Retail Sector India

December 2013

Produced by:

I. Retail Sector Overview 5. Semi-Processed Food Market 1. Retail Sector Highlights 6. Frozen Processed Food and Ready Meals

2. Main Sector Indicators 7. Milk and Cheese

8. Beverage and Cigarette Highlights 3. Retail Sector Snapshot 4. FMCG Market Snapshot 9. Alcoholic Beverage Data 5. Number and Size of Stores in India 10.Beer and Cigarette Data 6. Indian Retail in Global Rankings 11.Soft Drink and Bottled Water Highlights 7. Major Players by Retail Format 12.Soft Drinks and Bottled Water 8. Retail Sector Forecast III.Personal Hygiene and Care, Detergents 9. Retail Sector Forecast (cont’d) 1. Personal Hygiene Highlights 10.Indian Population and the Retail Market 2. Personal Hygiene Market

11.New Rules for FDI in Multi-Brand Retail 3. Personal Hygiene Market Forecast

12.Government Policy 4. Personal Care Highlights 13.Government Policy (cont’d) 5. Skincare 14.Employment 6. Color Cosmetics 15.Retail Sector SWOT Analysis 7. Natural Cosmetics and Fragrance II. Food & Beverages 8. Dishwashing and Laundry Care 1. Packaged Food Market IV. Apparel and Footwear 2. Ready-to-Eat Market 1. Apparel Market 3. Confectionery Highlights 2. Apparel Market (cont’d) 4. Bread 3. Athletic Apparel and Footwear 4. Other Apparel

V. Consumer Durables 3. Carrefour Wholesale Cash&Carry India Pvt. Ltd. 1. Consumer Electronics and Home Appliances – SWOT 4. TESCO/Trent Analysis 5. IKEA

2. Consumer Durables Snapshot 6. Future Retail Ltd.

3. White Goods 7. Reliance Retail 4. Brown Goods 5. Consumer Electronics 6. Consumer Durable Financing in India VI. Other Segments 1. Pharmaceuticals 2. Motor Vehicles 3. Luxury Goods

VII. E-Commerce (B2C) 1. E-Commerce Highlights 2. E-Commerce in India Snapshot 3. E-Tailing Data 4. E-Commerce – Ecosystem and Challenges VIII. Major Players 1. Top M&A Deals 2. Bharti Retail Pvt. Ltd.

India’s fiscal year runs from Apr 1 to March 31. Thus, FY 2013 (also called fiscal 2013) means Apr 1, 2012 – Mar 31, 2013. In Indian documents, FY (fiscal) 2013 is also labeled FY12-13. The remaining nine months of calendar 2013, i.e. Apr-Dec, belong to fiscal year 2014. In order to better align with calendar years and make international comparisons more meaningful, in the Major Players section of this report, Emerging Markets Insight has chosen to label data by the year in which most of the result occurred. Unless otherwise stated, in the Major Players section of this report, 2012, for example, means the 12 months between Apr 1, 2012 - Mar 31, 2013, or what in India is referred to as fiscal 2013. This applies only to Indian companies and does not apply to companies with global operations, which may be presented in this report. When sources have not provided details on their year labeling policy, year labels in graphs featured in this report have been presented as provided by the source.

Importance of Retail In FY 2012, organized retail represented some 8% of the USD 430 bn Indian retail industry, CRISIL said in Sep 2012. The total retail sector accounted for some 25% of GDP, while organized retail contributed some 2%, Technopak figures showed. The food and grocery segment accounted for more than half of the retail market, but claimed organized retail sales of between 2% (CRISIL) and 11% (Deloitte). The retail sector is one of the biggest employers in India with a nearly 24-million workforce, Technopak said. The country was the world’s 12th-largest consumer durables market in FY 2012 and is forecast to rank fifth-largest by FY 2025, IBEF said in Aug 2013.

FDI Policy In Aug 2013, the Indian government relaxed the rules for Foreign Direct Investment (FDI) in multi-brand retail in an attempt to woo investors, as no foreign multi-brand retailer has set up shop in India since 51% FDI in multi-brand retail was first permitted in the country in Sep 2012. FDI in multi- brand retail is a state subject and as per the policy, e-commerce is not allowed as an alternate channel as it can serve the customer beyond the physical location of the store, Deloitte India commented. Political changes in the state and central governments and the USD/INR currency fluctuation pose risks to foreign investment in retail in India.

Challenges States in India differ in terms of culture, language, socio-economic development and spending power, so international retailers would need to customize their offerings to suit regional tastes, Deloitte India said. The choice of real estate suitable for large retail operations is very limited, which will be a major challenge to the corporatized retail’s ability to grow, Technopak pointed out. Real estate limitations may also give a boost to informal retail channels. To meet the FDI policy guidelines on sourcing and improve margins, foreign retailers would need to work with local manufacturers to create India-specific private label brands.

Way Ahead Domestic retailers should focus on expanding their footprint not only in metropolitan areas, but also in towns with population of less than one million. Although foreign retailers have been allowed to operate in smaller cities since Aug 2013, they may reasonably be expected to prefer larger ones, leaving smaller urban and rural areas to domestic companies. While foreign retailers hunt for suitable retail spaces, domestic ones can apply accommodation flexibility and use their exclusive insight into the Indian consumption patterns to gain an edge over their global competitors. Issues that both local and foreign retailers will face include transportation and electricity supply challenges as well as finding skilled manpower.

Main Retail Sector Indicators

FY 2001 FY 2012 FY 2021 National GDP, USD bn 450 1,958 3,310 Estimated Merchandise Consumption (Retail Market Opportunity), USD bn 120 490 810

Urban consumption (% and value) 40% (USD 48 bn) 48% (USD 235 bn) 56% (USD 455 bn)

Rural consumption (% and value) 60% (USD 72 bn) 52% (USD 255 bn) 44% (USD 355 bn)

Share of Corporatized (Organized) Retail ~4% ~7% ~20% Share of Independent Retail 96% 93% 80% Size of Corporatized (Organized) Retail, USD bn 5 34 162 Size Of Independent Retail (USD bn) 115 455 648 Share of Indian Corporatized Retailers in Total Corporatized Retail ~100% ~95% 50%

Comments

India is home to approximately 15 million shops, the majority of which are run as standalone entities owned and operated by members of the same family. Employment in this segment, referred to as independent retail, averages 1.5 employees per shop. These employees have no social security and no say on working conditions and wages, Technopak commented in an Oct 2012 paper on FDI in the Indian retail sector. Independent retail is expected to create more than nine million jobs over the next decade. Therefore, a labor policy that manages to bring this large informal workforce in an environment of formal employment is much needed.

India's Retail Sector, FY 2012 India's Organized Retail Sector, FY 2012

Pie chart shows both Apparel 8% Mobile and Consumer organized and unorganized Telecom 6% Electronics 8% segments Jewelry 6% Food Service 5% Others 24% Jewelry 4% Food Service 7% Consumer Electronics 3% Size of Organized Retail, FY 2012: Food and Grocery Pharmacy 3% USD 34 bn 60% Mobile and (Technopak) Telecom 11% Food and Grocery Others 11% 11%

Size of Indian Retail Sector, 2012: USD 430 bn (CRISIL) Apparel 33% USD 490 bn (Technopak)

FMCG Market Break-Down by Product, FY 2013 FDI in FMCG, FY 2001-FY 2013, USD mn

2,000 1,811.10 50% Personal Care 1,800 45% 20% 1,600 46.60% 40% 1,400 35% Tobacco 15% 1,200 30% 1,000 865.5 25% 22.25% 800 632.4 20% 16.25% 600 384.9 15% Household 400 9.89% 10% Consumables 10% 200 95.4 101.2 5% 2.45% 2.60% 0 0% Others 2% Retail Tea, Coffee Vegetable Soaps, Paper, Pulp Food Food and Beverages 53% Trading Oil Cosmetics Processing FDI in FMCG, FY 2001-FY 2013, USD mn % of Total FDI in FMCG

Source: Deloitte Jan 2013; Images Group; Reuters; D&B FMCG Sector, Aug 2013; IBEF; DIPP; Aranca Research; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 7 - FMCG Market Snapshot

Indian FMCG Market Size Exports and Imports of FMCG

2,000 20% 1,766 1,800 18.5% 18% 121.2 16.3% 1,539 1,600 1,395 16% 14.8% 1,400 1,177 14% 84.3 1,200 1,012 12% 1,000 10.3% 10% 59.8 61.3 51.6 51.6 49.3 800 8% 37.2 600 6% 27.1 30 400 4% 200 2% 0 0% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FMCG Imports, INR bn FMCG Exports, INR bn Indian FMCG Market Size, INR bn % y/y growth

Top FMCG Players in India (Based on FY 2012 Earnings) Total Distribution Reach of FMCG Players

Nirma Ltd. 4.44% Nestle India Ltd. HUL 6.3 5.00% Nestle 3.6 GSK 1.5 Hindustan Unilever Ltd. Others 35.70% GCPL 3.9 15.06% Marico 3.3 Colgate 4.6 Emami 2.6 Dabur 2.8 Ruchi Soya 2.5 Industries Ltd. ITC 16.92% Jyothy Labs 2.9

ITC Ltd. 22.88% Total Distribution Reach of FMCG Players, million outlets

Source: D&B FMCG Sector, Aug 2013; EM Insight calculations; Tata Securities Research; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 8 - Number and Size of Stores in India

Number and Average Size of Stores in India Share in Total Space by Store Types, %

70,000 120% 67,100 Cash & Carry 0.3% 1% Convenience 100% 2% 2% Stores Hypermarkets 50,000 2% Discount Stores Department Stores 30,000 80% 37% 36,830 50% Specialty Supermarkets 2,000 Stores/EBOs 75% 60% 8% Supermarkets Specialty Stores/EBOs 1,500 9% 21% 11,192 40% Department Discount Stores 5% 1,000 20% Stores 7% 20% 25% Hypermarkets Convenience Stores 700 10% 2006 2011 2016 F 17% 0% 1% 2% 7% Cash & Carry Total Number of Stores in India Average Size of Stores in India, 2011, sq ft 2006 2011 2016 F

Number of Stores byType

50,000

30,000

10,000 8,500 4,000 4,000 100 400 2,000 500 1,500 500 50 600 1,400 40 300 1,000 2 30 200

Convenience Stores Discount Stores Specialty Stores/EBOs Supermarkets Department Stores Hypermarkets Cash & Carry

2006 2011 2016 F

livemint.com (based on forecasts by Boston Consulting Group, Ernst and Young Pvt. Ltd., Deloitte Haskins and Sells, KPMG Advisory Source: Services Pvt. Ltd., Technopak Advisors Pvt. Ltd. and Booz and Co.) Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 9 - Indian Retail in Global Rankings

India's GRDI Score, 2013 Retail Real Estate Momentum Index, Global Top 20 Markets

Change in Rank Country GRDI Score 2013 Compared to 2012 China Based on growth projections of total Brazil 69.5% - India population, urban Chile 67.1% - population, GDP, GDP/capita, retail UAE 63.5% +2 Indonesia, Turkey sales and modern Uruguay 66.5% +1 Brazil, Vietnam shopping center Oman 53.9% -9 stock, combined with Peru, Thailand, Russia real estate investment China 66.1% -1 Kazakhstan, Malaysia, Chile and international India 55% -9 retailer presence.

