TRENDS
There has been a lot of talk on the street about an economic slow down in
India, the key indicators being taken as a proof for the same are sluggish auto
sales trend and a few fmcg majors like HUL (Unilever Plc) moderating their
growth forecasts for the Indian market.
I feel, this is not an economic slow down but a major economic shift that
India is going through. The high young population percentage of India means a
lot of decision making and disposable income coming into the hands of
millennial and if we have to think or talk about the future we need to get an
inside scoop of the millennial thinking, How young India thinks and acts.
Note: This is not a well researched piece so pardon me for inaccuracies,
This is more of what I have observed or heard from people as I travel or talk
to people across India and try to observe them, their thinking pattern and
catch a trend. Since this is more of general talk, I am not attaching data of
any kind to the whole thing but just logic that i feel is correct.
I pen down a lot of my
thoughts on a very scattered way on Twitter, so I thought of writing this one
piece where I can integrate many of it into one.
So here are some interesting observations or say my own millennial thinking
on stuff :-
Banking:
Retail banking was a pretty big theme for investing in India, 10-15 years
ago a large percentage of our population was not connected to the banking
system.
Today, almost entire India is connected to the banking system after Jan
Dhan Yojana. Leaving aside a small percentage of population that continues to
be disconnected to the banking system.
Therefore, any new bank or even a old bank trying to get hold of a lot of
accounts might not really work out even if they expand their branch networks
aggressively.
Infact, Technology which has replaced the middle-men across the sectors
will emerge as a major threat to traditional banking system going ahead. With
the emergence of Fin Tech Companies: Your mobile wallets, digital bank accounts
and mPOS have already started to disrupt the financial world. Now going ahead,
traditional banking which is the largest middle man in the economy will witness
challenges from P2P lending and many such intriguing concepts. The banking
giants which actually slept on technological innovation will have to wake up
and smell the coffee sooner or later to compete with these fintechs and smaller
banks aspiring to grow big have to create fintech brands or keep trying to talk
about biting the retail banking cake and end up being eaten.
Auto Sector:
On my personal twitter handle, Last year in September I had posted about an
impending auto-slow down.
In real terms the auto slow down came a bit late but now it is the biggest
talking point on the street.
While many are taking this as an economic indicator of prosperity and
financial power I feel otherwise.
We had a good amount of growth in the 2 wheeler and 4 wheeler space in
India, most of the metro cities in India are over populated both with humans
and vehicles, Parking is a huge issue for all the car owners, Maintenance
costs are high, Petrol Diesel haven't been really cheap despite Acche Din.
The car buying is slow not because people dont have money but because
people have options like Uber & Ola in big cities, they are now venturing
into small cities as well.
The buying a second car idea is not even on most minds anymore.
If you have options to spend small and get services like Uber & Ola you
might not instantly look to spend big on a vehicle and pay EMIs, you would
rather spend it on some other things (This is how the millennial thinking is
shaping up)
Plus due to the above stated issues a large percentage of people no longer
see a car as a status symbol, flaunting an iPhone or flaunting about a holiday
on Instagram has become more interesting or worthy rather than driving your
tall boy Wagon-R. Now going ahead the Car Sales will soon turnaround because
while cities are done with owning a car obsession, smaller towns and cities
would witness a trend to buy cars and even if they don't once Uber & Ola
start to penetrate your smaller towns and cities you will anyway see amount of
growth returning in the sales figures soon.
Meanwhile 2 wheelers will be a growing trend, A lot of second car buying
would convert into owning a 2 wheeler for quicker commute, Plus the rise of
Swiggy, Zomato, Uber Eats largely the Delivery Boy Culture will also trigger a
good amount of growth in 2 wheeler buying.
FMCG:
HUL which is present across so many categories of FMCG has cut its growth
forecast in their latest quarterly results and the volume growth was unexciting
for analysts.
This whole thing of FMCG slowdown that is being peddled may not be a slow
down but a case of shrinking market share for these large mncs.
Just think about it a Patanjali which came out of nowhere and disrupted and
grew big even though even that is slower now points out at what?
It points out at a lack of loyalty in the mind of Indian consumer, this young
Indian consumer is not shy of trying new brands and things or eat new stuff.
For instance, India's total potato chips market both organized and
unorganized stood at close to 18000 crores in 2017 while the leaders continue
to grow at exciting or moderate growth rates, the latest entrant with a niche
of baked healthy snack, crisps, chips and innovative products like foxnuts and
quinoa puffs "Too Yumm" a brand by CESC endorsed by Virat Kohli went
on to clock almost 300-500 crore sales in their first year which is not a mean
feat. Even DFM Foods in their latest march quarter delivered a 30% revenue
growth backed by new launches like cheese balls and more.
The entire thing about India being hugely populated country and FMCG being
a huge growth story has caused a lot of start-ups, new companies venturing into
this field of business with a renewed focus on pricing and innovation, these
small companies with their small brands are so many in number that they are
managing to dent the market share of these biggies (It is actually good for
India)
Its not just limited to food but across the board, E-Commerce push has also
helped to cut off distribution headache and making it easier to sell your new
brand to large population.
For instance the best selling shampoo on Amazon right now is WOW's Apple
Cider Vinegar Shampoo priced at a discounted rate of 384 for 300 ML and it has
5951 customer reviews already and on an average 4 star reviews.
Their website: buywow.com tells us that Wow Skin Science is a beauty
company based in "Bangalore" so you know now its a start-up.
HUL's clinic plus comes as second best seller.
Across skin care there are brands like Skinsalad, Jovees, mcaffeine and
practically a lot many which are slowly starting to have their own set of
customers and are biting the market share of biggies.
Another example is that the best seller product in Chips category on Amazon
is Too Yumm's Multigrain Dahi Papdi Baked Chips and the second best seller is
Lays American Onion
So one thing is becoming clearer that the young millennial Indian customer
is not a very loyal or attached fellow to any brand, He is not shy of trying
things and he/she has a lot of options now compared to what they had earlier.
FMCG / Fast Food/ Restaurants contd:
Packet food is also getting disrupted by availability of fresh food through
swiggy and other such food delivery apps which can replace your hunger of Maggi
with a paneer wrap from your nearby Dhaba.
QSR, Take Away and Food Delivery is becoming a pretty booming business in
India, big cities like Mumbai or Kolkata or smaller towns like Indore: The
Demand is Real.
A simple question also is, if HUL’s growth forecast turning tepid hints at
recession does the mad growth of food delivery apps and restaurants hint at
India becoming an economic super power? NO for both.
This is not such a great news for a Dominos or Mc Donald’s because of
variety of options becoming available to people.
But in turn it is also fueling the hunger across people to order so they
are not complaining as they all are targeting the Kitchens as well not just each
other.
Overall:
I have left many sectors uncovered here, But the moot point I am trying to
make is that the disruption is pretty high and across industries, and there are
many opportunities for many companies and start-ups to make it big.
A lot of the listed company’s results or growth forecasts might or might
not reflect this due to shrinking market shares for big companies.
But this whole consumption slowdown does not seem very real to me,
Investors as well as young businessmen should try to identify new themes in the
consumption or service bracket to tap.
There is a lot at stake for FMCG Biggies and also a lot of Stake in the
market share to be won by younger companies.
