In the midst of continued sluggishness in the Chinese market, India has emerged as a new focus for global consumer goods giants such as PepsiCo, Unilever, and others. These international companies are investing heavily in the Indian market, aiming to fill the gap caused by weakening demand in China.
India’s economy is expanding at one of the fastest rates among major emerging markets. International companies are gearing up to launch new flavors and packaging to cater to India’s diverse market, aiming to attract the country’s vast population, especially in its extensive rural areas.
Brian Jacobsen, Chief Economist at Annex Wealth Management, told Reuters, “In the past decade, companies have focused on selling to China, but the next decade will be about selling to India.”
“You have to go where the population and economy are favorable,” he said.
India, with the world’s largest population, is expected to see growth in consumer spending in the coming quarters due to increased government spending, a revival in private consumption, and anticipated recovery in monsoon rainfall this year, according to major consumer goods companies headquartered in India.
On the other hand, China’s demand continues to remain weak, dragging down the performance of many European and American companies.
Nestle reported a decline in total sales in the Greater China region in the most recent quarter, citing that China’s overall economy and consumer sentiment were “significantly weaker than expected.”
Christopher Kempczinski, Chairman, CEO, and Director of McDonald’s, commented on the second-quarter performance this year, stating that “consumer confidence in China is quite weak.”
“Both in our industry and in the broader consumer industry, you can see consumers are very, very value-conscious,” he added, emphasizing that Chinese consumers are focused on price and will go where they get the best deal.
Starbucks reported a 14% decline in same-store sales in China for the quarter ending June 30, significantly higher than the 2% decrease in the United States. The company’s revenue from its 7,306 stores in China for the same quarter also dropped by 11%.
Don Nesbitt, Senior Fund Manager at F/m Investments, remarked, “China has long been seen as the darling of investors, but as we have seen, it has lost its allure.”
K Ramakrishnan, Managing Director of Kantar Worldpanel South Asia, noted, “China has gone through a long and sustained period of the COVID-19 pandemic… and even experienced brief periods of negative growth, with growth remaining very slow thereafter.”
He pointed out that in contrast, the fast-moving consumer goods (FMCG) sector in India has maintained a growth rate of around 4%, which seems to be a healthy growth trajectory.
He mentioned that growth has been seen in both urban and rural areas of India, with the rural areas showing slightly better performance.
International consumer goods companies are also pouring substantial funds into the Indian market. PepsiCo has launched new snacks called “Kurkure Chaat Fills”. Coca-Cola has upgraded its packaging to extend product shelf life, and Nestle plans to introduce its premium coffee brand Nespresso in India by the end of the year.
Data from Kantar Worldpanel shows that in the 12-month period ending in June, Coca-Cola saw a 24% increase in household penetration in India, PepsiCo saw a 12.7% increase, Nestle saw a 6.7% increase, and Unilever saw approximately 3.8% growth.
Mondelez International is collaborating with Lotus Biscoff Baking Group to sell its products and is planning to launch new packaging for Oreo biscuits in August. Mondelez reported achieving mid-single-digit percentage growth in the chocolate category in India in the second quarter of this year.
Coca-Cola saw double-digit growth in sales in India, while Unilever saw consecutive growth in sales in India.
PepsiCo witnessed growth in sales in the Africa, Middle East, and South Asia region, stating that India will be a “key growth space” for them.
(Adapted from relevant reports by Reuters)