NEW DELHI: Consumer spending in the Indian FMCG sector is set to more than triple by 2020, offering major opportunities for brand owners and retailers.
According to a study from the Boston Consulting Group and the Confederation of Indian Industry, expenditure levels should reach $3.6tr in 2020, compared with $977bn in 2010.
The core trends fuelling this process include growing affluence, rising aspirations among shoppers and the adoption of increasingly sophisticated media habits.
More specifically, 70% of Indians will be of working age in 2025, helping drive economic expansion and consumer spending, the report suggested.
"There is such a huge opportunity in Indian retail and FMCG that there is no need for players to fight for their share of the pie. Instead our focus should be to grow this pie which is small today, and to unlock a closed market," Nitin Paranjpe, CEO of Hindustan Unilever, said.
Currently, food takes 31% of expenditure, transport logs 18%, housing accrues 14%, education and leisure holds 7%, apparel attracts 6%, health posts 5% and durables and household services receive 4%.
Overall, category spending in India will rise by 14% per year in the forecast period, beating the worldwide total of 5.5%, and the projected 9% lift due to be recorded by emerging markets.
At the end of this timeframe, India will deliver 5.8% of global consumption, more the doubling the contemporary proportion of 2.7%.
There are seven shopper segments in India at present, including "professional affluents", or 2% of households; "traditional affluents", or 4% of residences; and "urban aspirers", or 8% of homes.
"Rural aspirers" make up 6% of the target audience on this measure, as do the "large town next billion". A further 24% of households were "small town and rural next billion", also a promising cohort.
The biggest group, however, was the "strugglers", or 50% of households, which require a nuanced selection of products such as single-serve sachets.
Looking ahead, the "professional affluent" group are expected to supply 26% of expenditure in 2020, the largest share, and improving from 16% in 2010.
"The Indian consumer pyramid is shaping into a diamond, but more importantly income is only one variable that is driving this consumption," said Manu Anand, CEO of PepsiCo India.
Data sourced friom CII/Economic Times/Rediff; additional content by Warc staff