Georgia 61.4% -2 Ukraine, Morocco, Saudi Arabia Source: Jones Lang Mongolia 62.5% +2 Poland, Mexico, Philippines, Colombia LaSalle, Aug 2012 Peru 56.5% -2

How India Compares to Other Markets - A.T. Kearney's Global Retail Development Index (GRDI), 2013

Peru 52.9% Peru 60.4% Peru 63.4% Mongolia 17.7% Mongolia 37.0% Mongolia 99.0% 36.6% Georgia Georgia 63.8% Georgia 83.4% India 36.8% India 59.4% India 63.3% China 62.1% China 67.9% China 34.3% Oman 77.5% Oman 97.8% Oman 11.3% Uruguay 92.0% Uruguay 73.9% Uruguay 63.5% UAE 95.8% UAE 94.6% UAE 3.0% Chile 95.6% Chile 100.0% Chile 18.7% Brazil 100.0% Brazil 86.2% Brazil 43.3%

Market Attractiveness, % Country Risk, % Market Saturation, %

Source: The 2013 Global Retail Development Index 2013 by A.T.Kearney; Jones Lang LaSalle 2012; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 10 - Major Players by Retail Format

Organized Convenience Store Market in India Grocery retailers in India, FY 2012

250 The convenience 26% store market 214.1 Company Name Market Share, FY 2012 accounted for 7.4% of 25.00% 25% 200 the total organized 173.3 139.8 retail market in India 25% Future Value Retail Ltd. 0.50% 150 in FY 2011. 24.27% 112.5 23.96% 24% 90 Reliance Retail Ltd. 0.30% 100 23.54% 24% Mother Dairy Fruit & Vegetable Pvt. Ltd. 0.10% 50 23% Others 99.00% 0 23% FY 2011 FY 2012 Est. FY 2013 F FY 2014 F FY 2015 F Number of outlets - 12 million in 2012 Organized Convenience Store Market in India, INR bn % y/y change

Mixed Retailers in India, FY 2012 Electronics (l) and Apparel (r) Specialist Retailers, FY 2012

Airplaza Retail Trent 6.90% Electronics and Apparel Specialist Market Share, FY Holdings 8.80% Fabindia Overseas Appliance Specialist Market Share, FY 2012 Retailers 2012 6.90% Retailers LG Electronics India 3.2% Raymond 0.5% Pantaloon Retail Reliance Retail Infiniti Retail 2.8% Bata India 0.5% India 16% 6.20% Next India Retail 2.5% Reebok India 0.4% MobileStore 2.2% Aditya Birla Nuvo 0.4% Vijay Sales 2.1% Benetton India 0.3% Others 15.20% Lifestyle Samsung India Electronics 1.7% Adidas India Marketing 0.2% International 19.90% Shopper's Stop Pantaloon Retail India 1.5% Levi Strauss India 0.2% 20% Others 84.1% Others 97.5%

Source: Netscribes report of June 2012; Passport by Euromonitor International; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 11 - Retail Sector Forecast

Organized Retail Forecast Indian Retail Market Forecast

120% 850

100% 675

80% Unorganized 470 Retail, % 60% 85% 270 92% 90% 88% 200 40% 84 70 12 0.6 26 9 20% Organized Retail, % 2006 2011 2016 Est. 2020 Est. 10% 12% 15% 0% 8% 2012 2013 F 2014 F 2015 F E-Tailing, USD bn Organized Retail, USD bn Total Indian Retail, USD bn

Organized Retail Sales Projections for 2015, USD bn

Footwear 7 Consumer Electronics 22.7

Home 3.8

Unorganized Total Retail in Organized Total Organized Retail Jewelry and Watches 7 2015: Retail Apparel 19 Retail in 2015: USD 565 bn USD 665 bn USD 100 bn USD 100 bn Pharmacy and Wellness 3.3 Books, Music and Entertainment 1.3 Food and Groceries 35.4 Source: Booz & Company Analysis

Source: dartconsulting.co.in; Sunstone Business Review, FICCI, Technopak, Business World, RIL Annual Report, Forrester; Booz & Company Analysis; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 12 - Retail Sector Forecast (cont’d)

FMCG Market Size Forecast Rural FMCG Market Size Forecast

3,000 16% 14.8% 100 14% 2,500 13.0% 13.1% 13.4% 12%

2,000 2,560 10.3% 10% 2,257

1,995

1,500 8%

1,766 6% 1,000 1,539 4% 12 500 2% 0 0% FY 2011 FY 2025 FY 2012 FY 2013 FY 2014 F FY 2015 F FY 2016 F Rural FMCG Market Forecast, USD bn FMCG Market Size Forecast, INR bn % y/y change

Consumer Durables Market in India - Forecast Consumption Expenditure Forecast

India was the world’s 12th-largest consumer durables market in FY 2012 and is forecast to rank fifth-largest by 12.5 FY 2025, IBEF said in Aug 2013. 2,020

7.3 991

FY 2012 FY 2015 Est. FY 2010 FY 2020

Consumer Durables Market in India, USD bn Consumption Expenditure, USD bn

Source: D&B FMCG Sector, Aug 2013; India Brand Equity Foundation (IBEF); Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 13 - Indian Population and the Retail Market

Rising Incomes Will Change India’s Social Structure

2015 2025 2015 2025 2015 2025

Household Income Number of Households, Number of Households, Aggregate Disposable Aggregate Disposable Aggregate Consumption, Aggregate Consumption, Brackets, Annual (thou mn mn Income, INR tn Income, INR tn INR tn INR tn INR)

Globals (>1,000) 3.3 9.5 6.3 21.7 4.1 14.1

Strivers (500-1,000) Middle 5.5 33.1 3.8 20.9 2.7 16.5 Class Seekers (200-500) 55.1 94.9 15.2 30.6 11.8 24.6

Aspirers (90-200) 106 93.1 14.6 13.7 12.2 11.9

Deprived (<90) 74.1 49.9 3.8 2.6 3.3 2.4

India's Population and the Retail Market

120% Population 2015 Population 2001, (Est.), million people 100% 15% million people 18% 20% % Population Living in: 28% 6% 80% 6% 7% Metros and Mini-Metros, 8 cities 67 130 Metros and Mini-Metros 2% 3% 3% 10% 60% Top Cities (Population > 1 million), 27 cities 37 72 Top Cities 4% 40% 77% Large Cities (Population: 0.5-1 million), 32 cities 24 45 Large Cities 73% 70% 58% Rest of India 20% Rest of India, 5,500 towns + 600,000 villages 874 1,153 0% Source: NCAER, CSSO, TSMG Analysis 2004 2010 2015 F 2025 F

Source: McKinsey Global Institute; NCAER, CSSO, TSMG Analysis; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 14 - New Rules for FDI in Multi-Brand Retail

In Aug 2013, the Indian government relaxed the rules for Foreign Direct Investment (FDI) in multi-brand retail, as part of a simplification to FDI regulations for nearly a dozen sectors, The Times of India reported on Aug 2, 2013. The step is the government’s latest attempt to woo investors, as no foreign multi- brand retailer has set up shop in India since 51% FDI in multi-brand retail was first permitted in the country in Sep 2012.

In Sep 2012, the government allowed 51% FDI in multi-brand retail. Before 2012, FDI in multi-brand retail was prohibited in India. As of Aug 2013, foreign multi-brand retailers are allowed to open stores in cities with a population of less than 1.0 million. A year ago, More Cities foreign investors were allowed to set up stores only in cities with a population of more than 1.0 million, which actually amounted to 53 cities.

Multi-brand retailers can now source at least 30% of their manufactured and processed goods from local micro, small and medium Better enterprises with a total plant and machinery investment of USD 2.0 million, instead of USD 1.0 million, as allowed in Sep 2012. Sourcing Sourcing can continue even after the companies’ USD 2.0 million investment cap has been reached. Retailers have also been allowed Options to buy from farmers’ and agriculture co-operatives, which will be counted in the sourcing requirement. Sourcing norms will have to be met over a five-year period.

Unchanged from the Sep 2012 regulations, foreign retailers have to invest at least USD100mn and put at least half of that in back-end Back-End infrastructure, such as cold storage and warehouse facilities within three years. Retailers will make subsequent investment in back-end Infrastructure infrastructure as needed. The policy does not specify whether the initial investment in back-end infrastructure needs to be a fresh one or can be a stake purchase in an already existing establishment, Deloitte India commented.

Until 1991, all Indian governments followed protectionist policies that were influenced What Keeps Investors Away by socialist economies. A balance of payments crisis in 1991 forced India to liberalize Economic its economy. The country joined the WTO in 1995, and, as part of the liberalization Liberalization process, has been slowly opening its retail sector to FDI through a series of steps. . Only 11 States of India’s 28, of 1991 The first was the permission of 100% FDI in cash-and carry (wholesale) in 1997. The have approved FDI in multi- regulatory regime was eased up in 2006. brand retail, which means a significant part of the country is out of bounds for global companies, keen on a pan- India footprint.

Foreign Investment in India is regulated by the Foreign Exchange Management Act (FEMA) and the Foreign Exchange Management Regulations issued by the . There is no central agency for Government a single-window clearance for Reserve Bank of India (RBI). The Ministry of Commerce and Industry is the key Bodies the approvals and licenses government body in charge of implementing the FDI policy. Official communications required to start a retail regarding the FDI policy are issued by the Secretariat of Industrial Assistance at business in India. Chasing the Department of Industrial Policy and Promotion (DIPP). multiple central and state government agencies may result in project delays and cost overruns. Global retailers have been operating for years in India, under legal forms including

franchise agreements (Pizza Hut, Lacoste), cash-and-carry wholesale trading (Metro), Major Players strategic licensing agreements (Mango, Starbucks) and manufacturing wholly-owned . The discretionary power of Operate subsidiaries (Nike, Reebok). The latter are treated as Indian companies and are states to approve retail projects results in uncertainty, Despite allowed to retail. Standalone boutiques (Christian Louboutin, Roberto Cavalli) have as states may impose Restrictions opened since 100% FDI in single-brand retail has been allowed. The government additional conditions. approved a total 18 FDI proposals in single-brand retail worth USD 173 mn between Apr 2010 and May 2013, The Hindu reported on Aug 20, 2013.

Source: Corporate Catalyst India; Legal India; AT Kearney; The Hindu; The Hindu Business Line; PWC India; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 16 - Government Policy (cont’d)

. The government has claimed that FDI in multi-brand retail will create 10 million new jobs without impacting existing employment in the unorganized retail sector, and will help keep food-based inflation down. In addition, more organized retail will mean easier and higher tax collection. Foreign multi-brand retail companies are expected to help develop supply chain and logistics, thus contributing to higher employment and tax collection from companies in these sectors. Why Let Global . Foreign supply-chain best practices will reduce India’s high food wastage levels (at some 24-40%). Food quality and safety will be Supermarket improved. Foreign multi-brand retail chains will reduce the number of intermediaries between producers and retailers. This will lead Operators to higher prices paid to producers and a more regular flow of income. Greater variety of products and more competitive prices will be available. Brand-conscious Indians shopping abroad could spend the same money at home. In . Micro, small and medium retail businesses suffer from lack of branding and possibilities to reach out to world markets. By allowing foreign retailers in, some could develop by signing franchise agreements for their neighborhood formats. Unorganized retail stores can buy their merchandise from wholesale retailers, eliminating middle men and benefiting from bulk discounts. The prestige of Indian products will increase as they will become more similar in design and qualities to their Western counterparts.

