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Consumer Markets
IBEF

According to a McKinsey Global Institute (MGI) study titled 'Bird of Gold': The Rise of India's Consumer
Market, the total consumption in India is likely to quadruple making India the fifth largest consumer market
by 2025. Urban India will account for nearly 68 per cent of consumption growth while rural consumption will
grow by 32 per cent by 2025.

India ranks first in the Nielsen Global Consumer Confidence survey released in May 2010. “India is one of
the fastest growing markets in the world and the current consumer belief that recession would soon be a
thing of the past has filled Indians with confidence,” said Piyush Mathur, Managing Director, South Asia,
The Nielsen Co. With 127 index points, India ranked number one in the recent round of the survey, followed
by Indonesia (116) and Norway (115).

According to an Ernst & Young transactions report released in May 2010, the Indian consumer sector is
attracting more interest from both private equity (PE) and mergers and acquisitions (M&A).

“This heightened level of PE interest is evidenced by three PE deals which have happened in the consumer
space in quick succession in the last few months — Henderson Equity Partners' investment in Genesis
Colors, IL&FS' private equity investment in The Mobile Store and investment by Bain Capital & TPG Growth
in Lilliput Kidswear,” said Ajay Arora, Partner, Transaction Advisory Services, Ernst & Young.

Retail

The BMI India Retail Report for the third-quarter of 2010 released in May 2010 forecasts that the total retail
sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014.

Moreover, for the fourth time in five years, India has been ranked as the most attractive nation for retail
investment among 30 emerging markets by the US-based global management consulting firm A T Kearney
in its eighth annual Global Retail Development Index (GRDI) 2009 published in June 2009.

Consultancy firm Technopak said that the organised modern retail segment in India will grow by over three
times during the next five years (from 2010), to reach a figure of US$ 80 billion. Raghav Gupta, President,
Technopak, observed that the country's modern consumption level will double within five years to an annual
figure of US$ 1.5 trillion from the present level (taking 2010 as the reference year) of US$ 750 billion.

In order to tap the growing opportunity in the segment, Aditya Birla Retail plans to invest up to US$ 44.34
million in 2010-11 to expand its 'More' brand. The group will open 100 new supermarkets of 'More' and 8-10
new hypermarkets under the More Megastore brand.

The Raheja Group promoted department store chain, Shoppers Stop has lined up investments worth US$
54 million to open 25 more stores in the next four years, as demand for lifestyle products picks up in June
2010.

Besides penetrating deeper into metros where it already has a presence, Shoppers Stop will enter eight
new cities such as Bhopal, Vijayawada and Siliguri, among others, said Govind Shrikhande, Chief
Executive, Shoppers Stop Ltd.

Moreover, leading watchmaker Titan Industries Limited announced to invest about US$ 21.83 million for
opening 50 premium watch outlets Helios in the next five years to attain a sales target of US$ 87.31 million.

Furthermore, international chains such as Wal-Mart are increasingly looking at India. Wal-Mart Stores Inc,
the world's biggest retailer, plans to accelerate its rollout of wholesale stores in India. Raj Jain, Chief of
Indian Operations for Arkansas-based Wal-Mart, said the firm now expects to open 10-12 wholesale centres
in India over two to three years, from an earlier target of five years, as real estate prices have become more
attractive.

Direct Selling

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The Indian direct-selling industry is likely to see major competition with both domestic and international
majors such as Nu Skin, Burlington, Salad Master and Golden Warp planning to start operations in two
years.

According to Chavi Hemanth, Secretary General, Indian Direct Selling Association (IDSA), “The Indian
market is clearly a growth story in every sphere of economic activity. We receive more than three
membership enquiries every week.”

Direct selling firm Tupperware India, known for its storage containers plans to foray into the rural markets in
the next two-three years. "We have solid plans for the rural market. We are working on bringing products for
rural people as well,” said Asha Gupta, Managing Director, Tupperware India.

