By
India is the second biggest market for Unilever, accounting for 12% of its global sales. However, its growth rate has tapered off over the past year, as consumers tightened their budget amid inflationary pressures across categories. But HUL’s British parent Unilever is betting heavily on India. “If you are running Unilever, you would not swap our Indian business with any other business,” Unilever’s new chief executive officer Fernando Fernandez, who was chief financial officer, said in London. “The market has been softer and food inflation was very significant in India and food inflation affects 80% of the households. The economic environment in India will get better in the second half of the year,” he said.
What Fernandez sees in India is “serious money” in a small section of population besides a growing class of other consumers.
Unilever’s bullish consumer math for India
Unilever CEO Fernandez is eyeing numbers in India which are set to grow phenomenally. With post-Covid premiumisation trend, India’s affluent class is splurging on consumer goods while an emerging class of consumers too is taking shape, and both are expected to grow vastly.
“The rise of affluent India is very important. There are 60 million households of the 320 million households in India that have serious money,” he said. “The economically active population in India is 430 million, so it’s 30% (of the entire population) and probably the lowest in the world. There are 80 million female workers in India in a 750 million female population. Every time women get into the labour force at a scale, companies like Unilever really have a tailwind. I am very bullish about the long-term prospects of India regarding the changes in consumer preferences.”
Unilever already has a class of buyers who prefer to buy premium but it is also hopeful of a growing class which is just coming up from the bottom.India is set to witness growth in both premium and mass consumption segments, and often these segments overlap. Talking recently with ET Now about consumer trends in India and how people choose to spend their money, Sanjiv Mehta, former HUL CEO and Executive Chair, L Catterton, pointed out how different consumption patterns co-exist. When asked if value-conscious consumption is a vanishing trend, he said, “No, India has many consumers. You are talking about 500 million people which would still be lower middle class, the bottom of the pyramid though the shape of the pyramid is changing. They would still be very value conscious. Indians per se remain value conscious. You may buy a Louis Vuitton bag on one hand, but you may still want to go to D-Mart and get a good bargain. Both these play out. You are willing to spend on aspirational items where price does not matter and on other things you want value. So, this plays out together.”
Why global consumer businesses can’t ignore India
Today, Western multinational giants, especially those in the FMCG sector, come to India looking for volume growth. India’s market size has a big pull. Imagine when in addition to even larger volumes, they also come to India looking for profit margins; such a large middle class will obviously give colossal purchasing power to India and the capacity for huge discretionary spending. Unilever CEO Fernandez could be looking at this prospect.
The People Research on India’s Consumer Economy (PRICE), an independent, not-for-profit think tank and facts tank, collected primary data in 2014, 2016 and 2021, covering over 40,000 households, both rural and urban from 25 states, for its PRICE ICE 360° surveys. The results painted a strikingly new picture of India.
By the end of this decade, the survey says, the structure of the country’s demographics will change from an inverted pyramid, signifying a small rich class and a very large low-income class, to a rudimentary diamond, where a significant part of the low-income class moves up to become part of Middle Class.
Consequently, the income pyramid will have a smallish layer at the bottom comprising the destitute and aspirer groups, a huge bulge of the middle class and a big creamy rich layer on top. The percentage growth is much higher for the upper income groups than the lower income groups. In fact, for the lowest income groups the growth could even be in the negative.
Estimates based on the survey suggest that the population of the destitute and aspirer groups will decrease from almost 928 million in 2020-21 to 647 million by 2030-31 and further to 209 million by 2046-47. The top income segment – the Rich – will soar from 56 million to an estimated 169 million and 437 million, while the huge bulk of the population will comprise a middle class of nearly 1.02 billion in 2046-47, up from 715 million in 2030-31 and 432 million in 2020-21.
While the middle class has expanded quite rapidly, the most significant point is that there has been an even faster growth among various categories of the rich. For instance, the number of super rich, earning more than Rs 2 crore in 2020-21, has gone up from 1.06 million households (6.1 million consumers) in 2015-16 to 1.81 million households (10.2 million consumers) in 2021.
This works out to an annual growth of 11.3 per cent. By 2030-31, the number of super rich households is expected to increase even faster, to 9.1 million households (46.7 million consumers), and by 2046-47 this is expected to go up to 32.7 million households (150 million consumers). The overall category of the rich, or those with family income of over Rs 30 lakh in 2020-21, is estimated at about 11 million households comprising 56 million consumers, compared to nearly 7 million households with 37 million consumers in 2015-16. By 2030-31, this will go up to 35 million households with 170 million consumers. And by 2046-47, the number will grow to 100 million households with 437 million consumers.
Given these growth projections of India’s consumer classes, Unilever CEO Fernandez would not swap his Indian business with any other business, as he has put it.