. The Goods and Service Tax (GST) has been proposed in 2009, but as of Sept 2013 has not been adopted as India’s single national tax rate. GST is expected to improve tax collection and simplify trade across India by replacing the multiple (state and national) taxation currently existing in India. The Goods . Under GST, both central and state taxes will be collected at the point of sale and will be charged on the manufacturing cost. The taxation and Service burden will be divided equitably between manufacturing and services through a lower tax rate by increasing the tax base and Tax minimizing exemptions. (GST) . GST is expected to improve cash flows, lower input costs and boost profitability of both manufacturers and traders. It may also lead to a re-evaluation of procurement and distribution agreements. . The planned tax refunds on goods purchased for resale will significantly reduce the inventory costs of distribution.

Source: Confederation of All Indian Traders; Corporate Catalyst India; Legal India; IBEF; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 17 - Employment

Employment in Retail in India Direct Employment in E-Tailing, Last Mile Delivery

162 2021 F 954,000 31

34 2012 22

5 2001 18 10,600

2012 2021 F No. of Direct Employees in Corporatized (Organized) Retail, million people No. of Direct Employees in Independent Retail, million people Direct Employment in E-Tailing

Current and Projected Employment in E-tailing 25,000 1,600,000 2,500 Others (Customer Care 1,400,000 20,000 Employees, Merchandizers, 3,500 HR, Finance, etc.) 1,200,000 Technology 800,000 15,000 5,000 1,000,000 800,000 10,000 Warehousing 600,000 250,000 12,500 400,000 5,000 Logistics 200,000 300,000 0 0 100,000 2012 2021 F

Source: Technopak Analysis (FDI in Retail, Oct 2012; E-Tailing in India, May 2013); Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 18 - Retail Sector SWOT Analysis

Strengths Opportunities

India is one of the fastest-growing consumer markets in the world. By . Consumption in India will continue to grow regardless of the general 2025, it is estimated to grow four times to become the fifth-largest pace of the economy. Rising disposable incomes have resulted in

globally. Urban India will account for roughly 70% of the consumption higher levels of discretionary spending and aspirational shopping. TV, growth, while rural India will grow 32% by 2025. The majority of the the Internet and other media help raise consumer awareness and the FMCG categories are growing faster in rural areas than in urban, desirability of the latest lifestyle trends and brands. Young, working-age suggesting that rural markets contain many untapped opportunities. people are the majority of the Indian population, which promises India is very diverse both culturally and economically, so products dynamic consumer behavior and eager response to new product catering to various consumer needs can be potentially successful there. launches and product innovation.

SWOT

Analysis

The market is very fragmented and largely price-driven. The condition Rising inflation has an adverse effect on consumer spending. Heavy of the road network affects supply chain efficiency. Food wastage due taxation, varying from state to state, curbs business activities. Price to transportation and storage problems is very high. In rural India, competition among retailers puts downward pressure on margins. India regular power supply is not a certainty and the character of purchases seems not as well positioned as other Southern and South-East Asian is seasonal. Cultural idiosyncrasies affect perception and sales of economies to take up moving global business. Political changes in the certain products. Skilled personnel is hard to find. The choice of real state and central governments and the USD/INR currency fluctuation estate suitable for large retail operations is very limited. poses risks to foreign investment in retail in India.

Weaknesses Threats…

Source: PWC; McKinsey Global Institute; IBEF; company annual reports; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 19 - II. Food & Beverages

Packaged Food Market Size Packaged Food Market Segmentation by Type

10,000 9,434.10 17% 102% 8,215.20 16.5% 16.4% 17% 100% 8,000 7,190.80 16% 6,228.3015.9% 98% 5,374.60 16% 6,000 15.5% 8.0% Semi- 4,618.50 96% 8.6% 9.1% 9.0% 15% 10.0% 10.6% Processed, 14.8% 94% % 4,000 15% 14.3% 92% 14% 2,000 14% 90% 92.0% Ready-to- 0 13% 88% 91.4% 90.9% 91.0% 90.0% 89.4% Eat, % FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 86% Packaged Food Market Size, USD mn % y/y change 84% FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Urban/Rural Packaged Food Market Segmentation Packaged Food Market Segmentation by Region

120% 120%

100% 100% 23.3% 22.9% 22.2% 21.7% 20.9% 18.0% 17.7% 17.5% 80% Rural 80% East Market, % 21.0% 20.9% 20.6% 60% 60% South 28.0% 28.8% 29.1% West 40% 76.7% 77.1% 77.8% 78.3% 79.1% 40% North 20% Urban 20% Market, % 33.0% 32.6% 32.8% 0% 0% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2011 FY 2012 FY 2013

Ready-to-Eat Market Segmentation Biscuit, Cracker Market Share by Sales Value (Apr-Sep 2012)

120% Total Market Size, Cream Biscuits Marie 11% 4,910.8 5,663.9 6,542.1 7,397.8 USD mn 8,430.40 22% 100% 8.8% 8.6% 8.2% 8.7% 8.9% Non-Salt Crackers 9% 16.6% 18.7% 19.7% 80% 21.8% 23.5% Ice Cream

60% 24.1% 24.2% 23.7% Snacks 24.9% 24.8% Salt Crackers 6% Confectionaries 40% Bakery Cookies 26% 50.5% 48.5% Others 6% 20% 48.4% 44.6% 42.8%

0% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Glucose 19%

Confectionery Sales by Value Ice Cream Market Segmentation (publ. Mar 2012)

by City Non- by Type of Product: 100,854.70 Metropolitan 90,393.90 Cities 35% Unbranded 78,409.70 52% 29,676 26,691 23,329 40,784 36,619 31,753

23,329 27,084 30,395

FY 2010 FY 2011 FY 2012 Six Major Branded 48% Chocolate Sales, INR mn Sugar Confectionery Sales, INR mn Gum Sales, INR mn Metropolitan Cities 65%

Source: Ken Research; Indian Biscuits Manufacturers’ Association; The Economic Times; BMI; CIER Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 22 - Confectionery Highlights

The Indian confectionery market was estimated at nearly INR 101 bn in 2012 (BMI) and according to research and market intelligence company Netscribes is expected to grow at a CAGR of 10.8% from 2012 onwards. Demand and consumption are Overview almost at par in rural and urban India, with rural consumers being more sensitive to price and urban ones to product variety. Unlike in other countries, mono- and not multi-packs of confectionery are preferred in India. Manufacturers often employ different promotional and advertising campaigns, as well as different size packaging and flavors, to lure urban and rural consumers into buying.

Low-priced products are distributed through the unorganized channel, while medium-priced and premium products are mostly sold by organized retailers. Organized manufacturers mainly comprise the Indian branches of multinational companies, but domestic players are also present. India’s top confectionery manufacturers include Nestle India Ltd., Cadbury India Ltd., Perfetti Players Van Melle India Ltd., Candico Ltd., ITC Ltd. and Wrigley India Pvt. Ltd. Some 30% and 10% of chocolate and chewing gum manufacturers, respectively, belong to the unorganized sector. The chocolate market in the country is 90% dominated by multinational companies Cadbury and Nestle. Premium chocolates are mostly imported and some 70% of annual chocolate sales are made in urban areas.

Some 39.1% of India’s sugar confectionery imports came from Indonesia and China in 2011, Netscribes said in a Nov 2012 Imports, report. Some 79.6% of block chocolate imports came from Malaysia and Singapore, and 75.4% of chewing gum imports were Exports from China and the UAE in 2011. Some 56.6% of India’s chewing gum exports were to the United Arab Emirates and 64.3% of block chocolate exports were shipped to Bhutan and Uzbekistan in 2011, Netscribes added.

India Packaged Bread Market Size Market Share by Bread Type, INR bn, Publ. Mar 2012

600 533.4 5.7% 479.1 505.3 500 453.7 430 5.6% 5.6% 400 5.6% 5.6% 5.6% 300 Brown Bread 10% 5.5% 5.5% White Bread 84% 200 5.5% 100 5.5%

0 5.4% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Others 5% Packaged Bread Market Size, USD mn % y/y change

Market Segmentation, FY 2013 Comments

By Players: By Regions: West . Per capita bread consumption ranges between 1.5 kg and 1.75 kg in 29% India, the bread manufacturers’ association said on its website. South . The organized sector includes some 1,800 small-scale bread 25% manufacturers, 25 medium-scale manufacturers and two large-scale industrial producers. East . The two largest players, Britannia Industries Ltd. (BIL) and Modern 10% Food Industries Ltd. (MFIL), were allowed to continue operations on the basis of their capacity and expertise in 1976, when the government restricted bread manufacturing to small scale industries (SSI) only. . VAT is not imposed on bread in most of the states. Bread is gradually

Unorganized 59% Organized 41% evolving into a branded product and in-store bakeries are gaining North popularity. 36%

Source: Ken Research; CIER; All India Bread Manufacturers’ Association; EM Insight calculations; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 24 - Semi-Processed Food Market

Semi-Processed Packaged Food Market Segmentation Breakfast Cereal Market Shares by Retail Value, FY 2012

120% 463.9 564.4 648.8 817.5 1,003.8 Total Market Size, Frito-Lay India Mohan Meakin USD mn 14.9% Ltd. 5.8% 4.6% 4.8% 5.0% 4.8% 4.8% 100% Marico Ltd. 3.8% 9.7% 8.4% 7.7% 6.5% 6.0% Avesta Good 80% 18.6% 19.0% 21.0% 22.9% 23.7% Soups Earth Foods Bagrry's India Ltd. Pvt.Ltd. 1.9% 15.9% 60% Frozen Foods Hindustan Oil Packaged Cereals Corp. Ltd. 1.6% 40% 67.1% 67.8% 66.3% 65.8% 65.5% Noodles 20% Others 16.3%

0% Kellogg India Ltd. FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 39.8%

Soup Market Shares by Retail Value, FY 2012 Noodles Market Shares by Retail Value, FY 2012

Bambino Agro Nestle India Ltd. ITC Ltd. 8.0% Industries Ltd. 23.30% 5.6% Indo Nissin Foods Ltd. 4.0% Hindustan Unilever Ltd. 2.6% CG Foods India Pvt. Ltd. 2.3% Capital Foods Ltd. 10.70% Glaxo SmithKline 1.8%

Hindustan Others 13.1% Unilever Ltd. Nestle India Ltd. 63.20% Others 2.80% 62.6%

Company Market Shares, Frozen Processed Food, FY 2012

Darshan Foods Temptation Foods Pvt. Ltd. 5.00% McCain Foods . The market size of frozen processed food in India, measured Ltd. 7.00% India Pvt. Ltd. by retail value, totaled some INR 3,700 mn in fiscal 2012, up 4.60% Innovative Foods from some INR 3,000 mn in the previous year. In terms of Ltd. 9.00% volume, some 22,000 tonnes of frozen processed food were sold in India in FY 2012, against some 18,000 tonnes in the Venky's India Ltd. 9.00% prpevious year. . The growth in frozen processed food sales in each year Others 26.80% between 2007and 2012 is fueled by the rising number of super- and hypermarkets with freezer display cabinets, Al-Kabeer Exports Euromonitor reported in Jan 2013. Pvt. Ltd. 16.50% Mother Dairy Fruit . Constant sales are expected to grow at a CAGR of 17% & Vegetable Ltd. between fiscal 2012 and 2017. In fiscal 2017, the retail frozen 22.10% processed food market is expected to be worth some INR 8,000 million for some 50,000 tonnes of food. Company Market Shares, Ready Meals, FY 2012 . The market size of ready meals food in India, measured by retail value, totaled some INR 1,000 mn in fiscal 2012, up Al-Kabeer Exports Pvt. Ltd. 9.10% Kohinoor Foods from some INR 800 mn in the previous year. In terms of Ltd. 7% volume, some 4,000 tonnes of ready meals were sold in India ITC Ltd. 19% Innovative Foods in FY 2012, against some 3,000 tonnes in the prpevious year. Ltd. 6% . Canned/preserved and frozen ready meals are the most Venky's India Ltd. important sub-segments. Demand is being pushed up by 5% time-strapped working people and modern grocery retailers with large in-house cold storage facilities, Euromonitor McCain Foods India Pvt. Ltd. reported in Jan 2013. 0.80% . Constant sales are expected to grow at a CAGR of 9% between fiscal 2012 and 2017. In fiscal 2017, the retail ready MTR Foods Ltd. meal market is expected to be worth some INR 1,700 million 36% Others 17% for some 14,000 tonnes of food.

