India 2016 |Market Intelligence| The New Consumer
Indians choose brands based on quality, convenience, price
But as choice increases, loyalty decreases
Indian consumers today are becoming wealthier, more discerning, confident and sophisticated. They select brands that best meet their needs and offer quality and convenience or other benefits at an affordable price. A brand’s provenance—whether it is multinational or local—is less relevant. And with the emergence of strong local brands, consumers enjoy greater choice.
Greater brand choice is accompanied by weaker brand loyalty, however. Consumers are using more brands, but the awareness scores of individual brands are declining, according to Kantar Millward Brown research. The brands that command the greatest loyalty either inspire strong emotional attachment or fill a specific need for a narrow audience.
In addition, two contradictory purchasing trends coexist: value seeking and premiumization. In a departure from past shopping patterns, Indian consumers are buying more on promotion, according to new trend research by Kantar IMRB and Kantar Worldpanel. Meanwhile, the premiumization trend continues, although at a slower rate.
Indian consumers are changing not only how they purchase, but also what they purchase. Driven in part by resurgent pride in India and Indian culture, foods with Indian tastes are popular, as are herbal and Ayurvedic products. The Patanjali brand best demonstrates this trend. Started by an Indian yoga guru only 10 years ago, Patanjali has grown from a limited number of Ayurvedic products to an extensive FMCG range.
At the same time, FMCG is declining as a percentage of total spending because increased wealth enables consumers to purchase more non-essentials. The proportion of disposable income spent on non-food items increased to 62 percent in 2015 from 56 percent in 2010, according to Kantar IMRB’s Wallet Monitor research.
The fact that many Indian consumers have more money in their pockets does not completely explain their greater willingness to spend it. Indian consumers are experiencing a fundamental change in mentality. Until relatively recently, consumers were more inclined to save rather than spend; an afternoon’s refreshment might have been tea from a street vendor, not coffee from Starbucks.
Young people influence this shift. India is a youthful country with a median age of 27. (The median age in the UK is 40.) Many young Indians born since economic liberalization began, in 1991, grew up in relative affluence compared with their parents and grandparents, who remember long periods of scarcity. Young people feel freer to spend. And they have money to spend, in part because they typically continue to live at home with their parents, even after entering the workforce.
The impact of young people on consumption is multiplied by their impact on the older generations, whose frugality has produced personal savings. Older people, who probably purchased only fresh vegetables in the past, are more willing to spend money to buy pre-cut vegetables for the added convenience. Consumers also are more open to experimenting. In the personal care category, consumers can find extensive variants of toothpastes, skincare or hair care products, each formulated with a specialized remedy or enhancement.
This new Indian consumer is found primarily in urban India, but not exclusively. Rural Indian consumers may spend less money because of their lower income levels. But urban and rural spending across most product categories is proportionally about the same. And the penetration of certain categories is increasing at a faster rate in rural India.
Among the factors driving the increased spending in rural India are: rising income from high employment as the rural economy edges away from agriculture to service industries, and wide access to information because of Internet penetration and the proliferation of mobile devices. The number of Indians with mobile phones recently surpassed 1 billion. Only people living in the most remote areas of India are insulated from these influences.
At the same time, consumer media consumption habits have changed, making brand communication more challenging. Reaching the Indian mass audience had been relatively simple. The top 10 TV programs accounted for perhaps 80 percent of viewership, a proportion that has declined significantly because people now view media on a variety of screens. Consumers are spending more time on social media, which presents brands with more possibilities and vulnerabilities, particularly in this time of growing brand choice and declining brand loyalty.