Despite Recent Turmoil, The India Story Remains Encouraging

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Despite Recent Turmoil, The India Story Remains
Encouraging

• Sustained growth in private consumption
• Retail opportunity slated to rise by about US
  160 Billion in 5 years, and another US 220
  Billion in the next 5 even at a GDP growth rate
  of 6 per year

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Strong Fundamentals, Still In Place
CAGR 10
Figures in US
Source RBI
Source Census
Dependency Ratio
50
40
Median Age
Figures in millions
Figures in millions
40
35
Years
30

30
20
25
10
20
Source UN
Source UN
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Fuelled By The Changing Mindset Of A Billion
People
2003
2008
The Age Of Altered Mindsets
The Age Of Consumption

• From belief in karmic destiny to transforming
  karma
• From functional needs to esteem/status needs
• Visible consumption, premium for products with
  stand out/bling value
• Indulgence enjoyment and experience
• More instant gratification
• Through the year consumption
• Fear of being ordinary, but still
  extraordinary within social norms

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Movement Away From Basics In The Consumers Purse

• The share of food and grocery in the consumers
  spending continues to drop releasing money for
  discretionary expenditure

Source India Consumer Trends 07, Technopak
analysis
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But Evolving Social Values Will Alter The Nature
Of This Discretionary Expenditure

• Individualism
• Out-of-home is fun

• Concern for environment
• Belief in people power
• Health consciousness
• Belief in education
• Pro-technology

• Pursuit of pleasure
• Meaningful work
• Need for control
• Traditionalism
• Looking good

High
Growth in strength of value

• Flexible gender roles
• Fancy for foreign
• Use and throw culture
• Faith in government machinery

• Openness to change
• Shopping fever
• Faith in religion
• India rules
• Ostentation
• Towards exclusiveness

• Saving for tomorrow
• Back to nature
• A simple life
• Brand consciousness

Low/ medium
Low
High
Medium
Current strength of value
Source Technopak -- Indias Social Values
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A More Evolved Consumer
2003
2008
2013
The Age Of Altered Mindsets
The Age Of Consumption
The Age Of Maturity

• From affiliation to individualism
• Connoisseurship taste and discernment
• From reckless consumption to considered
  indulgence
• Experiences, not products
• Pro-sumers
• More socially responsible consumption behaviour,
  emergence of the green consumer
• Need for balance -- concerned about serious
  issues without losing out on the lighter side of
  life
• Change in value definitions trade up and trade
  down extreme price sensitivity for functional
  products, premium for products of high perceived
  differentiation

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Modern Retail Will Continue To Grow

• Expansion across various categories and formats
• Over 20,000 new modern-retail outlets likely to
  be opened in next 2 years and the numbers will
  keep growing

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Diversification Of Formats

• Format diversification
• Rapid scale up by older players and new
  entrants
• Expansion into specialty formats along with the
  core FG

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Expanding Geographies

• Initial focus on Metros and Mini Metros
• Rapid move into smaller towns and even rural
  India
• By 2013, modern retail would have reached at
  least top-600 Indian cities and towns, and
  perhaps directly or indirectly reach to over top
  50,000 villages

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Reaching A Wider Strata Of Consumers

• With a presence in top 70-80 cities, modern
  retail is still currently under -penetrated and
  actually serves 7-8 of the total Indian
  population
• Retailers are moving to a larger consumer base
  with focus shifting from upper income consumers
  to middle class, and finally into the markets of
  the urban poor/rural market
• Lower income segment to be targeted by a
  different value proposition of products/ prices/
  services like Deep Discount/Cash Carry .etc

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Food And Grocery Will See The Largest Impact

• Food grocery, the largest and most
  underpenetrated category, is expected to see a
  lot of action from modern retail in the coming
  future. Apparel and footwear already have
  substantial modern retail presence and are not
  expected to see as much action

Overall Category Growth
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Modern Retail Will More Closely Reflect Actual
Share Of Wallet Of The Average Consumer

• From being Apparel and Lifestyle led, the modern
  retail contribution will be a reflection of
  actual share of wallet of an average consumer

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Supermarkets Will See The Maximum Action

• Specialty category like Apparel CDIT/ mobile
  stores are the highest contributor to the modern
  retail. However, supermarkets are expected to see
  the maximum action in the coming years

Expected Growth Y-O-Y
Market Size ( US bn)
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More Brands/ Manufacturers Looking For Vertical
Integration

• Increasing focus on vertical retailing looking
  for capturing the last mile.
• A natural progression for many Brands
• With low penetration of organized retail in many
  specialty categories, brands setting-up exclusive
  stores to create brand salience and experiential
  centres for the evolved consumers

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Strategic Alliances With The Best In The World

• New trend in last 24 months to partner in select
  formats / supply chain with global leaders in
  order to
• Launch new formats
• Access to better know-how
• Leveraging back-end investments across many more
  retail businesses

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International Retailers Will Take A Dominant
Position In More Complex Formats

• Formats with lower level of product innovation
  requirements and availability of quality
  suppliers, will be dominated by domestic
  retailers. Formats at the top right corner will
  see more International retailers taking a
  dominant position in the coming years

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Increasing Support From Private Equity

• Investment appetite from PE funds remains strong
  though they are looking for
• Differentiation
• Superior execution
• Realistic valuations

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Therefore, The Promise Is Still Intact

• Between 2009 2013, most of the current players
  would have expanded and consolidated (and some
  merged / acquired) exponentially compared to the
  situation during 2003-2008
• By 2013, most of the major multi-national
  retailers (across formats and categories) would
  have entered India giving further fillip to the
  overall growth of modern retail
• Modern Indian retail is currently experiencing a
  steep learning curve the current turbulence is
  not entirely unexpected or undesirable
• Investment options will further increase as the
  Government will finally open up international
  investment in the retail sector during 2009
  2013 period

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Technopak Forecast For 2013
Size of modern retail
Direct investment gt US 30 Billion
(2009-13) Revenues gt US 100 Billion Share
of total retail 14 Space occupied 500
Million sft Direct employment 2
Million Reach 600 Towns, 50,000 Villages
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Thank You !
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