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Indian consumer sector
Food for thought
Moving away from hunger to being hungry
Indian consumers’ food plate is undergoing a significant transformation. There is
a big shift occurring in what consumers eat, how they eat and where they eat. In
this report, we highlight three themes: consumers are seeking convenience and
are willing to pay a premium for it; changing lifestyles are driving out-of-home
consumption; and awareness about health and nutrition is rising.
We have highlighted five stocks that we expect to benefit from these themes:
Nestle India, GSK Consumer, Zydus Wellness, Agro Tech Foods and Jubilant
Foodworks.
Changing palate and food habits of Indian consumers
There is a significant shift in the food palate and eating habits that is visible
across the country and across all income levels. We believe this shift is led by
rising consumer affluence, a stressful lifestyle, rapid urbanisation (40% of the
population and 70% of GDP by 2030E), growth of the nuclear family (average
family size has declined by 10% since 1991) and an increasing proportion of
working females. The proliferation of QSR/cafes such as Domino's Pizza,
McDonald’s and Subway is also acting as a catalyst.
Further, two out of three urban households either receive home delivery or buy
takeaway food each month, and there has been a ~2% drop in meals prepared
at home in urban India during the past 10 years, with the largest decline in states
witnessing rapid urbanisation.
New urban middle class aspires to nutrition and wellness
According to an AC Nielsen survey, 54% of the Indian urban population is aware of
their weight-related problems, and ~69% of them are altering their diets to tackle
obesity and associated diseases (diabetes and cardiovascular). As nutritional and
wellness products have become affordable and accessible due to a rise in
disposable income and the advent of new retail channels, the urban middle class
is increasingly opting for preventive cure over post-diagnostic treatment.
Consumers’ willingness to spend more on nutritional and low calorie/cholesterol
products (20-50% CAGR) is being led by growing health concerns in the middle
class amid rising costs of Medicare (out-of-pocket healthcare spending is ~64%
of medical spending).
Consumption growth + supply constraint = food inflation
Supply side issues like diminishing agriculture productivity gains, limited scope of
acreage growth, waste in the supply chain and a large difference (up to 100%)
between farm gate and retail prices are driving food inflation in India. We see
little short/medium-term respite from high food prices due to a low-key supply
side response to improve farm productivity through deployment of new farming
techniques, high-yield seeds, farm mechanisation and efficient irrigation.
Nutrition/packaged and QSR players are the best play
Eating out forms 2% of Indian consumers’ total expenses and packaged food
3%. A 100bp increase in wallet share over the next five years could boost these
categories to 2x and 3x their current market size, respectively. We thus think
QSR and nutritional/convenience food stocks like JUBI, Nestle, GSK Consumer,
Zydus Wellness and Agro Tech will be the key beneficiaries.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian consumer sector
Food for thought
Moving away from hunger to being hungry
Indian consumers’ food plate is undergoing a significant transformation. There is
a big shift occurring in what consumers eat, how they eat and where they eat. In
this report, we highlight three themes: consumers are seeking convenience and
are willing to pay a premium for it; changing lifestyles are driving out-of-home
consumption; and awareness about health and nutrition is rising.
We have highlighted five stocks that we expect to benefit from these themes:
Nestle India, GSK Consumer, Zydus Wellness, Agro Tech Foods and Jubilant
Foodworks.
Changing palate and food habits of Indian consumers
There is a significant shift in the food palate and eating habits that is visible
across the country and across all income levels. We believe this shift is led by
rising consumer affluence, a stressful lifestyle, rapid urbanisation (40% of the
population and 70% of GDP by 2030E), growth of the nuclear family (average
family size has declined by 10% since 1991) and an increasing proportion of
working females. The proliferation of QSR/cafes such as Domino's Pizza,
McDonald’s and Subway is also acting as a catalyst.
Further, two out of three urban households either receive home delivery or buy
takeaway food each month, and there has been a ~2% drop in meals prepared
at home in urban India during the past 10 years, with the largest decline in states
witnessing rapid urbanisation.
New urban middle class aspires to nutrition and wellness
According to an AC Nielsen survey, 54% of the Indian urban population is aware of
their weight-related problems, and ~69% of them are altering their diets to tackle
obesity and associated diseases (diabetes and cardiovascular). As nutritional and
wellness products have become affordable and accessible due to a rise in
disposable income and the advent of new retail channels, the urban middle class
is increasingly opting for preventive cure over post-diagnostic treatment.
Consumers’ willingness to spend more on nutritional and low calorie/cholesterol
products (20-50% CAGR) is being led by growing health concerns in the middle
class amid rising costs of Medicare (out-of-pocket healthcare spending is ~64%
of medical spending).
Consumption growth + supply constraint = food inflation
Supply side issues like diminishing agriculture productivity gains, limited scope of
acreage growth, waste in the supply chain and a large difference (up to 100%)
between farm gate and retail prices are driving food inflation in India. We see
little short/medium-term respite from high food prices due to a low-key supply
side response to improve farm productivity through deployment of new farming
techniques, high-yield seeds, farm mechanisation and efficient irrigation.
Nutrition/packaged and QSR players are the best play
Eating out forms 2% of Indian consumers’ total expenses and packaged food
3%. A 100bp increase in wallet share over the next five years could boost these
categories to 2x and 3x their current market size, respectively. We thus think
QSR and nutritional/convenience food stocks like JUBI, Nestle, GSK Consumer,
Zydus Wellness and Agro Tech will be the key beneficiaries.
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