Milk Market Break-Up by Segments, FY 2011 Cheese Market Shares by Retail Value, FY 2012

MMD Dairy 4.1% Heritage Foods Others (Sweets, (India) Ltd. 1.0% Britannia Pantaloon Retail Ice Cream 1% Curd, Yoghurt, Industries Ltd. India Ltd. 0.2% Cheese 2% etc.) 49% 15.7% Table Butter 1% Milk Powder 2% Khoa/Panner/Cha nna 7%

Ghee 8% Others 29.8% Gujarat Co- Operative Milk Marketing Fluid Milk 30% Federation Ltd. 49.2%

Cheese Market by Region (l) and Type (r) (publ. Mar 2012) Highlights

Cheese East . Indians consume all internationally known dairy products but also Spread 42% traditional ghee (clarified butter) and dahi (yoghurt). With consumer 30% West tastes evolving, flavored milk is gaining popularity, especially among 16% the urban population, Investindia said. . Many of the industrially prepared dairy products are also produced in Indian households. High consumption of traditional milk products takes place during the winter season, rich in festivals and wedding celebrations. Other . Changing consumption patterns and growing foodservice in India are South Cheese going to boost the cheese market in the country. North 6% Varieties Processed . Cheese retail value was estimated at slightly below INR 10 bn and 36% Cheese 15% 55% volume – at some 40,000 tonnes.

Source: CIER; Snapshot: Dairy Sector in India, Dec 2012, e-Research and Publications India Pvt. Ltd.; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 27 - Beverage and Cigarette Highlights

The Indian alcoholic beverage market was estimated at around INR 500 bn in FY 2012 and is expected to exceed INR 1.4tn by 2015, figures by the Indian chambers of commerce association ASSOCHAM showed. The country is the world’s third-largest Overview market for branded alcoholic beverages in terms of volume and the fourth-largest tobacco consumer in the world.. The per capita consumption of alcoholic beverages, excluding country liquor, is 3 liters per year, which is low compared to other Asian countries. The per capita consumption of beer was 1.5 liters, against a global average of 27 liters in 2012, D&B added.

Indian-made foreign liquor (IMFL) is the largest segment, followed by Indian-made Indian liquor (IMIL or Country Liquor). Country liquor is made by the fermentation and rectification of molasses, a by-product of sugar. In terms of country of origin, Domestic 98% of the liquor the Indians consume is made in India. ASSOCHAM expects domestic alcohol consumption to grow to Consumption 20,000 million liters by the end of 2015, from 7,000 million liters in 2012. Products with relatively low alcoholic content such as beer and wine face growing demand, in urban areas in particular, FRPT said in a report in Aug 2013.

Some 52% of the alcohol produced in India is for making beverages, while 48% is used for industrial purposes, the All India Distillers’ Association (AIDA) said. Alcoholic beverages are the second-largest contributor to the state exchequer. Liquor is Regulations generally sold in specialty shops which are subject to licensing by state governments. State authorities also set the price at which liquor is sold to retailers. According to industry sources, up to 20% of the liquor consumed annually has evaded taxation. Alcohol and cigarette ads are banned, so producers opt for surrogate advertising to make their names visible.

Despite being the world’s largest whiskey market, only 30% of men and 3% of women have at least one drink a year, a study by the India Centre for Alcohol Studies (INCAS), a government research body, showed. However, urbanization, favorable Changing demographics, more financially independent women and the western cultural influence have slowly been changing the Perception perception on drinking in India. Super- and hypermarkets in some states have started selling beer and wine, products cater specifically to female consumers, there is a rise in the cocktail culture and women drinkers are more widely accepted, Reuters reported on Mar 20, 2013.

Alcoholic Beverage Market Break-Down, 2011 Alcoholic Beverage Consumption by Type

Alcoholic Beverage Consumption by Gin 1.50% Rum 15% Country of Origin Vodka 0.50% IMIL Beer 34.6% 30.3% Total alcoholic beverage Indian market 2011: 728 million Brandy 18% 98% cases (1 case = 9 liters)

Total IMFL Market 2011: Wine 1.50% 254 million cases

Total Wine Market 2011: 1.5 million cases Others 8.50% Wine Imported Whiskey 55% IMFL 0.2% 2% 34.9% Data published by source in Mar 2013 Data published by source in Mar 2013

IMFL Company Market Shares, Apr 2012 Wine Consumption By Segments, 2011

Radico Khaitan Jagatjit 9% White Wine 40% 12% Tilak Nagar 4%

Mohan Meakins 9% Sparkling Wine 13%

Others 13%

Rose Wine 2% United Spirits 53% Red Wine 45% Data published by source in Aug 2013

Whiskey (l) and Beer (r) Consumption by Region Market Shares of Beer Manufacturers, Apr 2012

West Beer Consumption by Type SAB 25% West Miller 37% South 49% 31% Mohan East Meakins 20% South 24% 6%

Others North 13% Strong 31% East Standard Beer Beer 2% North United Breweries 45% 54% Data published by source in Mar 2013 12% 50%

Cigarette Market Shares by Retail Value, 2011 Cigarette Market by Region (l) and Brand (r) (publ. Mar 2013)

India Kings South Rothma 5% Godfrey Phillips West 42% ns 15% Others India Ltd. 14.4% 18% 35%

VST Industries Ltd. 7.6% ITC Ltd. 75.0% Golden Tobacco Ltd. 0.5% Others 2.5% East 20% North 20% Classic 45%

Source: CIER, EMIS, Passport by Euromonitor International; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 30 - Soft Drink and Bottled Water Highlights

Sales of carbonated drinks in India are estimated at some INR 77.5 bn in 2011 and 88.3 bn in 2012, figures by BMI showed. Juice drink sales were estimated at some INR 89.8 bn and 103.4 bn in 2011 and 2012, respectively. Bottled water sales Overview jumped some 30% in value in 2011 to INR 129 bn, Euromonitor International said in a Jul 2012 report. In terms of volume, sales totaled slightly below 6.0 billion liters in 2011, up from some 5.0 billion liters sold in the previous year.

Per capita consumption of soft drinks in India is at about 5 litres per year, implying plenty of scope for growth, BMI reported. Middle and lower-income groups account for some 84% of the total consumption of soft drinks in the country, CIER said. Consumption According to a study by the National Council of Applied Economic Research (NCAER), quoted by CIER in Mar 2013, some 91% of soft drinks sales target the middle class, comprising lower, middle and upper income segments. According to CIER, per capita consumption of fruit juices is some 0.2 liters and comes almost exclusively from urban areas.

Some 80% of soft drinks are sold in returnable bottles, resulting in a floating stock of some 1,000 million bottles worth some INR 6.0 bn. Soft drinks sold in PET bottles account for some 12% of the market, CIER said. According to the same source, Domestic Sales some 70% of the soft and carbonated drinks are consumed by urban Indians and the remaining 30% - by people in the rural parts of the country. The cola and non-cola segments claim some 62% and 38% of sales. The non-cola segment includes soda and drinks with lime, orange and mango flavors.

Indian soft drink producers mainly rely on product innovation and marketing to boost sales. Efforts are made to offer more health and functional drinks to the increasingly health- and value-conscious Indian consumers, BMI reported. In the bottled Trends water segment, sales are being pushed up by rising safety and hygiene awareness following incidents of waterborne diseases, as well as by lifestyle changes, including higher health-consciousness. Bottled water sub-segments include 20-liter containers, popular in homes and offices, 500-ml bottles carried in backpacks and purses, as well as flavored and spring water.

Fruit Beverages, Market Share by Type (published Mar 2012) Market Share of Soft Drink Brands, 2011

7Up (Pepsi) 5.50% Pulp/Concentrate Coca-Cola 8.90% 40%

Sprite (Coca-Cola) 15.30% Others 39.10%

Ready-to-Serve (RTS) Beverages Thums Up (Coca- 47% Fruit Juices 6% Cola) 15.60%

Squashes 7% Pepsi 15.60%

Market Share of Health Drinks, Sales Value, 2012 Company Market Shares (Brand Names), Bottled Water, 2011

Boost 14% Complan 15% PepsiCo India Coca-Cola India Holdings Pvt. Ltd. Pvt. Ltd. (Kinley) (Aquafina) 14.90% 11.30%

Dhariwal Industries Ltd. (Oxyrich) 8.30%

Bournvita 15% Parle Agro Pvt. Horlicks 47% Ltd. (Bailley) 1.50% Mother Dairy Parle Bisleri Ltd. Calcutta (Mother Others 9% (Bisleri) 42.80% Dairy) 0.40% Others 20.70%

Source: CIER; Business Standard; Passport by Euromonitor International; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 32 - III. Personal Hygiene and Care Detergents

Per capita annual consumption of toothpaste in India totals some 130 gr, against more than 300 gr in Europe, 255 gr in Malaysia and 304 gr in China, Gyan Research and Analytics said in May 2013, quoting figures by the World Dental Federation. Oral Care The penetration of oral care products in rural India is at about 1/3 of that in the urban parts of the country. With a share of 75%, toothpaste was the largest contributing segment in oral care in FY 2012, followed by toothbrush at 12%, tooth powder at 11% and mouthwash at 2%, respectively.

India’s soap market is dominated by Hindustan Unilever (HUL) with its two major bradns – Lux, targeting women, and Lifebuoy, targeting men and families. Shower gels, which are gaining popularity, are dominated by HUL and Colgate Palmolive, but a Bath & Shower number of global and domestic players are present on the market as well. Counterfeit soap manufacturers sell products of dubious origin to illiterate and unaware customers, threatening both people’s health and the originals’ brand equity, Gyan commented.

