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UBS Investment Research
Asia On The Ground: Indian Consumer Sector
C onsumers are buoyant; no slowdown yet
We met with HPC & food companies, distributors in Mumbai
We met with the managements of home & personal care (HPC) and packaged food
companies across the country. We also met local carrying and forwarding (C&F) and
distribution agents.
Key objectives: assess the state of the market amid inflationary pressures
We wanted to understand: 1) how existing consumers continue to buy products; 2) new
consumers are being added to the consumption base; 3) the general consumer mood of
the market; and 4) economics of staples given volatile commodity costs, increased
competition.
Findings: resilient on daily necessities, procrastination of discretionaries
1) Take-off from retail shelves continues unabated and volume growth (reflection of
new consumers) continues at a healthy pace. 2) The overall consumer mood is upbeat.
3) Staple companies see a correction in commodities as a relief, given most were going
to implement further price increases in H2; advertising intensity remains low. 4) Some
pricing power back in categories that have been fiercely competitive.
UBS view and action
We believe the Indian consumer staples market is in a secular high volume growth
phase, as consumers upgrade from unbranded and non-existent consumption to
national-level brands. Intensity of consumption has improved over the past two to three
years as income levels have risen for the country. Our top picks are: 1) ITC—our
resilient consumer pick, unaffected by increasing competitive activity; 2) Godrej
Consumer Products (GCPL)—niche segments offer high growth; international
acquisitions should boost earnings; and 3) Pantaloon—largest retailer; changing
strategy and catalysts on the horizon.
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