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Canton Fair-April’15 1

Growth Opportunities – India

April 2015


AGENDA

4 Premium Segment Analysis

2 Economic Overview

3 MDA Overview

1 Emerging Middle Class

5 Key Highlights

3Canton Fair-April’15

Emerging Middle Class


Emerging Middle Class – some global numbers first.

According to the OECD Development Center,

the size of the middle class1 worldwide could increase from …

1 OECD, defines middle-class as those with daily expenditures between USD10 and USD100 per person in purchasing power parity terms

1.8 3.2 4.9


We will see an explosion of the Middle Class in Asia

Global regional distribution of the Middle Class (all regions = 100%)

Source: Kharas, Gertz. The New Global Middle Class: A Cross-Over from West to East. Wolfensohn Center for Development at Brookings

2009 2020 2030

18%

10%

36%

28%

6%

10%

2%8%

22%

54%

5%

7%

6%

14%

66%


58 into Lagos

Urbanization drives redistribution of people to mega

cities

By 2015 …

By 2020, 75% will live in Urban Areas.

39 into Jakarta

42 into Mumbai

50 into Dhaka

32 people an hour will be moving into Shanghai


Factors conducive for Appliances growth - India

Source: Govt. Of India Census 2001 and 2011.

2001 2011

1029

1210Population of India

2001 2011

192

247

No. of Households in Mn.Increasing

Population

Increasing

Households

9380

5436

22

618

41

43

36

1 2 419

32

0 0 1 1 90 0 0 1 2

1985 1995 2005 2015 2025

Globals

Strivers

Seekers

Aspirers

Deprived

755 928 1107 1278 1429Population in

million

Share of population by annual income bracket

(adjusted for inflation)

Growing

Middle

Class

Increasing

nuclear

families

Number of Nuclear Families

increased by 32% in 2011/2001

10.

6%

Delhi

11.

7%

Ahmedabad

18

%

Kolkata

18

%

Mumbai

20

%

Chennai

25

%

Bangalore

% of female workers (of total females)

Growth of

Modern

Retail

Organized Retail growing by ~23% in

2014/2013 (GfK)

Increasing

working

women


………..favorable Economic & Political factors fueling growth


3 3 1 16 4

127 4 5

7 6 11

8

618 142 2

0 1 3 2 1 2

96

2

3

22

42 46

81 81

59

80

3940

4146 26 37 23

21

24 24

1 0

19

9

44 40

31 31

3429

2530

3 3

14 16

1

1

1 11 2

0

18 17

4 3

18

714 15 12 11

18 1829 29

Y13.. Y14.. .. Y13 Y14 Y13 Y14 Y13. Y14. . Y13. Y14. . Y13 Y14 . Y13 . Y14 .

CE

SDA

MDA

SMART-MOBILEPHONES

MEDIATABLETS

MOBILE COMPUTING

DESK COMPUT.IN

~1/4th of Consumer’s wallet expenditure is on Appliances…..

…contribution has remained constant even after increased spends on mobile phones.

<=123 USD 123 -206 USD 206-309 USD 309-412 USD 412-514 USD >514 USDTOTAL

One of the

highest spends

in these price

brackets is on

MDA

GfK Report for Urban India TC 1-4


Growth Opportunities in MDA


‘000 units. All values from GfK Panel Market in Town Classes 1-4

Value growth was higher at 18%, driven by higher ASPs in domestic

appliances such as Refrigerators and ACs

3.9

11.0

3.7

9.6

19.4

26.2

45.8

89.9

85.7

58.9

173.9

119.6

458.8

98.4

Home Audio

Microwave Ovens

DVD Players

CRT TV

Digital Cameras

Media Tablets

Desktop PC

Mobile PC

AC

Washing …

PTV

Refrigerators

Smart Phones

Feature Phones

2014 Sales Value (INR Billion)

-8%

7%

-29%

-52%

3%

15%

-1%

-8%

26%

15%

18%

17%

48%

-19%

Y-o-Y Change

Total value = INR 1,205 bn

(USD 20 Bn)


Bulk of sales still comes from the top 35 Cities (1M+ Pop) across

majority of products…

61%

45%51%

61%47%

AIR

C

ON

DIT

ION

ER

RE

FR

IGE

RA

TO

RS

WA

SH

ING

M

AC

HIN

ES

MIC

RO

WA

VE

O

VE

NS

KIT

CH

EN

A

PP

LIA

NC

ES

Contribution from Top 35 Cities


More than 50% of MDA sales comes from 1 Million+ population cities……

…Lower town classes showing significant growth….next potential area!!


