Wealth in the Un-metro's. Who are the new rich? How are they getting there? What are their prized possessions, who influences them the most?

Premium goods, Luxury purveyors, and media experts debate.

India’s secular growth trajectory is being propelled largely by domestic consumption. Domestic consumption in turn is increasingly and rapidly being driven by middle

India… rise of the small town consumer.

‘Bharat’ is not so small…. large size and growing.

Large and growing size of the Middle India;

Houses almost half of the urban Indian population

Population 2013(000s)

2014(000s)

Growth (%)

Metro (Top 8) 37212 40264 8%

Middle (10L+) 14172 68392 383%

Rest of Urban (<10L) 35160 36204 3%

Source: TGI

Increasing income, rise in spending power and demographic dividend of a younger generation driving the

growth.

Monthly Personal Income (INR)

Metro2013 to 2014

Non Metro2013 to 2014

1,001 - 10,000 1% 22%

10,001 - 50,000 28% 39%

50,000 + 11% -14%

SECMetro

2013 to 2014Non Metro

2013 to 2014

SEC A -17% 8%

SEC B 21% 32%

SEC C 30% 30%

AGE (Years)Metro

2013 to 2014Non Metro

2013 to 2014

< 25 years 7% 24%

25 - 44 years 11% 22%

45 & Above 35% 38%

Heightened aspirations… a strong drive to be ahead and not feel left behind; wiling to

strive towards it, even if it is pressurizing.

Deviation from Mean Metro Non Metro

I am responsible for everything that happens in my life -4% 0%

I am willing to sacrifice my time with my family in order to get ahead -3% 0%

I would like my children to be ahead of others even if it means a lot of pressure -2% 0%

I want to get to the very top in my career 0% 3%

It is important to change jobs frequently for a faster career growth -1% 3%

It is more important to do your duty than to live for your own enjoyment -1% 2%

In their quest to get ahead, they continue to hold on to the traditional values and cornerstones of the ecosystem

Deviation from Mean Metro Non Metro

I pray / perform Pujas regularly 0% 2%

The decisions taken by the head of my family is always final and binding -4% 2%

Comfort with technology and gadgets

• Non metros buy more gadgets than their metro counterparts - 51% in non metros as compared to49% in the metros. …

• …and this has gone up by 35% as compared to 2012.

• NM buy more mobile phones (52% vs 48) and catching up fast in laptop consumption… 44% inNM vs 56% in M

• Equally consume tablets (50, 50)

• Consume as many digital cameras as metros

• Upgrading TVs much more (57%)

Deviation from Mean Metro Non Metro

Wait until technology becomes cheaper before purchase -1% -4%

Love to buy new gadgets and appliances -1% 1%

Source: TGI

The internet boom

• Internet usage booming outside of major cities (20% overall growth in 2013, 29% from non metros)

• 60% of India’s social media users are from non metros.

• Ebay India: Unmetro India accounts for over 50% of trade.

• Myntra.com: More than half the business comes from users in non-metro towns. This segment isgrowing faster than the metros.

• A recent survey by Google India and TNS has found that online shopping more than doubled inIndia in 2012, with the bulk of the growth coming from non-metropolitan cities.

Deviation from Mean Metro Non Metro

Shopping online makes life easier 2% 4%

Use Internet to help plan my shopping -1% 2%

Willing to pay to access content on newspaper/magazines websites -4% 7%

Frequently use social media to give/get the opinions of Friends 0% 3%

Source: TGI

Housing

• The housing sector may not be shining for the metros due to slow economic growth, but small cities are making a big impact in the newly-launched Housing Start Up Index (HSUI) . While the index has shown a declining trend in the sector in cities such as Kolkata, Chennai and Bangalore, it has indicated an upward trend in small cities like Dehradun, Bhopal and Hubli - Housing and poverty alleviation minister.

• Housing Loan: High disbursement growth in non metros while it is muted in metros; most business growth in recent years situated in NMs.

Education on a higher pedestal

• Education is paramount in Middle India. The education sector in Middle India has made considerable progress in the last five years, reflecting the population’s belief that higher education is the ticket to a stable career and a better life.

• Modern-day parents from smaller towns are more optimistic about their children’s educational opportunities, which was not the case a decade ago. Parents today, aspire to educate their children in English medium schools, as it opens the doors to a brighter career.

• Nielsen’s data shows that the Middle India population’s desire to join the best institutions like IIMs and IITs, at 47 percent, is nearly at par with that of an education-centric city like Pune

• Education opportunities in the middle India towns are not only compelling people to stay back, but also drawing people from even smaller towns.

