Retail Sector India

Retail Sector India December 2013 Produced by: Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 1 - Table of Contents 5. <a href="#0_0">Semi-Processed Food Market </a>6. <a href="#0_0">Frozen Processed Food and Ready Meals </a>7. <a href="#0_0">Milk and Cheese </a>I. <a href="#4_0">Retail Sector Overview </a>1. <a href="#5_0">Retail Sector Highlights </a>2. <a href="#6_0">Main Sector Indicators </a>8. <a href="#0_0">Beverage and Cigarette Highlights </a>9. <a href="#0_0">Alcoholic Beverage Data </a>3. <a href="#7_0">Retail Sector Snapshot </a>4. <a href="#8_0">FMCG Market Snapshot </a> 10.<a href="#0_0">Beer and Cigarette Data </a> 5. <a href="#9_0">Number and Size of Stores in India </a>6. <a href="#10_0">Indian Retail in Global Rankings </a>7. <a href="#11_0">Major Players by Retail Format </a>8. <a href="#12_0">Retail Sector Forecast </a> 11.<a href="#0_0">Soft Drink and Bottled Water Highlights </a>12.<a href="#0_0">Soft Drinks and Bottled Water </a>III.<a href="#0_0">Personal Hygiene and Care, Detergents </a>1. <a href="#0_0">Personal Hygiene Highlights </a>2. <a href="#0_0">Personal Hygiene Market </a>3. <a href="#0_0">Personal Hygiene Market Forecast </a>4. <a href="#0_0">Personal Care Highlights </a>9. <a href="#13_0">Retail Sector Forecast (cont’d) </a>10.<a href="#14_0">Indian Population and the Retail Market </a>11.<a href="#15_0">New Rules for FDI in Multi-Brand Retail </a>12.<a href="#16_0">Government Policy </a>13.<a href="#17_0">Government Policy (cont’d) </a>14.<a href="#18_0">Employment </a> 5. <a href="#0_0">Skincare </a>6. <a href="#0_0">Color Cosmetics </a><ul style="display: flex;"><li style="flex:1">15.<a href="#19_0">Retail Sector SWOT Analysis </a></li><li style="flex:1">7. <a href="#0_0">Natural Cosmetics and Fragrance </a></li></ul>8. <a href="#0_0">Dishwashing and Laundry Care </a>II. <a href="#20_0">Food & Beverages </a>1. <a href="#0_0">Packaged Food Market </a>2. <a href="#0_0">Ready-to-Eat Market </a>3. <a href="#0_0">Confectionery Highlights </a>4. <a href="#0_0">Bread </a>IV. <a href="#0_0">Apparel and Footwear </a>1. <a href="#0_0">Apparel Market </a>2. <a href="#0_0">Apparel Market (cont’d) </a>3. <a href="#0_0">Athletic Apparel and Footwear </a>4. <a href="#0_0">Other Apparel </a>Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 2 - Table of Contents 3. <a href="#0_0">Carrefour Wholesale Cash&Carry India Pvt. Ltd. </a>4. <a href="#0_0">TESCO/Trent </a>V. <a href="#0_0">Consumer Durables </a>1. <a href="#0_0">Consumer Electronics and Home Appliances </a><a href="#0_0">– </a><a href="#0_0">SWOT </a> <a href="#0_0">Analysis </a> 5. <a href="#0_0">IKEA </a>2. <a href="#0_0">Consumer Durables Snapshot </a>3. <a href="#0_0">White Goods </a>6. <a href="#0_0">Future Retail Ltd. </a>7. <a href="#0_0">Reliance Retail </a> 4. <a href="#0_0">Brown Goods </a>5. <a href="#0_0">Consumer Electronics </a>6. <a href="#0_0">Consumer Durable Financing in India </a>VI. <a href="#0_0">Other Segments </a>1. <a href="#0_0">Pharmaceuticals </a>2. <a href="#0_0">Motor Vehicles </a>3. <a href="#0_0">Luxury Goods </a><a href="#13_0">VII</a>. <a href="#0_0">E-Commerce (B2C) </a>1. <a href="#0_0">E-Commerce Highlights </a>2. <a href="#0_0">E-Commerce in India Snapshot </a>3. <a href="#0_0">E-</a><a href="#0_0">T</a><a href="#0_0">a</a><a href="#0_0">iling Data </a>4. <a href="#0_0">E-Commerce </a><a href="#0_0">– </a><a href="#0_0">Ecosystem and Challenges </a>VIII. <a href="#0_0">Major Players </a>1. <a href="#0_0">T</a><a href="#0_0">o</a><a href="#0_0">p M&A Deals </a>2. <a href="#0_0">Bharti Retail Pvt. Ltd. </a>Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 3 - I. Retail Sector Overview 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. Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 4 - Retail Sector Highlights 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 multibrand 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. Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 5 - Main Sector Indicators Main Retail Sector Indicators <ul style="display: flex;"><li style="flex:1">FY 2001 </li><li style="flex:1">FY 2012 </li><li style="flex:1">FY 2021 </li></ul><ul style="display: flex;"><li style="flex:1">National GDP, USD bn </li><li style="flex:1">450 </li></ul>120 1,958 490 3,310 <ul style="display: flex;"><li style="flex:1">810 </li><li style="flex:1">Estimated Merchandise Consumption (Retail Market Opportunity), USD bn </li></ul>Urban consumption (% and value) Rural consumption (% and value) 40% (USD 48 bn) 60% (USD 72 bn) 48% (USD 235 bn) 52% (USD 255 bn) 56% (USD 455 bn) 44% (USD 355 bn) Share of Corporatized (Organized) Retail Share of Independent Retail ~4% 96% 5 ~7% 93% 34 ~20% 80% <ul style="display: flex;"><li style="flex:1">162 </li><li style="flex:1">Size of Corporatized (Organized) Retail, USD bn </li></ul><ul style="display: flex;"><li style="flex:1">Size Of Independent Retail (USD bn) </li><li style="flex:1">115 </li><li style="flex:1">455 </li><li style="flex:1">648 </li></ul><ul style="display: flex;"><li style="flex:1">Share of Indian Corporatized Retailers in Total Corporatized Retail </li><li style="flex:1">~100% </li><li style="flex:1">~95% </li><li style="flex:1">50% </li></ul>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. Source: Technopak Analysis Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. - 6 - Retail Sector Snapshot <ul style="display: flex;"><li style="flex:1">India's Retail Sector, FY 2012 </li><li style="flex:1">India's Organized Retail Sector, FY 2012 </li></ul>Pie chart shows both organized and unorganized segments Mobile and Telecom 6% Consumer Electronics 8% Apparel 8% <ul style="display: flex;"><li style="flex:1">Jewelry 6% </li><li style="flex:1">Food Service 5% </li></ul>Others 24% Jewelry 4% Consumer Food Service 7% Size of Organized Retail, FY 2012: USD 34 bn Electronics 3% <ul style="display: flex;"><li style="flex:1">Pharmacy 3% </li><li style="flex:1">Food and Grocery </li></ul>60% Mobile and Telecom 11% (Technopak) Food and Grocery 11% Others 11% Size of Indian Retail Sector, 2012: <ul style="display: flex;"><li style="flex:1">USD 430 bn (CRISIL) </li><li style="flex:1">Apparel 33% </li></ul>USD 490 bn (Technopak) <ul style="display: flex;"><li style="flex:1">FMCG Market Break-Down by Product, FY 2013 </li><li style="flex:1">FDI in FMCG, FY 2001-FY 2013, USD mn </li></ul>2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 050% 45% 40% 35% 30% 25% 20% 15% 10% 5% 1,811.10 Personal Care 20% 46.60% Tobacco 15% 865.5 22.25% 632.4 16.25% 384.9 9.89% Household Consumables 10% <ul style="display: flex;"><li style="flex:1">101.2 </li><li style="flex:1">95.4 </li></ul>2.60% 2.45% 0% Retail Tea, Coffee Vegetable Trading Oil Soaps, Paper, Pulp Cosmetics Food Processing Others 2% Food and Beverages 53% <ul style="display: flex;"><li style="flex:1">FDI in FMCG, FY 2001-FY 2013, USD mn </li><li style="flex:1">% of Total FDI in FMCG </li></ul>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 <ul style="display: flex;"><li style="flex:1">Indian FMCG Market Size </li><li style="flex:1">Exports and Imports of FMCG </li></ul>2,000 1,800 1,600 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1,766 18.5% 1,395 121.2 1,539 16.3% 14.8% 1,400 <ul style="display: flex;"><li style="flex:1">84.3 </li><li style="flex:1">1,177 </li></ul>1,200 1,000 800 600 400 200 01,012 61.3 <ul style="display: