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The vision for the future of consumption in India is anchored in the growth of the upper-middle-income and high-income segments of the population. Nikhil Prasad Ojha, a partner with Bain's Consumer Products practice, discusses how businesses can thrive in this growing market by innovating for the country's diverse and unique preferences and embracing a Founder's Mentality® with a frontline obsession and a strong owner mindset.
Read the Bain Brief: Future of Consumption in Fast-Growth Consumer Markets: India
Read the transcript below.
NIKHIL PRASAD OJHA: The next decade is going to be very positive for the India consumption story. The great Indian middle class is going to finally come into its own. In 2005, not so long back, income distribution in India was like the Eiffel Tower—a broad base but then tapering very quickly to a very thin top. Today in 2018, it's more like the classic pyramidal shape.
But if you just fast-forward the same amount of time to 2030, we will finally get the diamond-shaped income distribution that we've all been waiting for, which is where the middle class really become salient. One hundred-sixty million households are going to move one step up the income ladder, which is going to be huge. And in aggregate, it's going to drive two to four times the demand and consumer spending across most categories.
What will people spend on? Our research shows that it's going to be split evenly across three different types of spending. They're going to be buying better, i.e., premiumization. They're going to be buying more, i.e., greater penetration and consumption across categories that they already know. And third, they're going to be buying new—households will enter categories which they hitherto have not been purchasing till now.
So an additional $4 trillion of consumption that's going to be happening in this period will be split one-third each over buying new, buying better, and buying more. Next, urban and rural aspirations have converged rapidly. This is because of both rising income, as well as much more widespread access to information. But physical infrastructure challenges, both in retail and in transportation, has meant that the potential hasn't been realized truly yet.
So with all this happening, what do firms that wish to thrive in India have to do? There are two things, one which won't be a surprise, which is that they need to innovate for India. This is not going to be about bringing the cheaper variants of what they sell in the West or the developed economies.
But second, which is going to be very important and not something that's widely known right now, is that firms truly need to embrace their Founder's Mentality. That means combining an insurgent mission for this market, with an owner's mindset and an obsession about the front line. These traits are the ones that will make for a company that is truly agile and entrepreneurial, and one that can participate in and benefit from the opportunity that is coming down the road.
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First published in 1월 2019