Deodorants have entered India as male grooming products, but rising demand from women has diversified the product range available. Women’s deodorants accounted for 40% of the market in FY 2012, Gyan said. The leading brand in the segment is Antiperspirants AXE from HUL. Market players include Wipro, Yardley, Vini Group, Fogg and 18. Almost half of the annual deodorant sales and Deodorants takes place between Mar and Sept, which is the hottest period in India, Feedback Analysis said in a Jul 2013 report. The coastal cities account for the highest sales of deodorants, Feedback added.

Hospitals and other institutions accounted for more than half of the handwash product sales in FY 2012, Gyan Research said. Rising hygiene awareness has helped make handwash an increasingly popular product for household consumption as well. Handwash The market is dominated by brands Dettol of Reckitt Benckiser and Lifebuoy of HUL, with shares of 53% and 30%, respectively. Popular brands also include Santoor, Palmolive and Fem.

Oral Care Market in India Bath & Shower Market

1,200 12% 132 130 2.50% 1,019 2.36% 1,000 928 10% 130 795 859 9.81% 127 2.00% 736 8.05% 128 800 8.02% 8.03% 8% 1.64% 1.60% 126 125 1.50% 600 6% 124 124 1.00% 400 4% 122 0.81% 122 0.50% 200 2% 120 0 0% 118 0.00% FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Oral Care Market in India, USD mn % y/y change Bath & Shower Market in India, USD mn % y/y change

Antiperspirant and Deodorant Market in India Handwash Market in India

300 40% 60 55 58.75% 240 35% 250 33.70% 33.30% 58.70% 58.70% 50 205 30% 58.65% 200 58.62% 164 25.00% 25% 40 34.7 58.60% 123 58.55% 150 20% 30 17.07% 21.9 58.50% 92 15% 58.50% 100 20 13.8 58.45% 58.45% 10% 8.7 58.40% 50 10 5% 58.35% 0 0% 0 58.30% FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Anti-Perspirant and Deodorant Market in India, USD mn % y/y change Handwash Market in India, USD mn % y/y change

Oral Care Forecast Bath & Shower Market Forecast

2,500 14.05% 14.06% 250 229 12.60% 14.04% 12.41% 204 12.40% 14.03% 1,962 2,000 14.02% 200 182 12.25% 1,721 163 12.20% 1,324 1,510 14% 14.00% 145 12.09% 1,500 150 12.00% 1,162 13.98% 13.97% 11.80% 13.96% 11.66% 1,000 100 11.60% 13.94% 13.94% 11.54% 11.40% 500 13.92% 50 13.90% 11.20% 0 13.88% 0 11.00% FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F

Oral Care Forecast, USD mn % y/y change Bath & Shower Forecast, USD mn % y/y change

Anti-Perspirant and Deodorant Forecast Handwash Market Forecast

700 20.20% 250 31.50% 597 20.14% 20.15% 204 600 30.90% 31.00% 498 200 20.10% 121 500 157 30.50% 415 20.05% 346 150 30.12% 400 20.00% 20.00% 20.00% 29.94% 30.00% 288 93 29.75% 19.95% 300 19.94% 100 29.50% 19.90% 72 29.17% 200 19.88% 29.00% 19.85% 50 100 19.80% 28.50% 0 19.75% 0 28.00% FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F

Anti-Perspirant and Deodorant Forecast, USD mn % y/y change Handwash Market Forecast, USD mn % y/y change

The Indian skincare market comprised some 980 brands in FY 2013, which made it the largest personal care segment, Feedback Analysis said in a report. The premium skin-care market has been growing faster than the overall market. Skincare Skincare demand in rural areas totaled some USD 172.6 mn in FY 2013, out of a total market size of USD 837 mn in the year. Hindustan Unilever (HUL) exports its locally produced Lakme range of products to the Middle East and South-East Asia.

Some 92% of color cosmetics were sold in stores, and 8% was contributed by direct marketing in FY 2013, Feedback Analysis said. Company using direct (network) marketing chains are Amway, Oriflame, Avon and Modicare. India imports most of the Color color cosmetics sold domestically from Thailand, the USA, France, China and Germany. Hindustan Unilever (HUL) and Modi Cosmetics Revlon are among the largest exporters. Export destinations include the UAE, USA, Nepal and Saudi Arabia. Key factors for growth include low penetration, increasing awareness and the changing lifestyle and spending habits of Indians.

Natural cosmetics are the fastest developing cosmetic segment in India, Feedback Analysis said in 2013, quoting the chamber of commerce association ASSOCHAM. The European Union (EU) is the largest market for Indian Ayurvedic products and Natural companies Shahnaz Hussain and the Himalaya Drug Company are India’s largest natural cosmetic exporters. The raw Cosmetics materials and manufacturing facilities for natural cosmetics are located in rural India which promotes employment and makes the government encourages investments in the sector.

The organized sector, comprising some 30 players, accounts for some 70% of the fragrance market in India, Feedback Analysis said in a report in Jul 2013. There are between 180 and 200 in the unorganized segment, the paper added. Men’s and Fragrance women’s fragrances account for 60% and 40% of the market, respectively. Teenagers are a significant customer group in both male and female categories, as an average urban teenager spends between USD 10-40 on fragrance and deodorants. More than half of the perfumes sold in a year are purchased as gifts.

Skincare Market Trend All India Skincare Market Size

900 837 12% 800 747 Production (+) Exports (-) Imports (+) Domestic Market 532 667 12.05% 12% 700 59612.03% 600 12% 11.99% 12% 500 12% 400 FY 2013 757 60 140 837 300 11.91% 12% 200 12% 100 FY 2011 622 45 90 667 0 12% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 All figures are in USD mn Skincare Market, USD mn % y/y change

Skincare Market Break-Down by Segments, FY 2013 Skincare Future Market Size

1,600 1,475 12.15% 1,317 1,400 12.10% Moisturizers 22% 1,175 12.09% 1,200 12.05% 1,050 12.05% 1,000 937 Others 33% 837 12.01% 12.00% 12.00% 800 11.95% 11.95% 600 400 11.90% 11.90% 200 11.85% 0 11.80% Fairness (Illuminating, FY 2013 FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F Whitening) Creams 45% Skincare Future Market Size, USD mn % y/y change

Color Cosmetics Market Trend All India Color Cosmetics Market Size

700 35% 32% 606 Production (+) Exports (-) Imports (+) Domestic Market 600 522 30% 500 340 450 25% 400 20% 300 16.00% 16.09% 15% FY 2013 566 60 100 606 200 10% 100 5% FY 2011 410 40 80 450 0 0% FY 2010 FY 2011 FY 2012 FY 2013 All figures are in USD mn Color Cosmetics Market, USD mn % y/y change

Color Cosmetics Market Break-Down by Segments, FY 2013 Color Cosmetics Future Market Size

1,400 1,270 16.15% Lips 181.8 1,200 16.09% 1,09616.10% 16.10% 944 16.05% Hindustan Unilever was the largest 30% Face 109.1 1,000 18% 814 16.00% player in Color Cosmetics in FY 800 702 15.97% 2013 with a market share of 29%. 606 15.95% 15.95% 600 15.90% Penetration of Color Cosmetics in 15.88% 15.84% 15.85% Urban Areas – 70% (FY 2013) 12% Eyes 72.7 400 Rural Areas – 40% (FY 2013) 15.80% 200 15.75% 40% 0 15.70% Nails 242.4 FY 2013 FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F Figures are in USD mn Color Cosmetics Future Market Size, USD mn % y/y change

Source: Feedback Business Consulting Services Pvt. Ltd. Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 39 - Natural Cosmetics and Fragrance

Natural Cosmetics All India Market Size Natural Cosmetics Future Market Size

2,500 20% 2,160 18.0% 18% 1,930 Production (+) Exports (-) Domestic Market 2,000 16% 1,540 1,720 1,370 14% 12.4% 12.2% 1,500 1,225 11.8% 11.7% 11.9% 12% 10% FY 2013 1,407 182 1,225 1,000 8% 6% 500 4% 2% FY 2011 1,000 120 880 0 0% FY 2013 FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F All figures are in USD mn Natural Cosmetics Future Market Size, USD mn % y/y change

Fragrance All India Market Size Fragrance Future Market Size

1,600 1,460 45% 41.2% 1,400 40% Production (+) Exports (-) Imports (+) Domestic Market 36.0% 37.5% 1,200 1,120 35% 30.3% 30.2% 30.4% 30% 1,000 860 25% 800 660 FY 2013 280 140 200 340 20% 600 480 340 15% 400 10% FY 2011 142 55 75 162 200 5% 0 0% FY 2013 FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F All figures are in USD mn Fragrance Future Market Size, USD mn % y/y change

Source: Feedback Business Consulting Services Pvt. Ltd. Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 40 - Dishwashing and Laundry Care (graphs show Indian fiscal years)

Market Shares by Retail Value, Dishwashing Products, 2012 Company Market Shares by Retail Value, Laundry Care, 2012

Jyothy Procter&Gamble Nirma 8.4% Laboratories Home Products Jyothy 16.4% 11.4% Laboratories 4.5% Rohit Surfactants 6.1% Fena 2.6% Rohit Surfactants Ecof Industries 16.6% Reckitt Benckiser 4.4% India 1.8% Pitambari Products 3.0% Fena 3.1% Others 16.4% Nirma 2.7%

Others 4.0% Hindustan Unilever 60.4% Hindustan Unilever 38.3%

Dishwashing Product Highlights Laundry Care Highlights

. The market for dishwashing detergents totaled INR 18 bn in FY 2012 . The market for laundry care products totaled INR 136 bn in FY 2012 and is expected to reach INR 21 bn by FY 2017, Euromonitor said in and is expected to reach INR 151 bn by FY 2017, Euromonitor said in a report in Jul 2013. a report in Jul 2013.

. Consumers have noticeably been shifting from dishwashing bars to . Fabric conditioners are also gaining popularity. Manufacturers are liquid dishwashing products. focusing on product innovation to keep brand loyalty and demand high. . Rising demand and inflation have kept the average retail price of dishwashing detergents rising, Euromonitor commented. . The average laundry detergent prices have gradually been rising, Euromonitor commented.

