URBAN(5,000+ cities

and towns)319

RURAL(600,000+

villages

1,147

828

36135667

0.1.0.5 Mio.Greater than 0.5 Mio.

<0.05 Mio.

4,240

0.05-0.1 Mio.

No of citiesAll across India

C. The India opportunity


India is expected to accelerate its growth over the next few years

Indian economy: Real GDP growth prospects

Average (5 years)

8.9%8.3%

7.2%

9.0%

DRIVERS

• Savings rate

• Investment

14AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Ministry of Statistics and Programme Implementation, World Bank

2011-1220010-11

6.7%

2008-09

7.2%

2003-08 2009-10

Year Starting April 1

• Investment

• Domestic consumption

• Current account deficit ~2%

Share of working population is likely to further in crease

India demographic dividend

India age mix [m, % to total]

2006 2016

Total population [in m ] 1,112 1,269

15AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Census India, Analysis by Tata Strategic

[in m ] 1,112 1,269

356(32%)

83(7%)

669(61%)

340(27%)

118(9%)

811(64%)

15-59 years >60 years <14 years

Urban population will continue to expand

Urbanization

India urban population [m]

% of Total28.6% 32.0%29.7% 30.8%

16AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Census India, Analysis by Tata Strategic

422385

348311

201920142004 2009

Mid income households are expected to grow rapidly

Income pyramid: India

No of households [in m, at 2005-06 Prices]

Annual income['000 EUR1)]

Annual income['000 EUR PPP]

~236

3 Super Premium >40 >113


Growing market for huge volumes at "right price".Potential centre for low cost innovation & business models

Source: NCAER, IMF, Analysis by Tata Strategic

1) 1 EUR = INR 60

132

53

17

1

2005-06

~204

0.6

78

103

46

5

2013-14E

3

Basic

Mass

Mass Affluent

Premium/International

Super Premium

< 2

2-4

4-20

20-40

< 6

6-11

11-57

57-113

>40 >113

Trends impacting consumer markets in India

Consumer market trends

✓✓✓✓Need for distinct offerings for various consumer segments• High share of young

population

• Increasing incomes ✓✓✓✓ Faster acceptance of newer products/services


✓✓✓✓ Shift from unbranded to branded products

✓✓✓✓Increasing demand for health & wellness and convenience led offerings

• Increasing incomes

• Faster urbanization

• Smaller families

• Increasing literacy

• More working women✓✓✓✓ Greater role of organized retail

✓✓✓✓ Faster acceptance of newer products/services

Consumption of packaged food in India is expected t o increase substantially in the short to medium term

Packaged food: India vs. global

Packaged food spend as % of per capita disposable i ncome for different income levels

9.1%9.2%10.2%10.2%

food

spe

nd

as %

of p

er c

apita

19AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Morgan Stanley, Analysis by Tata Strategic

500-1,000 3,000-5,000 >5,0001,000-2,000 2,000-3,000

1.9%

6.0%

300-500

Pac

kage

d fo

od s

pend

as

% o

f per

cap

ita

Per capita disposable income intervals

• India • China• Indonesia• Egypt

• Argentina• Brazil• Thailand

• Russia• Malaysia• S. Africa

• Chile• Mexico• S. Arabia

• US• UK• Australia

Key countries

India at the bottom of the curve, likely to see inflection

The food & beverage sector in India presents a sign ificant opportunity with scope for large and mid-sized play ers

Packaged Food & Beverage (F&B)

F&B market size [USD bn]

• Dairy

• Processed F&V

Large

• Nestle

Mid-sized

• Perfetti Van Melle

Key multi-national playersKey sub-sectors

20AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Tata Strategic

• Snacks

• Bakery

• Ready to Eat Foods

• Ready to Cook Foods

• Beer

• Unilever

• SAB Miller

• PepsiCo

• Coca Cola

Melle

• Good Food

• Dr. Oetker

• Orkla

107

46

20152008

13%

Home and personal care categories are significantly under-penetrated in India

HPC: India vs. global

HPC spend trajectory

200

250HPC per capita spend

[USD]

21AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Morgan Stanley, EIU, Analysis by Tata Strategic

0

50

100

150

200

500 4,0003,5003,0002,5002,0001,5001,000

Brazil

Mexico

South Africa

Thailand

ChinaIndia

Per capita disposable income [USD]

The home & personal sector in India is expected to become a USD 20 bn market opportunity by 2014

Home & personal care market

Key multi-national playersKey sub-sectorsHPC market size [USD bn]

• Skin care

• Cosmetics

Large

• Unilever

Mid-sized

• Beiersdorf

22AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Tata Strategic

• Deodorants

• Fabric Care

• Floor Cleaning

• Insect Repellants

• P&G

• Reckitt

• L’Oreal

• Henkel

• Wella

• Oriflame

• S.C Johnson

23

9

20152008

15%

Going ahead, the Indian market is further expected to present opportunities for innovation and reduced business c omplexity

