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Consumer Markets

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Consumer Markets

August, 2011


Where on one hand the world is still recovering from the ripple effects of financial meltdown, India is emerging stronger in terms of growth, skilled manpower and amiable business environment. The Indian consumers, highly optimistic about their financial well being in the future, are enjoying benefits of consumerism due to the availability of wide options and players in the market.

According to the latest edition of the Nielsen Global Online Consumer Confidence Survey (which tracks consumer confidence, major concerns and spending intentions among consumers) for the second quarter of 2011, Indian consumers stand most optimistic globally. India fared at 126 index points for the survey, followed by the Philippines (115) and Indonesia (112).

The household consumer expenditure survey for 2009-10, released by the National Sample Survey Office (NSSO) reveals that rural Indian households are spending more on consumer goods like durables, beverages and services as compared to their expenses on such things five years back. The 66th round of the National Sample Survey showed that monthly per capita expenditure (MPCE) in rural India was Rs 953.05 in 2009-10, an increase of 64.6 per cent from 2004-05.

India Inc’s appetite for mergers and acquisitions (M&A), private equity (PE) and venture capital (VC) deals remains strong according to research firm VCCedge, the financial research platform of VCCircl&. M&A deal value stood at US$ 1.36 billion across 58 deals during July, 2011 while PE and VC deal value was up 19 per cent to US$ 980 million across 35 transactions during the month.

Retail In India

The US$ 413 billion Indian retail market entails only 6 per cent of itself as organised retail segment as of 2010, according to Booz and Co. (India) Pvt. Ltd. Food and groceries is the largest segment in organised retail, followed by apparel, footwear and consumer electronics.

“Over the next five years, we expect organised food retail (through convenience stores, supermarkets, and hypermarkets) to grow by over four times from the current US$ 8 billion,” said Raghav Gupta, principal, Booz and Co.

The BMI India Retail Report for the fourth-quarter of 2011 forecasts that the total retail sales will grow from US$ 411.28 billion in 2011 to US$ 804.06 billion by 2015. The report has underlined factors like economic growth, population expansion, increasing wealth of individuals and rapid construction of organised retail infrastructure as major drivers for the optimistic forecast figures.

Moreover, India has been ranked as the fourth most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney, in its Global Retail Development Index (GRDI) 2011.

AT Kearney has also conducted a different study which says that organised retailers should follow hypermarket concept to penetrate through India’s US$ 435 billion industry. According to the report, given the gigantic size of the Indian retail market, it is no surprise that many Middle East retailers, most recently Lulu, have announced their interests to extend their retail operations to India.

Cumulative foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to April 2011 stood at US$ 66.69 million, according to the Department of Industrial Policy and Promotion (DIPP).

Jubilant FoodWorks Ltd, which operates fast food chain of Dominos Pizza in India, will invest over (INR 70 crore) (US$ 15.47 million) in the FY12 on new stores and commissaries.

Reliance Industries’ Reliance Retail (that runs supermarket and hypermarket chains) is planning massive expansion across the country by doubling the number of stores in several specialty formats in 2011.

The brand ‘More’, operated by Aditya Birla Retail, will open 12 hypermarkets and 150 supermarkets in fiscal 2012. After the expansion, its supermarket stores tally will reach 715.

Shoppers Stop Ltd, which has 43 departmental stores and 10 hypermarkets under the brand Hypercity, plans to open four more hypermarkets and 10 departmental stores in 2011.

According to a report by research firm CB Richard Ellis India, over 6 million square feet of retail mall space was added across India in the first six months of 2011; primarily due to aggressive expansion by organised retailers.