Indian Domestic Apparel Consumption, USD bn Branded/Unbranded Apparel Market

140 124 16% Share of Modern Retail in Total Apparel Market in 31 14.8% 30 120 14.3% 14% 2012 – 20% 12.9% 2017 F – 28.6% (Source: Technopak Analysis) 12% 100 20 10% 18 80 8.0% 8% 11 60 10 40 6% 5 31 35 4 40 25 27 4% 20 2% Branded, USD bn Unbranded, USD bn Branded, USD bn Unbranded, USD bn 0 0% 2007 2008 2009 2010 2011 2020 F 2011 2020 F

Indian Domestic Apparel Consumption, USD bn % y/y change Men Women

Apparel Market Size of Major Economies, USD bn

450 411 Global Apparel Market Size 2011 – USD 1,075 bn 35% 366 400 350 33% Global Apparel Market Size 2020 F – USD 1,670 bn 30% 350 316 25% 300 21% 250 225 20% 200 150 14% 15% 150 127 124 110 100 10% 10% 87 75 73 100 7% 40 37 45 34 50 4% 4% 25 20 31 5% 3% 2% 2% 0 0% EU-27 China United States Japan India Russia Brazil Canada Australia Others

Apparel Market Size in 2011, USD bn Apparel Market Size Forecast, 2020, USD bn % of Global Apparel Market in 2011

Source: Wazir Management Consultants, Sep 2012, Technopak analysis; IMAGES Business of Fashion; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 43 - Apparel Market (cont’d)

Footwear and Accessories Market, 2012, USD bn Brand Mix in Modern Apparel Retail, 2012

6 Footwear and Accessories Market by Retail Format, 2012 International Brands 18% International Modern Brands 25% Retail 27%

2 2012 2017 F

Footwear and Accessories Market, Domestic Domestic 2012, USD bn Brands 82% Brands 75%

Total Market Modern Retail Traditional Retail 73%

Men's and Womenswear Market Forecast Boy's and Girlswear Market Forecast

1,753.0 2021 Proj. 519.2 1,828.0 2021 Proj. 522.3

1,114.5 304.3 2016 Proj. 2016 Proj. 1,203.5 317.7

720.4 178.9 2011 Est. 2011 Est. 809.4 194.3

Womenswear Market Size Projections, INR bn Girlswear Market Size Projections, INR bn Menswear Market Size Projections, INR bn Boyswear Market Size Projections, INR bn

Source: Technopak Analysis; IMAGES Business of Fashion; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 44 - Athletic Apparel and Footwear (graphs show Indian fiscal years)

Asia-Pacific Athletic Apparel Market by Geography, % Asia-Pacific Athletic Footwear Market by Geography, %

120% 120%

100% 19.6% 20.0% 18.8% 18.8% 21.6% 100% 21.9% 20.9% 19.8% 17.9% Others 26.2% Others 2.2% 2.2% 2.6% 3.0% 3.2% 3.1% 3.0% 3.4% 3.8% 80% 80% 4.0% 5.8% 5.9% 4.8% 4.2% 3.7% 5.2% 4.4% India 6.5% 6.5% 3.7% India 21.7% 60% 32.6% 29.0% 60% 26.4% 24.2% 19.1% 39.7% 36.3% 28.8% 43.9% Australia Australia 40% 40%

Japan 47.3% 49.7% 46.9% Japan 20% 37.4% 41.4% 42.5% 20% 39.7% 43.2% 28.5% 32.3% 0% China 0% China 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

India Athletic Apparel and Footwear Market Size and Forecast Athletic Apparel and Footwear Market in India

Puma 1,568.00 Organized Nike 20% 12.2% 1,327.20 14.5%

1,120.80 Fila 915 Adidas 5.0%

758.8 21.1% 1,336.80 Market 618.5

501 1,138.60

960.1 Shares of 401.5 822 2012 Major

682.7 Players, 2011 558.2 452 361.4 Others 2010 2011 2012 2013 F 2014 F 2015 F 2016 F 2017 F 12.6% Unorganized Athletic Apparel, USD mn Athletic Footwear, USD mn 80% Reebok 34.6%

India Athletic Apparel and Footwear Market by Gender, 2012 Worldwear Market in India, USD bn

Women Women Total 2017: USD 39 bn 29.5% 28.4% 2017 F 25 7 7 Kids 17.9%

Total 2012: USD 25 bn Apparel Footwear 2012 17 4 4 Kids 14.5% Men Men 57.1% 52.6% Walking and Running Footwear 2012: 45.7%; Men's, USD bn Women's, USD bn Kids', USD bn Lifestyle Footwear 2012: 17.6% Penetration of Worldwear in India, 2012 Denim Market in India, USD mn

Other Other Apparel Worldwear Total 2017: USD 2,530 mn 40% 52% 2017 F 48% 12% 19% 21%

Total 2012: USD 1,290 mn

2012 58% 11% 15% 16%

Worldwear Casualwear 60% 48% Unbranded Mass Market Mid-Premium Premium/Luxury

Source: Ken Research; Technopak Analysis; IMAGES Business of Fashion; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 46 - V. Consumer Durables

Strengths Opportunities

The strengths of the Indian consumer electronics and home appliances Rural development will secure growth at entry level and the rising sector include low level of penetration of appliances, a vast unsaturated numbers of the middle class will encourage development in the high- rural market, a large share of young population with access to rising end segment. The aggressive pricing policies and the easy finance disposable incomes (13 million young people join the workforce every options offered by manufacturers boost sales among price-sensitive year), urbanization, the rise in the number of double-income families, consumers, while media and advertising provide increasing the strengthening of the middle class and the increasing demand for consumer awareness. modern housing and appliances.

SWOT

Analysis

Most of the Indian-made consumer durables are for the domestic market and thus are not eligible for tax refunds. As a result, the heavy The intense competition among players make them incur huge branding multiple-level taxation in the country is a major factor stalling innovation and advertising expenses which lower their profit margins. In addition, and growth. As of mid-Sep 2013, the Goods and Services Tax (GST) the rising of raw material prices results in higher production costs and has not been implemented, despite having been in the works since the rapid changes in technologies make product lifecycle short. The 2009. Other weaknesses include rising inflation; seasonal demand and entry of low-priced products by private labels of organized retailers is uncertain power supply esp. in rural India; underdeveloped organized likely to lower market shares of both domestic manufacturers and global distribution networks and slow and uncertain transportation companies. infrastructure. Weaknesses Threats…

Consumer Durables Market Size Market Segmentation - Consumer Durables, FY 2012

600 520 13% Multinational 12.29% Flat Panel TV Companies 500 463.1 12% Washing 16% (MNCs) 65% 375 415.3 Machines 11.51% 12% 21% 400 340 11% 300 10.75% 11% 200 10.29% 10%

100 10% AC 15% 0 9% FY 2011 FY 2012 FY 2013 Est. FY 2014 F FY 2015 F Domestic Refrigerators Companies Consumer Durables Market Size, INR bn % y/y change 42% Microwave 35% 6% Data Published Mar 2012

Penetration of Consumer Durables in India Consumer Durable Sales

25% 120% Air-Conditioner 3.80% 17% 100% Washing Machine 13% 4% 80% Air Cooler 17% 48% Low-Value Products 71% 67% Refrigerator 33% 60% 81% 78% TV Refrigerator Air Conditioner TV 77% 40% 52% High-Value Penetration of Consumer Durables in Penetration of Consumer Durables in 20% 29% 33% Products Urban India (data published Dec 2012) Rural India 19% 22% Source: capitaline.com 0% Source: Netscribes report, Jan 2012 Data publ. Dec 2012 FY 2009 FY 2010 FY 2011 FY 2012 FY 2017 F

Source: Netscribes; ASSOCHAM; capitaline.com; Corporate Catalyst India (CCI); CRISIL Opinion Sept 2012; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 49 - White Goods (graphs show Indian fiscal years)

Air Conditioner Sales in India Washing Machine Market in India

3.6 Figures for 2017 are approximate Videocon Industries 4.00 40% Samsung 13.9% 2.8 3.5 158 3.50 India Whirlpool 28.60% 3.1 30% 3.00 27.30% Electronics of India 20% 24.8% 11.90% 2.50 2.2 2.00 12.90% 10% 73 1.50 2012 0% 1.00 -10% 6 10.4 0.50 -13.90% 0.00 -20% LG Washing Machine Washing Machine Electronics Others 2008 2009 2010 2011 2012 Proj. Sales, mn units Sales, INR bn India 24.8% 26.20% Air Conditioner Sales in India, million units % y/y change 2012 2017

Refrigerator Market in India Dishwasher Market in India

Company Market Shares, 2011 82,000 Figures for 2017 169 are approximate LG Electronics IFB Industries India 10.80% Others 51.5% 47%

Godrej 97.69 18% 32,000 2012 Electrolux 8.70% 886 1,800 Others Dishwasher Dishwasher 17.90% BSH Bosch & 2010 2014 F Sales, units Sales, INR mn LG 35% Siemens Samsung India Electronics Hausgeraete Refrigerator Market in India, INR bn 2012 2017 2.50% 8.60%

Source: capitaline.com; Euromonitor International; Netscribes Jan 2013; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 50 - Brown Goods (graphs show Indian fiscal years)

Microwave Oven Market Size Iron Market in India

Figures for 2017 Inalsa Kitchen Appliances 43.6 are approximate 10,400 Crompton Appliances 6.40% Greaves India 6.00% 32.6 7,800 9.90% Ajanta 5.20% 24.5 Usha Intl 18.8 10.60% 14.6 11.5 2012 4.4 1.5 1.7 2.1 2.6 3.4 12 16.8 Philips Others 2011 2012 2013 Est. 2014 F 2015 F 2016 F Electronics 23.00% Iron Sales, mn units Value of Iron Sales, India INR mn 13.30% Bajaj Electricals Microwave Oven Market Volume, mn units Microwave Oven Market Value, INR bn 2012 2017 25.60%

Vacuum Cleaner Market in India Food Preparation Appliance Market in India

Figures for 2017 Figures for 2017 Preethi 600.0 are approximate LG Electronics Philips Electronics are approximate 17.0 Industries Maharaja India 5.5% India 2.4% 7.40% Sujata 439.0 12.0 Appliances Others 8.2% Enterprise 18.80% 9.2 5.70% 6.0

2012 Inalsa 2012 Appliances 21.0 27.0 4.5% Food Preparation Value of Food Philips Vacuum Cleaner Value of Vacuum Appliance Sales, mn Preparation Appliance Electronics Usha Sales, thou units Cleaner Sales, INR Eureka units Sales, INR bn India International bn Forbes 13.10% 3.2% 2012 2017 Bajaj Electricals Ltd. 15.7% 2012 2017 73.30%

Personal Computer Market in India Mobile Handset Market in India

Unit Shipments Jan-Apr 2013, millions % y/y change 6.71 6.84 6.77 6.03 6.16 5.49 5.53 5.75 Mobile Handsets 73.5 11.10% 5.28 Featurephones 94.1 2.40% 4.40

4.02

Smartphones 9.4 167.30% 3.28 2.51 Mobile Handset Leading Players Jan-Apr 2013 1.52 Market Share Nokia 20.30% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Samsung 14.20% Desktop Sales, mn units Notebook Sales, mn units Monitor Sales, mn units Micromax 8.90%

TV Market in India Digital Camera Market in India

TV and Broadcasting in India, 2012 Units 104.1

TV Receivers 175 million 72.9

TV Households 130 million 51 35.7 25 TV Household Penetrartion 52% 17.5 7.4 10 2.5 3.4 4.1 5.5 Cable TV Households 95 million FY 2010 FY 2011 FY 2012 Est. FY 2013 F FY 2014 F FY 2015 F Source: BuddeComm estimates based of ITU, TRAI and industry data Digital Camera Sales, mn units Digital Camera Sales, INR bn

Source: CEIC; CyberMedia Research (CMR); BuddeComm; Netscribes Jan 2012; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 52 - Consumer Durable Financing in India

Consumer Durable Loans Finance Penetration for Consumer Durables

15% 124

10%

FY 2012 FY 2017 FY 2012 FY 2017

Consumer Durable Loans, INR bn Finance Penetration for Consumer Durables, %

Consumer Durable Loans by Product, FY 2012 Consumer Durable Financing by Regions, FY 2012

Other Regions Split Air- Refrigerator 17% 40% Conditioner 20%

High-value products Washing Machine 5% account for 2/3 of the total consumer durable CRT TV 1% financing in the Southern and Western regions.