High temperature in Q2 acts as a growth driver for compressor

categories

43

46

57

84

91

181

Faridabad

Jaipur

Allahabad

Patna

Lucknow

Surat

Total India Panel Market grew by 26% over PY and it grew by 36% in April to June over PY

AC

Growth Rate Q2’14/13

34

41

53

54

70

78

Faridabad

Baroda

Surat

Nagpur

Lucknow

Nasik

Cooling

Growth Rate Q2’14/13

Cities growth more than All India growth in compressor categories


Lower energy cost promises helps in formation of AAP government

in Delhi

http://www.abplive.in/india/2015/02/25/article511496.ece/AAP-government-announces-cheaper-power-free-water-for-Delhi

https://www.bijlibachao.com/news/domestic-electricity-lt-tariff-slabs-and-rates-for-all-states-in-india-in-2015.html

0-200 Units

INR 2.00

Multi-step Electricity Pricing

201-400 Units

INR 2.98

401-800

INR 7.3

801-1200

INR 8.1

1201&Above

INR 8.75

Inverter AC Trend

1.2 4

9

2012 2013 2014




















Frost Free

Inner circle represents 2013 and outer circle represents 2014

1%

22%

41%

25%

5%

6%

1 2 3 4 5 n.a. Unknown

5%

35%

50%

8%

Split AC

Star Rating has become mandatory by BEE for Ref and AC

Market has transitioned from 5 Star to 2&3 Star in 2014 for FF

14%

52%1%

22%

10%

1 2 3 4 5 n.a. Unknown

20%

46%

3%

25%

4%


Growth by Sectors

Funding From Domestic Investment

Rising of Service Sector in India’s GDP

Reasons for Affluency in India


Changing Pattern of Private final

consumer expenditureGrowth in Private final consumer expenditure

Increasing Consumer Expenditure in India


2 Dr Frz Top

Side By Side

+45%

249-300 Ltrs

75 new launches made by industry in 249-

300ltrs in 2014 vis a vis 55 launches in 2013

>399 Ltrs

39 launches made by industry in >399Ltrs

in 2014 vis a vis 23 launches in 2013

2 Dr Frz Top

1 out of 10 FF is SBS .

Korean brands cover 90% of the SBS market

24 new launches made by industry in 2014

Side By Side

+14%

2Dr Frz Top and SBS Capacity Trend

25%


• Higher Price bracket (>500 USD) has gained significant contribution from Jan-Dec’12 to Jan-Dec’14

• Owing to festive season and discounts, lower price brackets(75-420USD) gained contribution in

second half of year


Category Mix >500USD

87%

13% 10

18.8

17.6

Window AC

Split AC

AC

Growth % 2014/13

44.4

14

17.1

16.7

3+ Doors

2 Dr. Frz Top

1 Door

Cooling

Split AC

Window AC

DC

FF

61%

39%

Shift towards premium categories like energy efficient products, inverter AC and SBS, higher

price brackets witnessing growth.


23 % in value

Every 3rd Washing

Machine sold in

India is FATL 35% 41%

23%

FATL

FAFL

SATT

WM Segment

Contribution>401 USD to <=562

USD Price Class is more

than 1/3 of Total FATL

FAFL is growing

by 12 % in

Value


Channel Mix


Organized retail sector has a significant part of the Value for these

categories...

31%

23%

42%

33%

14%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

AC COOLING MICROWAVE OVEN

WASHING MACHINE

KITCHEN APPLIANCES

PERSONAL CARE

Contribution to Sales value in 2014


< -15≥ -15< -10

≥ -10< -5

≥ -5< -3

≥ -3< -1

≥ -1< 1

≥ 1< 3

≥ 3< 5

≥ 5< 10

≥ 10< 15

≥ 15 n.a.

ValueLCGrowthMDA TOTAL

year 2015WorldForecast 2015

India Major Domestic Appliances on a high growth path


Key Highlights


Emerging Economy

• Increasing middle class and growing urbanization

• Higher consumer spending

• Attractive market with numerous opportunities

• 2nd Highest growth in MDA.