Infocomm growth and domestic reforms

Infocom –ubiquity & usage

I • Mobile subscriber base expectedto reach 800 Mn by 2012

• Broadbrand subscriber base expected to reach 16-18 Mn. by 2012

• 3G services expected to be launched

New BusinessesNew Business Models

New Media

Web 2.0Ubiquitous

mobile internet

23AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Crisinfac, Government of India, Analysis by Tata Strategic

Next domestic reforms e.g. GST

II

• 3G services expected to be launched nationwide in 2011

• GST expected in April 2011

• Would enable significant rationalization of distribution and logistics networks

New Media

Newer mediaGrowing

broadband users

Share of organized retail in India is low currently

Share of organized retail [%]

80%

24AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Images Retail, Analysis by Tata Strategic

BrazilRussia

22%

36%

Vietnam

40%

UKThailand

33%

China

6%

India

20%

The organized retail market in India will present m ultiple opportuni-ties within its USD 70 bn market size by 2015

Organized retail market size [USD bn]

Key sub-sectors

• Food & grocery Large Mid-sized/niche

Key multi-national players

Organized retail

20%


• Food & grocery

• Home improvement

• Consumer durables

• Apparel

• Food Service

• Walmart1

• Tesco1

• Woolworths1

• Benetton

• Adidas

• Nike

• Levis

• Jockey

• Samsonite

• B&O

• Swarovski

• Mont Blanc

• Gucci

Source: Tata Strategic

Opportunity for single brand retail, franchise and wholesale / cash & carry

70

20

2008 2015

20%

Modern Trade contributes to ~5% of retail sales in India

India retail structure

Channel segment

Modern Trade

Outlets Sales contribution

0.05% ~5%

26AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Analysis by Tata Strategic

Wholesale

Mass Traditional Retail

Key Accounts Traditional Retail

Canteen Stores Department (Defence Services)

3%

90-95%

3-5%

0.5%

20-25%

40-50%

20-25%

5-10%

Modern Trade in India has multiple players across v arious formats

Key F&G retail players & formats

PLAYER

Key store

Metro Bharti(Walmart)

Trent (Tesco)

Reliance AdityaBirla Retail

Future Group

K Raheja Spencers Dairy Farm Int'l

27AWT_India-Opportunties_Challenges_Act Now!_10-06-14.pptxSource: Company Websites

FORMAT

Key store brand

Cash & Carry

Hyper-markets

Super-markets

Con-venience

Planned – – – – – –

––

–

– – – – –

– –

Modern trade represents both an opportunity and a t hreat for FMCG manufacturers in India

1 Entry into new categories, formats & geographies

2 Margin pressures

Key retail trends & implications for FMCG playersImplications for FMCG Manufacturers

• Increased points of sale• Enhanced channel conflict

• Harder terms of trade with retailers,


2 Margin pressures

3 Increasing focus on private labels

4 Initiatives for improving supply chain efficiencies

5 Single point negotiations with retailers

6 Merchandising & interaction with consumers at point -of-sale

Source: Analysis by Tata Strategic

resulting in lower margins

• Pressure on brands to maintain shelf and sales share

• Better availability

• Easier control, better efficiencies

• Facilitates new product launches and impulse sales

D. Key factors for success in India


Wheel has become a USD 450 m brand in India

Case study: Wheel detergent (Unilever)

• Wheel was introduced as a counter to a new competitor's (Nirma) sudden upsurge in the lower priced mass segment


• Wheel developed for the Indian market –not part of the global portfolio

• Third party manufacturing introduced

• Flexible pricing policy – based on geographic differential in taxation and input price fluctuation

• No. 1 detergent brand in India

• Became the world's largest selling detergent by vol ume

• Sales of ~USD 450 min India in 2009, largest brand f or Unilever India

Source: Industry sources, Company websites, Analysis by Tata Strategic

Nokia has become the dominant mobile handset player in India

Case study: Nokia

• Wide product range straddling all consumer segments: Prices from EUR 20 to 800

• Product innovations to suit Indian market e.g. Nokia 1100


• Alliance with local company for nationwide distribution1)

• Local manufacture of low cost high volume handsets

– Largest Nokia factory ~100 m phones pa

• ~60% value market share in 2009 (~USD 3 bn)


1) HCL Infosystems is a local company has a nationwide network for computer & laptop distribution

• Product innovations to suit Indian market e.g. Nokia 1100

– Features like torch, better grip, dustproof

– Priced at ~EUR 20

McDonalds has adapted to suit Indian tastes

Case study: McDonald's India

• Focused on catering to Indian preferences

– Created localized products

– No hamburger served

– Segregated vegetarian cooking


– Segregated vegetarian cooking

• Store expansion – current 157 to ~350 by 2015


• "Indian" price to expand consumer base

• Know-how transfer to develop long term suppliers

• Home delivery model – pioneered in India

Vegetarian burger at EUR 30 cents

Marketing mix innovations drove Pepsico India's succ ess

Case study: Pepsico India (Frito Lay)

• Salty extruded snacks (Kurkure) developed to suit spicy Indian palate – nearly 40% of total revenues (2008)

• Attractive price points maintained in snack food – Rs 5,10,20 (EUR 8,15,30 cents )