Others 11% Panel TV 46% Southern, Western Regions 60%

Indian Drug Retail Market OTC Market in India

1,400 19% 268.1 1,275.10 300 16% 1,071.50 15.21% 1,200 19% 19% 232.7 15% 901.2 18.90% 250 1,000 19% 203.3 14.46% 15% 18.70% 200 178.6 14% 759.2 157.8 13.83% 800 640.7 19% 140 14% 18.50% 150 600 542 18% 13.18% 13% 100 12.71% 13% 400 18.21% 18% 12% 50 200 18% 12% 0 18% 0 11% FY 2011 FY 2012 FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2012 FY 2013 FY 2014 F FY 2015 F FY 2016 F FY 2017 F Est. Est.

Indian Drug Retail Market, INR bn % y/y change OTC Market in India, Inr bn % y/y change

Drug Retail Market Segmentation OTC and Prescription Drug Sales Segmentation, 2012

120%

100% Prescription Drugs 80% 85%

60% 85% 93% 92% 90% 89% 87% Unorganized, % 40% Organized, %

20% 10% 11% 13% 15% 0% 7% 8% FY 2011 FY 2012 FY 2013 FFY 2014 FFY 2015 FFY 2016 F OTC Drugs 15% Est.

Total Vehicle Sales Annual Domestic Vehicle Sales (Excluding Exports)

The difference between annual values in the left and right graph represent the respective annual vehicle exports. 17,376.62

20,286.68 Two- Wheeler 15,481.38 Sales, Domestic 17,801.34 thousands Two- Wheeler Sales, Three- 12,295.40 thousands Wheeler 14,099.82 Sales, Domestic thousands Three- 10,123.99 9,724.24 13,435.77 9,654.44 Wheeler 11,254.84 15,382.97 11,135.52 10,892.77 11,768.91 Sales, Commercial 13,300.53 thousands Vehicle Sales, thousands 9,370.95 Domestic 10,511.01 Commercial 7,872.33 Vehicle 8,068.99 7,249.28 7,437.62 8,491.98 8,441.79 795.99 876.13 Sales, Passenger thousands 613.61 Vehicle 513.25 547.81 506.01 497.79 758.95 902.20 Sales, 526.02 577.73 thousands Domestic 440.39 684.91 809.53 Passenger 426.82 403.91 364.78 349.73 532.72 Vehicle 549.49 490.49 517.30 3,125.39 467.77 384.19 Sales, 2,397.48 2,945.87 2,501.54 2,618.07 1,768.28 1,888.43 1,951.33 thousands 1,578.43 1,379.98 1,549.88 1,552.70 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012

Indian Luxury Goods Market Luxury Goods Market of Selected Countries

South SouthEast 6.8 Brazil India 5.8 Africa Asia*** 5 4.3 Population 2011 190 million 1.2 billion 51 million 560 million 3.6 3 % of World Population 2.80% 17.50% 0.70% 8.10%

UHNWI* 2011 4,600 7,700 800 4,300 2010 2011 2012 Est. 2013 F 2014 F 2015 F HNWI** 2011 165,000 125,000 ~70,000 ~200,000 Indian Luxury Goods Market, USD bn

Luxury Goods Market 2012 EUR 2.7 bn EUR 1.0 bn EUR 0.8 bn EUR 4.8 bn Luxury Goods Market in India by Segments, 2011 Est

Luxury Services % of Global Market 1.30% 0.50% 0.40% 2.30% 22%

Expected Growth over next 15-25% 20-30% 20-30% 15-25% 5 years

UHNWI is Ultra-High Net Worth Individuals Luxury Products Luxury Assets HNWI is High Net Worth Individuals 65% 13%

SEA includes all APAC countries, except for Greater China, South Korea, India and Japan.

Source: Technopak report, Sept 2011; Bain & Company (Fondazione Altagamma) 2012; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 57 - VII. E-Commerce (B2C)

E-commerce in India has evolved noticeably over the past years in terms of market turnover, usage patterns and the range of Growth services offered. The total e-commerce business in the country, including retail and other products and services such as travel and financial services, was estimated at USD 10 billion in 2012 and is seen to grow by some 33% by end-2013, data by Technopak and the Internet and Mobile Association of India (IMAI) showed.

In Mar 2013, India reported the world’s third-largest Internet population, jumping 31% y/y to 73.9 million people, comScore said Users in a report. About ¾ of India’s online population was aged under 35 as of Jun 2013. Men generally surf more and longer than women, but women aged 35-44 are among the heaviest Internet users. Some 60% of Indian web users visit e-tailing sites, but the time spent on online shopping is low compared to other countries.

Factors encouraging the development of e-commerce and e-tailing in India include rising discretionary spending, a rapidly Drivers growing middle class with aspirational consumption patterns, a growing online consumer base, which is estimated to comprise 180 million broadband users by 2020, and a burgeoning class of mobile internet users. Cost saving, convenience and the 24/7 availability of online products and services are also beneficial to their future growth.

E-tailing, which is selling retail goods on the Internet and is a segment of e-commerce, is set to touch USD 76 bn by 2021 in Outlook India, The Times of India reported in Jan 2013, quoting a study by Technopak. The Internet and Mobile Association of India (IMAI) expects the consumer potential of e-commerce to reach 228.6 million households in FY 2025, from 146.2 million households in FY 2010. E-tailing is set to capture 5.3% of the total retail market by 2021, from 0.1% in 2012, Technopak added.

Companies wishing to sell to consumers online should strive to develop innovative services and delivery models and set up high standards of quality and safety for delivery, returns and payments, IMAI commented. The government should work to Challenges improve infrastructure, raise broadband connectivity, carry out fiscal and regulatory reforms and provide digital literacy training for low-income groups.

Digital Commerce Trend Components of Digital Commerce Market in 2012

700 629.67 37% 37% 600 E-Tailing 16% 473.49 36% 500 351.42 35% 35% 400 34% 34% 300 262.65 192.40 33% 33% 200 Financial Services 6% 100 32% Online Travel 71% 0 31% Classifieds 5% as of Dec 2009 as of Dec 2010 as of Dec 2011 as of Dec 2012 as of Dec 2013, F Other Online Services 2% Digital Commerce Turnover, INR bn y/y growth, %

Penetration of Online Retail, as of Jun 2013 India's Online Population as of Mar 2013

100% 200 84.1% 120% 77.3% Total 604 Million Total 644 Million Rest of 80% 74.4% 168.2 62.7% 150 100% APAC 60.3% 13.9% 13.5% 60% 9.4% 9.6% Southeast 100 80% Asia 40% 84.3 12.2% 11.4% 60% 9.3% 11.5% Japan 58.5 50 20% 36.9 28.4 40% India 0% 0 55.2% 54.0% Worldwide China India Russia Brazil 20% China 0% Penetration of Online Retail in India and the World, as of Jun 2013 As of Mar 2012 As of Mar 2013 Average Time Spent on Online Retail Activities, as of Jun 2013

Source: informationweek.in; Internet and Mobile Association of India (IMAI); comScore Media Metrix, Mar 2012 - Mar 2013, Jun 2013; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 60 - E-Tailing Data

E-Tailing Penetration by Segments, as of Jun 2013 Three-Month Growth in Online Retail, as of Jun 2013

Apparel 21% Healthcare 17% Computer Software 16%

Comparison Shopping 15% Fragrance/Cosmetics 18%

Consumer Electronics 13% Jewelry/Luxury Goods/Accessories 25% Computer Hardware 11% Tickets 26% Healthcare 8%

Retail - Movies 7% Retal - Food 80%

Penetration of Retail Categories in Digital Commerce, %, as of Jun 2013 Three-Month Growth in Online Retail, %, as of Jun 2013

Unique Visitor Data for Selected Domestic E-Tailers, as of Jun 2013

13,173 14,000 12,649 18 12,425 11,924 12,000 16.2 16 14 10,000 8,447 8,109 12 8,000 6,092 10 6,000 7.6 7.8 8 6 6.3 6 4,000 4 2,000 3.1 +156% +77% +124% +31% +10% +119% 1.9 +151% 2 0 0 myntra.com flipkart.com jabong.com Amazon Sites snapdeal.com homeshop18.com Indiatimes Shopping

Unique Visitors, thou persons Minutes per Visitor y/y Increase in Unique Visitors

The E-Commerce Ecosystem is Intricately Interconnected

Supply chain: Broadband and Warehousing and Networking Infrastructure Delivery Connectivity Infrastructure Infrastructure

BUSINESS CONSUMER TRANSACTION Products/Services Demand/Ability to Pay

Regulatory Payments Infrastructure Infrastructure State/Local Taxes, Sector Digital Payments and Regulations Gateways

Comments Challenges the Indian e-commerce has to overcome to boost its share on the retail market include: . Connectivity: low and costly broadband penetration, low computer ownership, low digital literacy; . Payments: poor payment gateway infrastructure, low levels of debit/credit card penetration, low levels of financial inclusion; . Delivery: poorly developed supply chain sector, inefficient postal system; . Regulatory: taxes on trade and commerce are complex and vary across states, which makes business operations of companies with innovative models very difficult.

Top M&A Deals in the Indian Retail Sector in the Past Year

Deal Value Date Target Company Deal Type Buyer Seller Stake % USD (mn) Minority Stake Purchase; Jul 10, 2013 Flipkart Online Services Accel Partners,Iconiq Capital, Naspers Ltd.,Tiger Global, N/A 200.00 N/A PE Entry; VC Entry

Bessemer Venture Partners, IndoUS Venture Partners, Intel Capital, Nexus Minority Stake Purchase; Jun 7, 2013 Snapdeal.com Venture Partners, Recruit Holdings Co. Ltd., Saama Capital, eBay China, ruNet N/A 140 N/A PE Entry; VC Entry Holdings

Aug 13, 2013 Snapdeal.com Minority Stake Purchase Softbank Corp N/A 75 N/A Woolworth's Wholesale India Sep 27, 2012 Acquisition Infiniti Retail Ltd. Woolworths Ltd. 37.55 100% Pvt. Ltd.

Jan 22, 2013 Pantaloon Retail India Ltd. Block Trade, PE Entry Goldman Sachs Capital Partners, Morgan Stanley Kotak Securities Ltd. 25.29 2.40%

Sep 17, 2013 Trent Ltd. Open Market Purchase Arisaig Partners Asia N/A 18.38 2%

Feb 6, 2013 V-Mart Retail Ltd. IPO N/A N/A 17.83 32% Apr 11, 2013 TV18 Shopping Network Ltd. Minority Stake Purchase OCP Asia Ltd. N/A 15 5%

Big Shoe Bazaar India Pvt. Minority Stake Purchase; Catamaran Ventures, Fidelity Growth Partners India, Nexus Venture Partners, Apr 25, 2013 N/A 12 N/A Ltd. PE Entry; VC Entry Qualcomm Ventures,

Apr 10, 2013 Hoopos.com Acquisition BabyOye.com N/A N/A 100.00% Minority Stake Purchase; Apr 10, 2013 BabyOye.com Accel Partners, Helion Venture Partners, Tiger Global, N/A 12 N/A PE Entry; VC Entry Minority Stake Purchase, Apr 2, 2013 Pepperfry.com Norwest Venture Partners (NVP) N/A 8 N/A VC Entry

Apr 5, 2013 Fintiquette.com Acquisition Myntra.com N/A N/A 100.00%

Bharti Retail Net Sales, INR bn

4.6

3.6 . Bharti Retail is a wholly-owned company of the Bharti 2.9 Enterprises industrial conglomerate, which also operates in the telecom, real estate and insurance sectors. . Bharti Retail operates hypermarket and convenience stores under the Easyday and Easyday Market brands. . The company had a 1.8% market share in 2012 and ranked 11th in grocery retailing in India, Euromonitor 2009 2010 2011 International said in a Jul 2013 report.

