All Arisaig’s partners were in India in February to run two separate tracks of research visits to current holdings and prospects. These trips always include visits to the houses of Indian consumers at different economic strata. Over the last year, we have done household visits in Chennai, Mumbai and Hyderabad. As investors focussing on domestic demand driven businesses, we spend a disproportionate amount of time meeting with households to understand changes in consumer behaviours. Most of our visits are with women, who are estimated to drive 70% household purchase decisions[1]. However, often the conversation evolves beyond biscuit brands, retail choices and paints to understanding their broader circumstances and ambitions. Despite our Mumbai team all being born and raised in India, we frequently find our assumptions challenged by these encounters.
Paisa Vasool (‘value for money’) – Often, the lower income households we meet are much savvier in their consumption decisions than those higher up in the economic pyramid. We met with a home-maker from an SEC C (lower-middle income) household who mentioned that every Sunday her husband and her split their grocery shopping, with one going to Star and the other to D-Mart (both modern supermarket chains), calling each other to check prices/offers on individual products. So, it isn’t just about consuming the lowest price products but ensuring that you get the best deal on your preferred options. So much so that looking for bargains is often referred to as a national pastime.
Cultural nuances – Arisaig’s meetings with women across cities and communities also indicate cultural nuances that govern consumption, understandable in a country with 28 states, a population that speaks close to 400 languages and 6 major religions (with many more sub-sects). Some of the households we met with in Mumbai who follow Jainism ate in vegetarian-only restaurants. This has meant the rise of dedicated vegetarian only pizzerias in several parts of the country and several other chains stopping non-vegetarian pizza sales during certain festivals. Another household spoke about inflation pinching their wallets, but when asked if they would purchase second-hand clothing, there was apparent reluctance. Their spiritual beliefs inhibited them from inheriting the energy of the previous owner of the garment.
Aspirational Drive – In 2008, the much awaited ‘Nano’ car was launched in India at the attractive pricing of USD 1,250. However, one of the reasons it saw limited success, despite its affordable price, was due to it being perceived as the ‘cheapest’ car. Indian consumers may have fixed budgets, but they continue to be aspirational – not wanting to consume products which are pitched for lower economic strata but striving to rise in their consumption patterns. This aspirational drive has only accelerated with the penetration of smart-phones in the country which has allowed for consumption of media like never before – a home-maker from an SEC C household spoke to us about her family’s fascination with Shark Tank India and her kids encouraging her to expand her home-cooking into an Indian sweets start-up.
Prudent Consumption – Whilst there is a tendency to look at brands as aspirational symbols and focus on improving standard of living, behaviourally, Indians are not ‘over-spenders’. Only 3% of India has a credit card[2] vs. 3 cards per person in the US[3], which helps to prevent consumers falling into consumption-driven debt traps. In fact, savings continued to be critical for Indian households even during the past couple difficult years. Women we spoke with continued to invest in Systematic Investment Plans (SIPs) starting with as low as 6 USD per month. There are local ways of saving as well. For example, women across income classes form informal ‘chit funds’ which ensure they save while also providing an excuse to socialise every month.
We are always amazed at the aspiration and optimism which are on show during these Indian household visits, despite low levels of income and difficult living conditions. Almost every family we visit emphasises the importance of education in helping the next generation to progress. India’s strong recent development (per capita incomes have doubled over a little more than a decade)[4] and the democratisation of opportunities driven by digital media (India consumes more data per capita than any other country globally)[5] are part of the reason why we are so confident in continued progress.
References:
[1] https://www.forbes.com/sites/bridgetbrennan/2015/01/21/top-10-things-everyone-should-know-about-women-consumers/?sh=4c3562886a8b
[2] https://www.pwc.in/assets/pdfs/consulting/financial-services/fintech/payments-transformation/decoding-indias-credit-card-market.pdf
[3] https://www.thehindubusinessline.com/money-and-banking/indias-credit-card-boom-faces-threat-from-payment-apps/article30128957.ece
[4] https://www.livemint.com/news/india/india-s-per-capita-income-doubles-since-2014-15-uneven-wage-distribution-remains-a-challenge-11678023250808.html
[5] https://www.thehindubusinessline.com/info-tech/end-of-american-internet-india-china-contribute-to-50-of-worlds-data-traffic/article66222842.ece
