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Indian reforms mean more money, more choice

Ask an Indian housewife to describe how a decade of economic reform has changed her life, and chances are the answer will be simple -- choice.

Ten years ago, a visit to the local grocer would have taken just 15 minutes, leaving her plenty of time to watch one of India's two state-run TV channels.

Now it's not just the number of TV channels that have changed.

"I spend fifteen minutes just deciding on the best soap and toothpaste for my family," says 31-year old Sunita Mohanty.

A decade ago Indians slaked their thirst with tea or homegrown soft drinks.

Now Coke and Pepsi battle for their attention, just as detergents from Procter & Gamble jostle with local brands for shelf space.

Multinationals have been drawn in by the huge size of the Indian market and have used a cable TV boom to push their products to more households.

"Liberalisation has fuelled industrial growth, and has changed consumer demographics completely," said R K Shukla, senior statistician at the National Council for Applied Economic Research.

NCAER says the "consuming class" -- households with annual salaries of Rs 45,000-215,000 ($957-$4,574) based on 1994-95 --- will account for 53 million households in 2001-02.

This is roughly 30 per cent of Indian households against 14 per cent a decade ago, and is slated to touch 40 per cent -- or 80 million households (445 million people) -- by 2006-7.

It helps consumer good sales that many of those households watch cable TV.

"It's cable TV that's brought Indian usage patterns and aspirations in line with global ones," says SMIFS analyst Rajesh Kothari.

The number of channels available on Indian TV has grown from two to 112 since the world's top broadcasting companies started entering Indian living rooms from the early 1990s.

TWO FIZZY, ONE SOGGY

Some multinationals have been more successful than others in a demanding marketplace.

"Among the multinationals, Coke and Pepsi stand out as the biggest hits of the decade, but Kellogg has been a bit of a flop with its breakfast cereals," says BNP Paribas analyst Sujay Mishra.

Coke has invested more than $900 million in India since 1993, building up an impressive distributor network and says sales last year crossed Rs 32 billion.

"It's likely that we'll move out of the red for the first time this year with a modest net profit," a Coke spokesman told Reuters.

Coke says it has a 58.4 per cent share of India's softdrink market, driven in large part by Thums Up, an Indian Cola brand it acquired when it set up shop in the country.

Pepsi, which has invested $500 million in India, for its part says it has "more than 50 per cent share of the cola market as a whole", a figure which Coke disputes.

The companies are involved in high-profile TV advertising battles, enlisting the help of Bollywood stars and cricketers to push their products.

Kellogg, an entrant in 1994, has struggled, say analysts, though the managing director of its Indian unit R Venkateish says it has been instrumental in "growing the cereal market in India five fold in seven years."

"Indians may switch from Indian-made shampoos to foreign-made ones, but they're emotionally attached to food, and I don't see them abandoning traditional breakfasts for cold cornflakes," says Mishra.

Analysts also question P&G's strategy of focusing only on high-end brands in its competition with Unilever subsidiary Hindustan Lever in the soap, detergents and feminine hygiene segments.

"P&G is out of sync with the Indian market," says Mishra. "The fact that they've chosen to look away from the mass market, hoping for income levels to rise, has limited its prospects."

Meanwhile HLL, India's top consumer goods company, may also be struggling with poor sales growth of late -- just 1.1 per cent in the January-March quarter to Rs 26.42 billion -- but it grew strongly in the decade, especially in personal care products such as shampoos.

FLYING THE FLAG

Through all this, some Indian brands have thrived -- few more so than Nirma, a low-cost producer of detergents and soaps.

Nirma's share in the washing powder and liquid category has fallen from 38 per cent to 24 per cent in the last decade according to market research firm ORG Marg, but it has given headaches to HLL, with its soaps capturing more than a fifth of the market.

"Nirma is India's biggest consumer goods success in the last ten years," says SG Asia analyst Gaurav Narain.

"It's providing good quality products at a low price point, and has hit on the just the right recipe for survival," he said.

Analysts say the other major star is the unlisted Parle Bisleri, which has pioneered the sale of bottled water in India.

SOFTWARE-LINKED FUTURE?

The future for India's consumer industry could be linked to the country's strong software services sector.

"Relatively high-paying jobs in software services should increase nine fold from 70,000 in the next seven years, and there could be a strong urban market emerging for higher-end products," says Mishra.

"Add to this a rural slowdown driven by poor government prices for farmers' grains, and one sees a shift in focus from rural to urban areas in consumer goods marketing strategies," he adds.

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