New Trends - MDA

• Shift towards premium segments

• Shift towards higher energy efficient products

• Increasing contribution of higher price classes

• ¼ of the consumers wallet expenditure is on MDA

Premium Segment

• SBS is growing by 45%

• Dominated by 550-600 Ltrs.

• 90% market is covered by Korean brands

• 2 door Frz Top dominated by 3 & 4 star segment

• Inverter AC contribution to total AC market has doubled in a year

• Fully Automatic 6-6.5kg driving growth for Washers.

Organized Retail

• Increased Modern retail

• Excellent launch pad for premium and innovative products

• High visibility and appropriate exposure

Key Highlights

30© GfK 2015 | Global survey | Consumers’ attitudes towards, and time spent cooking

Cooking: Consumers’ attitudes towards,

and time spent cookingGlobal GfK survey

March 2015


Global results


Cooking: Consumers’ attitudes and time spent cooking


Cooking: Country comparison


India


India: Share of consumers who say they have great knowledge of

and experience with food and cooking

33%

47%

57%

51%53%

40%

15-19 years

20-29years

30-39 years

40-49 years

50-59 years

60+ years

Source: GfK survey among 27,000+ consumers (ages 15+) in 22 countries – global average – Top 2 boxes – rounded

of Indian consumers

say they have great

knowledge of and

experience with food

and cooking

48%

Age groups100%

0%

50%

72%24%


100%

0%

50%

Age groups

29%

40%

47%

42%38%

30%

15-19 years

20-29years

30-39 years

40-49 years

50-59 years

60+ years

Source: GfK survey among 27,000+ consumers (ages 15+) in 22 countries – global average – Top 2 boxes – rounded

of Indian consumers

say they are really

passionate about food

and cooking39%

India: Share of consumers who say they are really passionate

about food and cooking

57%20%


7.2hours

12.5hours

14.6hours

16.2hours

13.1hours 11.4

hours

15-19 years

20-29years

30-39 years

40-49 years

50-59 years

60+ years

Age groups

13.2 hours

Age groups

India: Average number of hours per week spent cooking,

amongst those who cook

Average hours per week

Indian consumers spent

cooking, amongst those

who cook

Source: GfK survey among 27,000+ consumers (ages 15+) in 22 countries – global average – mean number of hours consumers spend on cooking weekly (excluding those who say ‘none’)

14.2 hours

5.9 hours


Typical Indian kitchen

Traditional Type Modular Type


Indian lady is juggling across multiple roles… and spends ~2 hr per day in the kitchen

as she likes to cook


Both domestic & international brands have been able to reach to the Indian homes

111Number of brands operating in SDA

Of this, 27 are international brands

Example of international brands operating in India - SDA


Sales value growth | Apr-Dec 2014 vs. Apr-Dec 2013+13%

Overall growth

Love for cooking, beauty, and health concerns driving the growth of SDA

+12% +15% +53%

+28%+3%

+38%+31%

+11%

Garment Care Kitchen Appliances Personal Care

IronsJuice

extractorShaving/Epilation

Hair DryerLiquidiser

Hair StylerKitchen

machines

Rice Cooker

Consumables

Water Purifier +40%


MDA Other SDA CE IT Smart Phone

DSC Personal Care

1 2 2

68

10

20

% Volume Contrb. of Online sales – GfK Est (2014).

Online channel also adding to this growth of SDA

Love for deal & convenience driving online shopping…especially for personal care

Manufactures launching their products on online channel as well

Some models/brands are launched for online channel only

Even the offline players (distributors/retailers) are placing their

products online – resulting into multiple sellers of the same products


Premium/luxury products riding on this growth too… targeting mix of offline & online

channels

Air FryerIn last 1 year itself, atleast

7-8 new brands entered

the market

Slow Juicer

Air PurifierEpilator – premium range

(INR >8K)


Stay in touch

Ushpreet Singh Bawa

Account Director SDA &

Lighting

[email protected]

+91 9582333189

photo

mailto:[email protected]

ttps://www.facebook.com/gfk.market.research

https://plus.google.com/u/0/+GfkGlobal

http://www.linkedin.com/company/gfk

https://twitter.com/GfK_en

http://www.youtube.com/user/GfKTube

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