overview of the indias consumer and retail sectors

8/8/2019 Overview of the Indias Consumer and Retail Sectors

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Overview of IndiasConsumer and Retail

Sectors

1

Raghav Gupta

President

18 February, 2010


2/21

Contents

1 Overview of Consumption & Retail

2

3

Some Projections & Recommendations


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33%31%

27%

16%21%

Slowdown has had significant impact on consumer

confidence, private consumption & organized retail

Organized Retail

3

2006 2007 2008 2009 2010

Q1

2010

Q2

2010

9.30% 9.7% 9.1%

6.1% 6.1%7.9% 7.2%

7.10% 6.3%8.5%

2.9%1.6% 5.6% 5.2% Private Consumption

FY

GDP Growth

2011P 2012P 2013P 2014P 2015P

Source: Ministry of Finance, Technopak Analysis and Estimates

Real Growth Rates


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31%29%

27%

25% 25%

From Q2 FY10, private (discretionary) consumption has

returned, providing growth fillip to organized retail

Organized Retail

33%31%

27%

16%21%

4

2011P 2012P 2013P 2014P 2015P

8.1% 8.5% 8.5% 9.0% 9.0%

7.0% 7.0% 7.5% 7.5% 7.5%Private Consumption

GDP Growth

Source: Ministry of Finance, Technopak Analysis and Estimates

Real Growth Rates

2006 2007 2008 2009 2010

Q1

2010

Q2

2010

9.30% 9.7% 9.1%

6.1% 6.1%7.9% 7.2%

7.10% 6.3%8.5%

2.9%1.6% 5.6% 5.2%

FY


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Consumption is set to double in 5 years (nominal growth of

US$750 Bn). Traditional retail is likely to capture a larger share

1175

1777

1,000

1,200

1,4001,600

1,800

2,000All values in US$ Bn

5

639

266

435587

7 2167

0

200

400

600800

2005 2010P 2015P

GDP Total retail Organized Retail

Source: Technopak Analysis and Estimates

Real Growth Rates & Values, Inflation assumed at average 7%


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Organized retails evolution in India is not very different

from other sectors, though profitability is still elusive

Evolution Curve

Size of

IT

6

T0 T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12 T13 T14

Industry Organized Retail

TelecomBPO

Source: NASSCOM, TRAI, Technopak Analysis


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Consumer product sectors are experiencing high

growth, and some have gained share of wallet

15%

20%

25%

Sector Growth Rates

Growth

7

0%

5%

10%

2005 2006 2007 2008 2009 2010P 2011P 2012P 2013P 2014P

FMCG CDIT Apparel

Rates

Source: Technopak Analysis and Estimates


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Consumer products companies have outperformed

organized retail on financial metrics

11%

28%

20%

3%

-4%

10%

12%

22%

8%

1%

Pantaloon Retail

Shoppers Stop

Koutons

Westside

Vishal Retail

Financial Comparison of FMCG Companies and Retailers (FY09)

Retailers

8

121%

53%

48%

39%

38%

35%

25%

15%

32%

19%

12%

19%

23%

8%

HUL

P&G

Dabur

Marico

GSK

ITC

Britannia

EBITDA/Sales ROCE

FMCG Companies

Source: Annual Reports


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Contents


9

3



10/21

Categories offering price-performance value to consumers were

first to recover from slowdown (durables vs. semi-durables)

Semi-durablesGoods that are neither

erishable nor lastin

Clothing, Furnishing,

Home Textiles etc.

DurablesHeavy goods intended to

last 3 or more years

Refrigerators,

washing machines,

Automobiles

10

Non-durablesGoods that do not last a

long time, so need be

continually replaced

FMCG, Food

Products, etc.

ServicesServices that are

becoming essential

Healthcare,

Education, Telecom,

etc.