flex;"><li style="flex:1">10.3% </li><li style="flex:1">59.8 </li></ul><ul style="display: flex;"><li style="flex:1">51.6 </li><li style="flex:1">51.6 </li></ul>49.3 37.2 30 27.1 <ul style="display: flex;"><li style="flex:1">FY 2009 </li><li style="flex:1">FY 2010 </li><li style="flex:1">FY 2011 </li><li style="flex:1">FY 2012 </li><li style="flex:1">FY 2013 </li></ul><ul style="display: flex;"><li style="flex:1">FY 2009 </li><li style="flex:1">FY 2010 </li><li style="flex:1">FY 2011 </li><li style="flex:1">FY 2012 </li><li style="flex:1">FY 2013 </li></ul><ul style="display: flex;"><li style="flex:1">FMCG Imports, INR bn </li><li style="flex:1">FMCG Exports, INR bn </li></ul><ul style="display: flex;"><li style="flex:1">Indian FMCG Market Size, INR bn </li><li style="flex:1">% y/y growth </li></ul><ul style="display: flex;"><li style="flex:1">Top FMCG Players in India (Based on FY 2012 Earnings) </li><li style="flex:1">Total Distribution Reach of FMCG Players </li></ul>Nirma Ltd. 4.44% Nestle India Ltd. HUL Nestle 6.3 5.00% 3.6 GSK 1.5 3.9 3.3 4.6 2.6 2.8 2.5 2.9 Hindustan Unilever Ltd. 15.06% GCPL Others 35.70% Marico Colgate Emami Dabur Ruchi Soya Industries Ltd. 16.92% ITC Jyothy Labs Total Distribution Reach of FMCG Players, million outlets ITC Ltd. 22.88% 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 <ul style="display: flex;"><li style="flex:1">Number and Average Size of Stores in India </li><li style="flex:1">Share in Total Space by Store Types, % </li></ul>120% 100% 80% 60% 40% 20% 0% 70,000 0.3% 2% 1% 2% Cash & Carry Hypermarkets 67,100 Convenience Stores 2% 50,000 30,000 Discount Stores Department Stores Supermarkets 37% Specialty Stores/EBOs <ul style="display: flex;"><li style="flex:1">36,830 </li><li style="flex:1">50% </li></ul>2,000 1,500 1,000 700 75% 8% Supermarkets Specialty Stores/EBOs Discount Stores 9% 21% 11,192 2006 Department Stores 5% 20% 7% Hypermarkets 25% 7% Convenience Stores 10% 17% 2% <ul style="display: flex;"><li style="flex:1">2011 </li><li style="flex:1">2016 F </li></ul>Cash & Carry 1% Total Number of Stores in India Average Size of Stores in India, 2011, sq ft <ul style="display: flex;"><li style="flex:1">2006 </li><li style="flex:1">2011 </li><li style="flex:1">2016 F </li></ul>Number of Stores byType 50,000 30,000 10,000 8,500 <ul style="display: flex;"><li style="flex:1">4,000 </li><li style="flex:1">4,000 </li></ul>2,000 1,500 1,400 <ul style="display: flex;"><li style="flex:1">1,000 </li><li style="flex:1">600 </li><li style="flex:1">500 </li><li style="flex:1">500 </li></ul>400 <ul style="display: flex;"><li style="flex:1">300 </li><li style="flex:1">200 </li><li style="flex:1">100 </li><li style="flex:1">50 </li><li style="flex:1">40 </li><li style="flex:1">30 </li><li style="flex:1">2</li></ul><ul style="display: flex;"><li style="flex:1">Convenience Stores </li><li style="flex:1">Discount Stores </li><li style="flex:1">Specialty Stores/EBOs </li><li style="flex:1">Supermarkets </li><li style="flex:1">Department Stores </li><li style="flex:1">Hypermarkets </li><li style="flex:1">Cash & Carry </li></ul>2006 2011 2016 F livemint.com (based on forecasts by Boston Consulting Group, Ernst and Young Pvt. Ltd., Deloitte Haskins and Sells, KPMG Advisory Services Pvt. Ltd., Technopak Advisors Pvt. Ltd. and Booz and Co.) Source: Any redistribution of this information is strictly prohibited. - 9 - Copyright © 2014 EMIS, all rights reserved. Indian Retail in Global Rankings <ul style="display: flex;"><li style="flex:1">India's GRDI Score, 2013 </li><li style="flex:1">Retail Real Estate Momentum Index, Global Top 20 Markets </li></ul>Change in Rank Compared to 2012 <ul style="display: flex;"><li style="flex:1">Country </li><li style="flex:1">GRDI Score 2013 </li></ul>Based on growth China projections of total India Brazil Chile 69.5% 67.1% 63.5% 66.5% 53.9% 66.1% 55% -population, population, GDP/capita, sales and modern shopping center urban GDP, retail -Indonesia, Turkey Brazil, Vietnam <ul style="display: flex;"><li style="flex:1">UAE </li><li style="flex:1">+2 </li></ul>+1 -9 -1 -9 -2 +2 -2 Uruguay Oman China stock, combined with real estate investment Peru, Thailand, Russia Kazakhstan, Malaysia, Chile <ul style="display: flex;"><li style="flex:1">and </li><li style="flex:1">international </li></ul>retailer presence. India Georgia Mongolia Peru 61.4% 62.5% 56.5% Source: Jones Lang LaSalle, Aug 2012 Ukraine, Morocco, Saudi Arabia Poland, Mexico, Philippines, Colombia How India Compares to Other Markets - A.T. Kearney's Global Retail Development Index (GRDI), 2013 Peru Mongolia Georgia India 52.9% Peru Mongolia Georgia India 63.4% 63.3% 63.5% Peru Mongolia Georgia India 60.4% 17.7% 99.0% 83.4% 37.0% 36.6% 36.8% 63.8% 59.4% China 62.1% 77.5% 92.0% China 34.3% China 67.9% Oman Uruguay UAE Chile Brazil Oman Uruguay UAE Chile Brazil 11.3% 3.0% Oman Uruguay UAE Chile Brazil 97.8% 94.6% 73.9% 95.8% 95.6% 18.7% 100.0% 86.2% 43.3% 100.0% Market Attractiveness, % <ul style="display: flex;"><li style="flex:1">Country Risk, % </li><li style="flex:1">Market Saturation, % </li></ul>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 <ul style="display: flex;"><li style="flex:1">Organized Convenience Store Market in India </li><li style="flex:1">Grocery retailers in India, FY 2012 </li></ul>The convenience store market accounted for 7.4% of the total organized retail market in India 250 200 26% 214.1 <ul style="display: flex;"><li style="flex:1">Company Name </li><li style="flex:1">Market Share, FY 2012 </li></ul>25% 25% 24% 24% 23% 23% 25.00% 173.3 139.8 Future Value Retail Ltd. Reliance Retail Ltd. 0.50% 0.30% 0.10% 150 in FY 2011. 24.27% 112.5 23.96% 90 100 23.54% Mother Dairy Fruit & Vegetable Pvt. Ltd. 50 <ul style="display: flex;"><li style="flex:1">Others </li><li style="flex:1">99.00% </li></ul>0<ul style="display: flex;"><li style="flex:1">FY 2011 </li><li style="flex:1">FY 2012 Est. FY 2013 F </li><li style="flex:1">FY 2014 F </li><li style="flex:1">FY 2015 F </li></ul>Number of outlets - 12 million in 2012 <ul style="display: flex;"><li style="flex:1">Organized Convenience Store Market in India, INR bn </li><li style="flex:1">% y/y change </li></ul><ul style="display: flex;"><li style="flex:1">Mixed Retailers in India, FY 2012 </li><li style="flex:1">Electronics (l) and Apparel (r) Specialist Retailers, FY 2012 </li></ul>Trent 6.90% Airplaza Retail Holdings 8.80% Electronics and Appliance Specialist Retailers Apparel Specialist Retailers Market Share, FY 2012 Fabindia Overseas 6.90% Market Share, FY 2012 LG Electronics India Infiniti Retail 3.2% 2.8% 2.5% Raymond Bata India 0.5% 0.5% 0.4% Pantaloon Retail India 16% Reliance Retail 6.20% <ul style="display: flex;"><li style="flex:1">Next India Retail </li><li style="flex:1">Reebok India </li></ul>MobileStore Vijay Sales 2.2% 2.1% Aditya Birla Nuvo Benetton India 0.4% 0.3% Others 15.20% Lifestyle International 19.90% <ul style="display: flex;"><li style="flex:1">Samsung India Electronics </li><li style="flex:1">1.7% </li><li style="flex:1">Adidas India Marketing </li><li style="flex:1">0.2% </li></ul>Shopper's Stop 20% Pantaloon Retail India Others <ul style="display: flex;"><li style="flex:1">1.5% </li><li style="flex:1">Levi Strauss India </li></ul>Others 0.2% <ul style="display: flex;"><li style="flex:1">84.1% </li><li style="flex:1">97.5% </li></ul>

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