Net Sales, INR bn . Bharti Retail’s stores are mainly located market areas in Tier 2 cities in northern and western Indian states. . In 2012, Bharti Retail added a new store in Andhra Stores and Private Labels Pradesh to its few other outlets in southern India, . The first Easyday store was launched in Ludhiana and Easyday Market - Euromonitor International said. in Jalandhar, in 2008. In 2012, the company operated more than 210 . The company has a wide private label portfolio of both stores in the states of Punjab, Haryana, Uttar Pradesh, Uttarakhand, grocery and non-grocery products. The company also Madhya Pradesh, Rajasthan, Himachal Pradesh, Chhattisgarh, NCR sells goods under the Walmart private labels Great Value Delhi, Jammu & Kashmir, Maharashtra and Karnataka. and George. . In April 2012 Bharti Retail signed an agreement with . Bharti Retail’s private label portfolio comprises Home Trends and Naturals Salon and Spa, owned by Chennai-based Groom Mainstays (furniture and homeware), Kid Connection (toys, games and India Salon & Spa Pvt Ltd. Under the contract, Naturals apparel), Faded Glory (footwear), Athletic Works (sportswear), Easy Salon and Spa outlets will open in 250 Easyday outlets by Choice (groceries), Equate (beauty and personal care) and Astiva and 2015. Simply Basic (Apparel).

Source: Company data; Passport by Euromonitor International; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 65 - Carrefour Wholesale Cash & Carry India Pvt. Ltd.

Current Operating Income by Geographic Region, 2012, EUR mn

929 . French company Carrefour, established in 1959, is Europe’s largest and the world’s second-largest retailer. The group operates four grocery store formats: 608 509 hypermarkets, supermarkets, cash&carry and convenience stores. . In Dec 2010, Carrefour opened in New Delhi Carrefour 168 Wholesale Cash&Carry - its first store in India. In 2012, -74 the company operated a total 4 cash&carry stores in the country – in Delhi, Jaipur, Agra and Meerut, the global France Europe (excl. Latin America Asia Global Functions retailer’s most recent Annual Report said. France) . Carrefour plans to open eight to 10 wholesale stores in India, doubling its network in the country, and is searching Current Operating Income by Geographic Region, 2012, EUR mn for potential locations, livemint.com reported on Aug 9, Carrefour SA’s Net Sales by Geographic Region, 2012, EUR mn 2013. The company has adopted a wait-and-see attitude after the Indian government allowed 51% FDI in multi- brand retail and has still not made any steps toward opening retail stores in the country. Europe (excl. France) 20,873 Latin America . Besides India, Carrefour is present in two other Asian 14,174 markets - China and Taiwan. As of December 2012, it had 218 hypermarkets in China and 61 hypermarkets and three supermarkets in Taiwan, the Business Standard reported on May 13, 2013. . Over the past few months, Carrefour has withdrawn from Asia 6,400 key Asian markets like Singapore, Malaysia and Indonesia, to reduce debt and generate cash flow. Among France 35,341 other countries, it has exited from Colombia and cut stake in its Turkish business.

Source: Carrefour SA 2012 Annual Report; Livemint.com; The Business Standard; Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 66 - TESCO/Trent

Trent Financial Performance (Standalone)

9,358.04 . British giant Tesco is one of the world’s largest retailers 8,217.93 7,167.12 and the grocery market leader in the UK, Malaysia, the Republic of Ireland and Thailand. 5,874.81 . In India, the company operates a wholesale business in Mumbai – Tesco Hindustan Wholesaling Pvt Ltd. (THWPL)

- which supplies products to Star Bazaar – a chain of

stores operated by Trent, which is the retail arm of the 622.59 472.67 430.37 402.2 industrial conglomerate Tata Group. Tesco has a franchise arrangement with Trent to help with the growth of the Star 2009 2010 2011 2012 Bazaar chain.

Net Sales, INR mn Net Profit, INR mn . Tesco also has two offices in Bangalore and Delhi, which source over £270 mn worth of products a year from India. . Tesco’s Hindustan Service Centre (HSC), which employs Performance of Trent Brands over 6,000 people and supports ongoing worldwide operations, is located in Bangalore, Karnataka. 2010 2011 2012 Number of Employees 2012 . Tata Group’s subsidiary Trent owns and manages a number of retail chains in India. Established in 1998 and Westside 54 67 70 2,863 headquartered in Mumbai, Trent runs fashion & lifestyle Star Bazaar 11 15 15 2,516 chain Westside; hypermarket chain Star Bazaar; book-and- Landmark 19 719 music chain Landmark and Fashion Yatra, a value-for- 7,810 6,480 money family fashion store. 2,230 2,000 . As of Mar 31, 2013, Trent and its subsidiaries had 116 stores across all formats, the company said in a corporate 2011 2012 filing. For 2012, Trent reported a consolidated net income Star Bazaar Revenue from Operations, INR mn of INR 21,320.3 mn and a net loss of INR 379.5 mn. Trent Landmark Revenue from Operations, INR mn employed a total 6,407 at end-Mar 2013.

IKEA India Ltd.

. IKEA has already incorporated an Indian subsidiary called IKEA India . Swedish furniture maker IKEA is in the process of Ltd, firstpost.com reported on Aug 13, 2013. IKEA has sought injunction orders from Indian courts against a dozen domestic companies whose purchasing land in the states of Andhra Pradesh, names sound similar to IKEA, regardless of their lines of business, the Maharashtra, Haryana and Karnataka, to house its stores Economic Times reported on Sep 17, 2013. Two such companies are in India, the Wall Street Journal reported on Aug 12, 2013. Aikiya Global, a Bangalore-based events and communications company, . IKEA’s first store in the country might open in four to five and IKYA Human Capital Solutions, an HR firm. years, WSJ added, quoting company CEO Mikael . After months of discussions between IKEA officials and Indian Ohlsson. authorities, the company has been allowed to run cafes and restaurants . Indian Trade Minister Anand Sharma and Ohlsson held a within its single-brand stores in India, but would not be able to sell closed-door meeting on Aug 12 to discuss the furniture packaged food. The reason for the ban, announced in early 2013, was maker’s plans in the country. that the single-brand retail policy, under which IKEA’s application had been filed, disallowed retailing of food. . IKEA said it would spend some INR 105 bn, or USD 1.72 bn, to open 25 stores across India, after its government Number of IKEA Stores in Selected Countries allowed 100% foreign ownership in single-brand retail stores in late 2011. . The company applied to open stores in India in June 2012 China 11 and received an approval in May the following year. Russia 14 . Before actual construction works begin, the company’s stores would have to be approved by the authorities of the UK 18 respective states in which they will be located. India (as planned) 25 . As part of its setting foot in India, IKEA will enhance its local sourcing of products made of bamboo, hand-loom France 28 fabrics and handicrafts. It has also started working with U.S. 38 the Indian National Institute of Design on developing products for the local market, WSJ and firstpost.com Germany 46 reported.

Pantaloon Retail Financial Performance Note: The financial results of the two accounting periods are not comparable. . Future Retail Ltd., formerly Pantaloon Retail, is a 67.72 subsidiary of Indian industrial conglomerate Future Group and a major Indian retailer. The company officially changed its name in Mar 2013. 39.42 . In the 18 months that ended on Dec 31, 2012, Pantaloon Retail underwent major consolidation and realignment, aimed at streamlining its business activities and dealing with the consumption and economic slowdown that had 2.73 0.77 affected India in the period.

18 months ended Dec 31, 2012 12 months ended Jun 30, 2011 . The company divested its investments in non-core areas like financial services and demerged its highly successful Sales (Net of Taxes), INR bn Profit After Tax, INR bn fashion & lifestyle format Pantaloons to Aditya Birla Nuvo. The Competition Commission of India (CCI) approved the Future Retail Quarterly Financial Performance deal in Dec 2012, livemint reported. . Under its revised strategy, the business of Future Retail 9,406.90 has been consolidated under three verticals – Hypermarket Retail (including Home Improvement), Fashion and Food. Three distinct companies were formed - Future Retail, Future Lifestyle Fashions (FLF) and Future Ventures, 3,457.40 respectively. . In addition, the company carried out an extensive 24.70 renovation of a large number of stores to improve customer -94.60 experience and brand positioning. 3 Months Ended Jun 30, 2013 3 Months Ended Mar 31, 2013 . During the 18 months that ended on Dec 31, 2012, the company attracted over 433 million customer footfalls, which meant that stores registered 24 million customer visit Total Income From Operations, INR mn Net Profit (Loss) of the Period, INR mn each month.

Reliance Retail Financial Data Highlights

5.84 5.81 . Reliance Retail, a wholly-owned subsidiary of Reliance Industries, and India’s second-largest retailer after Future Retail, was set up in 2006 in Mumbai. At the end of FY 2.76 2013 on Mar 31, 2013, the company operated 1,466 stores across 129 cities and over 9.0 million sq ft of retail area. . During its strategic phases, internally named Reliance 0.18 Retail 1.0, 2.0 and 3.0, the company has established businesses under value, digital, lifestyle, jewelry and -0.2 -0.24 brands formats, the Business Standard reported in Jul 2013. 2008 2009 2010 . At the end of Reliance 3.0 on Mar 31, 2013, some 56% of Net Turnover, INR bn Net Profit/Loss, INR bn Reliance Retail’s INR 108 bn revenue, came from its value and grocery chain segments. Reliance Retail Performance . At Reliance Retail’s Annual General Meeting in Jun 2012, the company said it would invest some INR 400 bn - 500 bn in the next three to four years, the Business Standard 2011 2012 added. Total Revenue, INR bn 76.00 108.00 . The company has identified the cash-and-carry business as EBITDA, INR bn -0.34 0.78 its growth driver, as it provides higher volumes and higher No. of Jewelry Stores 37 51 Return on Capital (RoC). No. of Brand Stores 49 68 . By opening its cash-and-carry store Reliance Market in Ahmedabad in Sep 2011, Reliance Retail became the first No. of Digital Stores 93 139 Indian retailer to enter the cash-and-carry business, No. of Fashion & Lifestyle 353 448 dominated by multinationals such as WalMart, Metro and Stores Carrefour. No. of Value & Other Stores 750 760 . Under Reliance Retail 4.0, the cash-and-carry store Total No. of Stores 1,282 1,466 Reliance Market is to become a separate vertical. Source: Company announcements, Business Standard (Jul 22, 2013);

Asia Headquarters Corporate Headquarters Americas Headquarters Eucharistic Congress Bldg. No. Nestor House 225 Park Avenue South III Playhouse Yard New York, New York 10003 4th Floor, 5 Convent Street London EC4V 5EX US Mumbai 400 001 UK Voice: +1 212 610 2900 India Voice: +44 207 779 8471 Fax: +1 212 610 2950 Voice: +91 22 22881123 Fax: +44 207 779 8224 Fax: +91 22 22881137

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