Andy Mukherjee has a really interesting article today about demand for so-called fast-moving consumer goods (FMCGs) -- soaps, shampoos, toothpastes -- in India. Basically, while the Indian economy has been growing at in the 6-7% range, and while demand for two-wheeled vehicles grows at a current rate of around 19%, and morgages at around 35%, demand for FMCGs has been stagnant and even declining since around 2000. There are various reasons for this:
Down-trading, as urban consumers lock an increasing proportion of their income into consumer durables, and demographics, as a large proportion of Indias population remain stuck in the low productivity agriculture sector. Between the two toothpaste is getting what you might call the 'big squeeze'.
More Jobs, More Shampoo
The $661 billion Indian economy expanded at an average 6.6 percent pace in the last five years. Much of this growth resulted from productivity gains; a revival in capital investment has only just begun after a nine-year hiatus.
After the mid-1990s, only service industries such as computer software added new jobs at a pace of 5 percent or more a year. If a nascent recovery in manufacturing holds, new factory jobs will be created, ushering in volume growth for non- durables.....
With job growth in agriculture stagnating, rural households are struggling to catch up with consumption in urban areas.
Overall, only 11 percent of ``hair-wash occasions'' in India lead to shampoo usage, Hindustan Lever said in a presentation to investors in May. Per capita shampoo consumption in India is 60 U.S. cents, compared with $1.1 in China and $3.7 in Thailand.
As Unilever, P&G and local Indian companies such as Dabur India Ltd. fight for market share they also are waiting for Indian women to change their thrifty ways.
Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.