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Apparel, Home Furnishing, Value Retail, etc. have not matched

other categories in their price-performance value offer

Volume CAGR

Last 4-5 years

Per Unit

Price Change

Talk time

Laptops

80%

76%

-24%

-20%

11

LCDs

Premium Shirts

(Apparel)

Home

Textiles

40%

6%

12%

-20%

15%

25%

Source: Technopak Analysis


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Dramatic changes are taking place in Indias

consumption basket of Roti, Kapda, aur Makaan

Rank

2009Category

Size

2009

Size

2014

Rank

2014

1 Food & Grocery 270 339 1

2 Healthcare 36 58 2

3 Apparel & Home Textiles 34 45 4

4 Housing 33 47 5

5 Education 30 47 3

All values in US$ Bn

12

6 Telecom 26 42 67 Jewelry & Watches 26 36 9

8 Personal Transport 25 39 7

9 Travel and Leisure 13 21 8

10 CDIT 12 18 10

11 Home Furniture, Furnishing 11 15 1112 Personal Care 10 15 12

13 Eating out 5 8 13

14 Footwear 4 6 14

15 Health & Beauty Services 1 2 15



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Leading to emergence of new categories and inter

category competition

13

mobile handset and calling charges US$ 25 Bn (Rs. 1,15,000crores) on auto & transport

US$ 13 Bn (Rs. 60,000 crores)

on travel and tourism

US$ 9 Bn (Rs. 40,000 crores) on

self-learning and coaching


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Contents


14

3



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F&G and CDIT categories are expected to see

significant growth in organized retail

Apparel

FootwearConsumerelectronics

Books, musicand

entertainment

30 %

35 %

40 %

45 %

50 %

organizedr

etail

16

Total category CAGR 2008 to 2014

Food and

groceries

Home(Furniture, DIY)

Jewelleryand watchesPharmacyand wellness

0 %

5 %

10 %

15 %

20 %

25 %

0 % 2 % 4 % 6 % 8 % 10 % 12 % 14 % 16 %

Size of bubble represents market size of the category

%agesales

i



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Apparel is likely to be the most attractive category from a financial

standpoint, but price-performance value needs to improve

Jewellery &Watches

20%

25%

30%

35%

OCE

ROCE vs. EBITDA

17

Food & Grocery

Footwear

CDITHome

WellnessBooks & Music

-5%

0%

5%

10%

15%

-2% 0% 2% 4% 6% 8% 10% 12% 14%

R

EBITDA

Size of bubble represents sales per sq. ft.



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Though retail has gone through a steep learning curve,

operations still need to improve significantly

40%44%

51%44%

63%

40%

58%

37%

45%49%

48%

67%

39%

48%

30%

40%

50%

60%

70%

200

250

300

350

400

Average

Indian Retailers International Retailers

18

11081

260

93133

160

6038 48 50 43 30 34 29

0%

10%

20%

0

50

100

Days of Inventory/Sales - Indian Gross Margin - Indian

Average

Inventory

Inventory3 times more inventory in India

Source: Annual Reports, Technopak Analysis, for FY09


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Finally, as retailers look to raise fresh capital,

understanding what the markets reward is key

Performance Value co-relation for US markets:

Performance Metric Correlation to Value

19

1. ROCE 0.65

2. Same store sales growth 0.40

3. New growth 0.20

Source: McKinsey & Co., Research for US markets


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Summary of Key Messages

1. Consumption is likely to double in India in next 5 years, (nominal growth

of US$750 Bn). In the next 5-10 years, the scale of business opportunity

and pace of change are fundamentally different. This will require almostevery company to go back to the strategy drawing board

2. Dramatic changes are taking place in Indias consumption basket of

20

Roti, Kapda, aur Makaan, leading to emergence of new categories and

inter category competition. A price-performance value offer is key

3. Organized retail has and is experiencing a steep learning curve, and the

recent turbulence is not entirely unexpected or undesirable

4. Retail will witness expansion, consolidation, acquisition and further

entry of international chains between 2010-2015, giving further fillip to

the overall growth of organized retail


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Thank You!

Raghav Gupta

[email protected]

+91 99585 22993

overview of the indias consumer and retail sectors

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