Direct selling fast moving consumer goods (FMCG) company, Amway India Enterprises is aiming at a 25 per
cent growth to clock US$ 545.7 million by 2012. The company posted revenues of US$ 307.1 million in
2009, which was 22 per cent higher than its 2008 revenue.

Rural Consumers

Mega retail chains are looking to build a high-quality supply chainretailers such as Bharti-Wal-Mart,
Carrefour and Reliance are working to strengthen their supply chain formula by roping in farmers as
stakeholders. Despite being the biggest names in the trade, these retailers are ploughing rural areas to
teach innovative farming methods and find the best suppliers among them.

Hindustan Unilever Ltd (HUL) is planning to significantly increase its rural reach. Currently, HUL products
reach approximately 250,000 rural retail outlets and the company intends to scale it up to nearly 750,000
outlets in two years time.

Swiss FMCG player, Nestle plans to make further inroads into the rural markets. The company has asked
its sales team to deliver “6,000 new sales points every month in rural areas” to expand presence in Indian
villages, according to Antonio Helio Waszyk, Chairman and Managing Director, Nestle India.

FMCG

According to a FICCI-Technopak report, India's FMCG sector is poised to reach US$ 43 billion by 2013 and
US$ 74 billion by 2018. The report states that implementation of the proposed goods and services tax
(GST) and the opening of foreign direct investment (FDI) are expected to fuel growth further and raise the
industry's size to US$ 47 billion by 2013 and US$ 95 billion by 2018.

According to figures released by market researcher Nielsen, demand for personal care products grew faster
in rural areas than urban areas during the period January-May 2010.

In shampoos, rural demand grew by 10.7 per cent in value terms, while in urban markets, it rose by 6.8 per
cent. Similarly, toothpaste sales grew by 9.1 per cent in rural India and by 4.4 per cent in urban markets.

Furthermore, according to data from market researcher Nielsen, the FMCG industry posted a 14 per cent
sales growth year-on-year in April 2010, the highest in eight months.

Consumer Durables

According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), the consumer
durables and electronics sector has registered a 30 per cent growth during January-March 2010. According
to the industry body, the total size of consumer durables and electronics sector is around US$ 6.58 billion.
While flat panel display registered a growth of 70 per cent, air conditioner (AC) sales increased by 50 per
cent. Additionally, the industry also witnessed a 40 per cent healthy growth in home appliances business
during the same quarter.

Automobiles

Passenger vehicles sales shot up 33 per cent to 554,000 units in the April-June 2010 quarter over the
year-ago period, according to the Society of Indian Automobile Manufacturers (SIAM). Moreover as per
SIAM, the Indian passenger vehicle market is likely to grow by 12-13 per cent for the year ending March
2011.

German luxury car-manufacturer Audi aims to increase its market share in India to 25 per cent from the
present 20 per cent by end of 2010. It aims to sell 2,700 units in the country by the end of 2010 as against
1,658 in 2009.The company plans to invest US$ 36.8 million in building production capacity by 2015.

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Toyota Motor Corp will invest about US$ 103 million to produce engines and transmissions for the Etios
compact car in India developed for the local market.

Yamaha is planning a major initiative in rural India by launching more models in the affordable price range in
2010. “We are very strong in Tier 1 and Tier II cities. Now onwards, our focus will be rural India (Tier III
towns). We will launch more models in the affordable price range to dominate the rural market," according
to Pankaj Dubey, National Business Head, India Yamaha Motor. At present, around 15 per cent of its sales
come from the rural market and Dubey sees this demand increasing substantially in 2010.

If Yamaha is looking at the rural market, US-based Harley Davidson, the iconic heavyweight motorcycle
maker is targeting the urban consumers in India. Harley Davidson opened its first outlet in Hyderabad
recently and plans to open more across the country. According to Anoop Prakash, Managing Director,
Harley-Davidson India, the company will open outlets in other cities including Delhi and Mumbai before the
end of 2010.

Exchange rate used: 1 USD = 46.81 INR (as on June 2010)

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