Urban consumption to remain subdued over next 6-12 months, says study
Moneylife Digital Team 07 February 2014

According to a survey conducted by Religare, travel, jewellery, luxury good and FMCG spends across urban India are weakening while home and car purchases are being deferred by consumers

Discretionary travel, jewellery, luxury goods and fast moving consumer goods (FMCG) spending among urban Indians is weakening. While gold is losing its lustre, home and car purchases are being deferred by urban consumers and this downtrend may continue over the next six to 12 months says a study.


Religare Capital Markets Ltd, in its "The 5th Urban Consumer Survey" found a marked decline in consumer confidence, especially in larger cities. "We expect consumption trends to remain subdued over the next 6-12 months, with H2FY14 growth rates likely to moderate given the high festive demand base of last year and comparatively early festive season in FY14. As such, we maintain our negative stance on the sector in view of the soft demand trends and fairly rich valuations," it said in the study.


The study was conducted across 100 plus towns and cities and over 1,000 people participated in the survey.


Here are the survey results...


Discretionary spend outlook muted:

Only 33% of respondents are more confident about economic and own growth prospects, down from 40%/51% in our November 2012/May 2012 surveys. Moreover, those in higher income households (HH) and metros are less upbeat than persons in lower income HH and tier-3 cities. Food inflation, although moderating now, has been hurting discretionary spends. In FMCG, we are seeing downgrading to cheaper products in select categories such as hair oil, toothpaste and health drinks, albeit not as evident as in our November 2012 survey, Religare said.


FMCG –what’s on the shopping list?

FMCG spends have moderated but key brand preferences stand out. In soaps, Dettol, Lux and Dove continue to dominate the market (16%, 15%, 15% market share, respectively based on respondent preferences), while P&G’s Head & Shoulders (H&S) is the most preferred shampoo brand. Notably, Dove, L’Oreal and H&S are doing well among higher income HH (Dove gaining strongly).

Overall, Hindustan Unilever (HUL) maintains its strong lead in home & personal care (HPC) with a steady 53% market share in soaps (unchanged from our November 2012 survey) and 43% share in shampoo (vs 40% last survey, widening its lead over P&G to 1,000 bps with the latter shedding 200bps to 33%).

In skin cream, HUL has about 50% share (Nivea, the biggest gainer at over 400bps to 17%) and in detergents, 62% (Surf dominates high income HH).


Colgate continues to lead in toothpaste with 47% market share (45% last survey) while HUL has lost 700bps from our last poll to35% now.


Asian Paints remains the most preferred brand in the paints category with a stable 54% share, while Berger has lost 200bps to 10%.


In footwear, BATA has improved its share to 27% (25%).

Homes and Cars –highly aspirational:

About 18% and 22% of consumers polled are looking to buy homes and cars, respectively over the next three to six months, though purchase decisions hinge on the economic outlook. Property and fuel prices are the key variables affecting purchase plans rather than interest rates.

Maruti is the most preferred auto brand with 48% market share (40% previously), followed by Hyundai at 23% (29%) and Tata Motors.


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