Health & Wellness

• Health consciousness is evident in Middle India households as a large portion of citizens claims to periodically practice some form of exercise, like Yoga, walking, swimming or visiting a health club or a gymnasium.

• The study by Nielsen shows, about 24 percent people from Middle India practice Yoga, which is much higher compared to the 19 percent who do so in Pune.

• In line with this awareness, the consumption of health foods like oats, cornflakes and other low cholesterol products in these areas are at par with Pune at 37 percent.

• In addition to food choices, Middle India consumers are also opting for annual health check-ups and gathering more information on staying fit.

• The people in these unmetros have a per capita income ranging from $1,500 to $5,000 and $5,000 to $10,000. In 2020, their spending on healthcare is expected to be a whopping 200,000 crores.- Harvard School of Public Health

Personal Grooming

• Personal grooming has become increasingly important to Middle India – personal care categories dominate the list of Middle India categories outpacing all-India value growth. Affordability, access, and awareness have contributed to the rapid rise of the personal care segment.

• The per capita expenditure on personal grooming and hygiene products is steadily increasing in the 1-10 Lac population towns. Today, this segment prefers to find homemade solutions for their grooming requirements. However, over time, requirements are expected to evolve and schedules to get busier, which would lead to a higher demand for personal care services like beauty salons, and boost the market for beauty and hygiene products. With an improvement in consumer lifestyle, an increased acceptance for newer products like affordable hair creams, deodorants, and shaving products is expected.

• Women power in Middle India

• While women are not the sole decision-makers in the household, their contribution to the decision making process will evolve over the next few years. Nielsen research found that men and women have an equal say in many of the products they purchase, including food items. In addition to this, women are increasingly participating in big ticket household purchases like consumer durables and electronics. White goods companies should take note of these trends to design in-store consumer experiences and form promotional strategies to grab the attention of decision makers for their products.

• When it comes to opportunities for women, Middle India is making slow but steady progress. However, longstanding problems like inadequate security and dowry still persist. Companies setting up shop in these regions that want to play a role in ensure women participation in the work force need to ensure the safety of their female staff through facilities such as pick up and drop, flexible work timings, etc.

Middle India surging ahead

Unmetro India contributes to 38% of Indian FMCG market today; growth contribution is even larger.

Some of the fastest growing categories from a consumer pull perspective are many specialty & evolved categories like pre-post wash, hair conditioners, air fresheners, prickly heat powder and cheese… Smaller towns want to shop like the metros and marketers better take notice!

Marketers riding the wave

• Increased exposure to the media and a gradualimprovement in infrastructure have played asubstantial role in introducing the middle Indiapopulation to what was earlier only a ‘metro’ lifestyle,fuelling a desire to improve their standard of living.

• These factors, combined with an increased spendingcapacity, are rapidly pushing up the demand for a vastconsumer product profile.

• They are accepting categories that never were part oftheir consumption basket. This has opened up awindow of opportunity for FMCG companies tointroduce products that were initially brought tomarket primarily for the metros.

• Interestingly, the focus on hygiene, health, personalgrooming and convenience seems to be driving therapid growth in these towns.

• Middle India is also accepting evolved categories likebreakfast cereals, air fresheners, acne preparations,liquid toilet soaps.

Luxury Shopping

• Around 70 per cent of luxury handbag player Judith Leiber‘s customers now come from tier-II and tier-III cities without depending on storebased expansion. Its local partners showcase select products to potential consumers through exhibitions.

• About 40% of our luxury growth comes from non-metros: Diageo India MD

• Honda Cars India expects Tier-2 and Tier-3 locations continue to drive its major portion of sales. The company has seen bigger sales contribution from these locations to its models.“Growth in Tier-2 and Tier-3 locations has been faster as the propensity to consume has increased. About 60 per cent of Amaze’s sales are contributed by Tier-2 and Tier-3 cities, while in the case of Honda City the contribution is about 55 per cent.

• In line with this consumption growth story, Indian marketers have a great responsibility to nurture this consumption with sensible and responsible demand generation

• As distribution inroads are made into these smaller Indian towns and as brands find ways to connect with the small-town Indian, we will continue to see a stronger proportion of value growth being led by consumer pull.

• Marketers will need to cultivate their brands with middle India and build loyalty now while habits are changing, so that they can flourish when spending increases manifold in the coming decade

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