Although it is generally accepted in most global markets that economies are suffering from the impacts of inflationary pressures and general economic downturns, economic experts believe that purchases made by younger Chinese and Indian consumers will remain the biggest source of growth for the luxury food and beverage sector.
“There have been many rumblings about how the Chinese economy is in a downturn and growth is dropping and so has many people concerned – but we need to look at this from a wider angle,” economist Keyu Jin told the floor at the recent Tax Free World Association (TFWA) Asia Pacific conference in Singapore.
“The first thing to remember that this is essentially only China’s first recession of sorts ever, and even with this it registered 5% growth last year – in contrast, the United States has gone through some 12 recessions since its birth.
“The next thing is to remember the strength of China’s ‘New Generation’, essentially the millennial group of consumers with a strong propensity for online shopping and also a strong liking for spending in general.
“This is a group that has a very different mentality from their parents in terms of saving prioritising, and are in fact much more risk averse and wiling to even borrow money to spend on leisure and luxuries now, whether it is on good food, expensive alcohol, or a new Rolex watch.
“This is amidst an economic environment where they in fact have less money in-hand than their parents – but they are already spending two times as much on the leisure areas of food, travel and entertainment.
“That said, it should also be noted that this group tends to be far more open-minded than their parents as many of them have had western educations, hence they are more open to various religious, political views and so on – which in turn means they are the generation that is most likely to serve as a bridge linking the east and west moving forward.”
Singapore Management University Professor of Marketing Nirmalya Kumar highlighted that for India - the world’s latest largest global economy in size – a major sign of maturation as been that companies entering this market now need more advanced marketing strategies to succeed here.
“No longer do Indian consumers view imported products as good quality and local ones as poor automatically – this is because many young consumers, unlike their parents before them, are now taking a great deal more pride in the India brand and see this localisation as far more important than before,” he told the floor.
“Although India is a price sensitive market, research shows that in fact value is what matters the most to these consumers – so it is not enough to be affordable, now products also need to be high in quality as we found 53% of consumers prioritise price but 77% prioritise quality.
“That said, luxury and branding is not to be ignored as 34% highlighted this as an important attribute guiding their purchases; whereas a good 31% said that country of origin is important to them, with local Indian products becoming an increasing draw.”
He also highlighted that business success in India also requires a specific strategy, which will crucially require localised investment especially in areas such as food and beverage manufacturing.
“One of the key lessons to be learned from successful companies here such as Unilever, which established Hindustan Unilever Limited (HUL) as its local arm here many years ago, is that there is a need to make significant resource commitments here in India to make it work,” he said.
“Products and services must be customised according to the Indian culture, and it is also vital to learn how to navigate the digital India Stack, which is essentially a digital platform comprising identity and payment information of many of India’s consumers – and any business that learns to unlock this will have access to business success in this market.
“Based on its local understanding and strategy, HUL now makes up some 70% of global Unilever revenues.”
Asia not to be ignored
China has long been regarded to be amongst the most important economies both in APAC and the world due to population strength, rise of middle income class and potential for future growth, and with India’s rise as well as the young population growth in South East Asian markets, Asia remains the market to watch for premium items such as alcohol and premium chocolates.
“Asia is home to some of the biggest economies in the world, which means it is home to some of the biggest opportunities,” Asia Pacific Travel Retail Association President Sunil Tulli added.
“China saw a downturn due to the pandemic but will always remain important due to its scale alone, whereas India has the world’s largest workforce comprising many young consumers eager to explore [new food and beverage options].
“In addition we now see a lot more foreign investment pouring into India, Indonesia and Vietnam driven by this growth of young population, which will in turn spur further economic development, so in addition to previous hotspots such as China, Korea and Japan we now have even more Asian markets on the up and up – so businesses who choose to ignore the progress in this region will be doing so at their own peril.”