(EUR 8,15,30 cents )

• Overall market share of ~45% in branded snacks (2008 )


• High retail penetration led by innovative point-of-sale solutions

Kurkure to be taken global (Walkers brand)

"It is the most talked about brand and has generated great interest in the US, UK, South Africa, Australia and West Asia"

Kelloggs' relaunch succeeded with an India specific strategy

Case study: Kellogg's India

• Reformulated products to meet Indian dietary habits i.e. preference for hot milk

• Developed India specific fortified range – Iron Shakti


• Affordable packs for Rs 10 (EUR 15 cents)

• High visibility in modern retail outlets

• Currently 70% value share in ready-to-eat cereals m arket


Perfertti Van Melle is the market leader in confectio nery

Case study: Perfetti van Melle

• India focused value proposition:

– Extensive, efficient distribution in traditional retail channels; available in 1 m outlets

– Thrust on mono-pack sales to tap all segments


– Thrust on mono-pack sales to tap all segments

– India specific brands e.g. Chatar Patar

– Strong brands created through innovative advertising campaigns

• Market leader in the Indian confectionary market with ~30% value share


Figaro is the largest player in the fast growing ol ive oil segment

Case study: Figaro Olive Oil

• Spain based Figaro was one of the first players to marketolive oil in India

– Leveraged on growing demand for healthier edible oils

– Able to target the price insensitive premium segment despite


– Able to target the price insensitive premium segment despite additional cost of imports

– Conducted awareness campaigns on olive oil in its niche target group

• "Good for heart" edible oils likely to grow at ~35% over the next 5 years

• Market leader with 20-25% market share


Aqua Montana, a German beverage player has recently entered India with plans for a long term play

Case study: Aqua Montana

• Aqua Montana, set up in 1997 is based out of Munich and is a medium sized importer and bottler of non alcoholic beverages, including mineral water in Germany


• In 2007, Aqua Montana in Germany produced approximately 7 m hl of beverages.

• Entering India with diet carbonated beverage – slim and energy drink – explode. To enter iced tea and mounta in water subsequently

• Plans to achieve ~USD 10 m revenues in year 1 and do uble it in year 2

• Finalized 3 bottling contracts in 3 different regio ns in India


Market leaders have created an India specific busin ess model in their respective spaces

Key success factors

• Value proposition aligned to local market needs

• Price for target customers


• Distribution/reach

• Conforming with regulations – central, state, city

Acceptability Affordability Availability

E. How Roland Berger and TSMG can help you to succeed


Roland Berger Strategy Consultants

Roland Berger and Tata Strategic Management Group h ave formed an alliance to cover your India needs

Benefits of a strong alliance


• Common values

• Global best practices know-how

• Sound expertise in Indian markets and industries

• Premium access to Indian as well as global companies and networks

Tata Strategic Management Group

Tata Strategic Management Group is the largest Indi an owned management consulting firm

Tata strategic overview

Founded in 1991 as a division of Tata Industries Lt d.

The largest Indian owned Management Consulting firm


Over 70 member strong Consulting Team

Supported by a panel of domain experts

Growing client base outside India

500+ engagements, 100+ clients, across countries, across sectors

Increasing presence outside the Tata Group & India

• 50+% revenue outside Tata Group • 20% revenue outside India

We can support your India entry with a wide array o f offerings

Entry strategy• Market understanding/assessment• Market entry: new products,

markets, value proposition, pricing, positioning customers, channels

Consumer Markets: India entry offerings for manufacturers


Acquisition advisory• Market scan and target

identification• Strategic due diligence

Growth/competitive strategy• Distribution alliance• Rural market strategy• Health and wellness strategy

Operations/organization• Supply chain strategy• Manufacturing strategy• Procurement strategy• Organization structure design

India Entry:Consumer Market

offerings

Why are we best suited to partner you in India entr y?

✓✓✓✓

✓✓✓✓

In-depth understanding of India Consumer Market lan dscape

Right mix of strong industry experience and consult ing know -how


✓✓✓✓

✓✓✓✓

✓✓✓✓

✓✓✓✓

Established methodologies & tools

Access to global benchmarks and best practices

Our resolve to deliver innovative, actionable India -specific solutions

Right mix of strong industry experience and consult ing know -how

Contacts at Roland Berger – Tata Strategic

PANKAJ GUPTA

PRACTICE HEAD –Consumer & Retail (TSMG)

Phone: +91 22 6637 6753Mobile: +91 9820414670Fax: +91 22 6637 6600e-mail: [email protected]


ANDREAS BAUER

PARTNER Head of competence center Consumer Goods & Retail (RB)

Phone: +49 (89) 9230 8316Mobile: +49 (160) 744 8316Fax: +49 (89) 9230 8391E-mail: [email protected]

ALESSANDRA CAMA

PRINCIPALConsumer Goods & Retail (RB)

Phone: +49 (89) 9230 8228Mobile: +49 (160) 744 8228Fax: +49 (89) 9230 8176E-mail: [email protected]

THANK YOU


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