Panel Discussion on “Decoding Market Evolution”Feb 5 2014 – 10 am.

MODERATORPanelist Panelist Panelist

Where is the Indian consumer today compared to 10 years back?

Previously our addressable market was 30 crore Indians. In the last 10 years, another 15 crore new voters have come in.

This segment is young, democratic in its thinking, and wants to “fit in”.

They will buy organic. They will also buy frozen for convenience. The frozen french fry at home costs Rs 10 – at McDonalds it costs Rs 30 – they see value in both formats.

Value for the customer of today is CONTEXTUAL. That’s the single biggest change.

Is consumption in India de-growing?

You need to contextualize this. McDonalds India, has the highest rate of Same Store Growth -globally.

We are growing at 20%. Previously, growth rates of 30 to 40% were common. That does not mean de-growth.

In the last 5 years, countries such as Philippines, Thailand, China, Indonesia and India have seen similar growth rates in consumption.

In an Asia Pacific context – a 20% growth rate is good. Its very good.

Do you see the frozen french fry as competition?

No. Anything which grows the category is good for the market.

Our reference point is the QSR category. People in India still eat out less than 8 times a week – versus 28 in Thailand. So we see immense market potential.

Are you surprised by the pace of consumption in India?

No. The shift of power from West to East has been clear for a while now.

“I’m a DND man” – [DND = markets other than Americas, Western Europe and Japan]

None of the CPG categories are anywhere close to maturity. Take laundry. We went from cottage soaps to machine produced soaps, to whiteners and now to Comforters.

Different sub-markets in India are making this transition at different speeds.

Even where you have adoption, there is scope for growth from both penetration and from increasing the frequency of consumption.

Does government have a role to play in retail?

The government’s role is to encourage consumption.

This is only possible when they realize that MORE Consumption = Good Development.

More consumption = More manufacturing = More Turnover = More Taxes = More Revenues = More Growth = More Consumer confidence = More Consumption. Governments role is to recognize this cycle.

In some ways the government is struggling with the “Gandhian” dynamic – that of non-consumption.

Can you recall any legislation by the Government which catalyzed Consumption?

The role of the government to enable. Without getting into FDI debates – they need to adopt a “Compassionate Capitalism” framework.

Indians have superior commercial instincts, once they have a framework, they don’t need the government to grow.

Is democracy a stumbling block to consumption?

At 7% GDP growth, the country see’s prosperity. Between 2003 and 2013 – Indians increased their eating out from 3 times a week to 8 times a week. IN Thailand its 42 times a week.

In China we are opening 300 restaurants a year. In India – its 30 restaurants a year.

Democracy has nothing to do with it. Its about growth and “tipping points”.

What will drive growth in emerging markets?

As people have more discretionary money to spend – personal care and beauty takes up some of the spend.

Market penetration in this category is low so you will see explosive growth. Markets like Thailand and Philippines consume 30x what India does in personal care …. Tremendous headroom.

The most relevant channels for this are Modern Trade and E-tailing so these channels will see high growth.

What we look at when we review a market is population, money, growth and most importantly consumer confidence. In India, the slowdown has not impacted money

in the wallet as much as it has confidence.

What categories will drive growth in your business?

Breakfast Foods, frozen foods, chocolates and yes personal care and beauty.

Other categories which see high growth are “occasion wear” and fast fashion.

Non retail channels – example birthday parties, and social media to recommend experience.

For QSR it’s the shift to online for home delivery, Mobile ordering.

What’s so big about BIG Data?

Gives you the ability to personalize marketing. It’s granular marketing at its finest.

Your ability to use “convergence” technology and mass customize the brand experience is what creates consumer relevance.

Customers are INDIVIDUALS. The experience of AAP (Aam Aadmi Party) shows that they want to be treated as individuals.

For us, BIG Data helps enhance our ability to understand shopper mission and answer the question of “who is the shopper in the ½ km catchment” – then target

him with range, assortment and promotion.

Role of the small retailer

The small retailer is the smart retailer. Modern retail will serve the top 30% of the consumption pyramid, the 300-500 SKU retailer will serve the rest.

92% of retail is non-modern. To harness these, the key will lie with manufacturing. There is a need to focus on productivity and innovation in manufacturing to service this retailer – in the face of increasing cost of doing business.

Advice to young retailers?

Use technology to personalize. Build brand relevance. Go long on Consumption.

Tremendous potential to grow consumption. Surf the coming wave.

Invest. It’s the bottom of the cycle.

Panel Discussion on “Decoding Market Evolution”Feb 5 2014 – 10 am.