The $10 Trillion Prize. David Michael
key purchase decision-maker, managing the entire household budget. She and her husband earn more than fifty times what her parents were making in the village. She has reached a level of affluence where, she says, “It’s not about how to survive but how to live.”
They own two apartments (one is their home, one is an investment), two cars (one BMW, one minivan), and many branded modern home appliances, including a thirty-two-inch flat-screen color TV (a local brand called Changhong), a side-by-side refrigerator (Electrolux), a microwave oven (Galanz), two mobile phones (Oppo), two air conditioners (Midea), a washing machine (Rongshida), and a branded toilet (Kohler). They travel domestically twice a year and are thinking of visiting Paris or New York in the future. They have a very active social life and go to the movies at least once a week, dine out at better restaurants frequently, and play mah-jongg with friends on the weekends. Her favorite brands include Estée Lauder, Esprit, and Louis Vuitton. Her husband recently joined a golf club.
Zhanghong is very happy with her life and feels grateful for her experiences. “I learned how to treat every job with 100 percent dedication and not just focus on short-term return.” As she is about to deliver her second baby and her elder son is going to enroll in elementary school next year, she plans temporarily to “slow down” at work so that she can spend more time with the family. But that does not mean that she is going to terminate her career. She sees her career as a lifetime journey and plans to rejoin the company soon after giving birth. “I feel it is my duty to further develop the business, to create better lives and futures for the employees.”
In the next decade, Zhanghong expects to be the beneficiary of China’s growth and development. “I am calm and very optimistic,” she says. “I always believe in a bright future. I am confident that my hard work will pay off.”
Consumer Sentiment: The Hopes and Dreams of the Newly Affluent
If Rakesh and Zhanghong are exceptional, there are many others, across China and India, who have great dynamism and determination to succeed, to spend money, and to be happy as never before. We know this from BCG’s annual consumer attitude survey, which helps us to understand consumer passions and preferences. Our Center for Consumer and Customer Insight has now tracked the hopes and dreams of the Chinese for a decade and of Indians for five years. Consumers in China and India have high aspirations, are optimistic about their future, and are eager to enjoy their first taste of affluence. Their attitudes are in sharp contrast to those of the recession-humbled consumers in the Western world.
According to our survey of twenty-four thousand consumers around the world, 36 percent of Chinese and 19 percent of Indians expect to increase their discretionary spending over the next 12 months (figure 1-10). By comparison, only 11 percent of Americans, 8 percent of Europeans, and 5 percent of Japanese expect to do so.
FIGURE 1-10
Appetite to spend and willingness to trade up, by country
Also, many consumers in the two countries expect to trade up to higher-quality goods: 39 percent in China and 34 percent in India, compared with 18 percent in the United States and 16 percent in Europe. The driving impulse is the desire for greater technical and health benefits. Electronics, apparel, and home decor are the top trading-up categories. Also, spending on health care is rising in both countries, although China’s per-capita spending in this category has increased at double the rate of India’s and now stands at $309 per capita, compared with $132 in India.6
One of the biggest budget expenses of the newly affluent consumers is food at home and in restaurants (including sit-down, stand-up, and to-go outlets)—and they are buying a wider variety of foods than ever before. We expect an individual’s average daily calorie consumption to rise by roughly 10 percent in both India and China by 2020. But if the preference for fresh vegetables is rising, it is not likely to lead to a healthier population. In China, the new diet also has more meat, and this, together with the consumption of prodigious amounts of cigarettes and alcohol, is likely to lead to an epidemic of obesity, cardiovascular disease, and diabetes.
We have identified a virtuous circle that is driving the new optimism of the Chinese and Indian consumers (figure 1-11). Besides higher incomes, the newly affluent are opting for smaller families. In China, of course, the one-child policy has created a nation where four grandparents and two parents devote their love and resources to one family heir. This permits massive investment in that child’s social welfare, health, and education. But even in India, where efforts by Indira Gandhi to sterilize mothers had to be abandoned in the 1970s, there is a trend toward smaller families—especially in urban areas, where the average among the affluent class is two children.
FIGURE 1-11
Virtuous circle of growth in India and China: high savings, smaller families, more investment
In addition, the Chinese and Indian governments have been making major investments, which are programmed through a series of five-year plans and which are designed to improve the lives of the people. In particular, as we will show in chapter 11, the governments, as well as individuals, have been investing heavily in education, knowing that this will serve as the grand escalator to greater opportunities and higher-paying jobs.
The bountiful optimism is leading Chinese and Indian consumers to believe, possibly for the first time, that they will be able to achieve their dreams—prosperity, security, and relative affluence. As part of our consumer sentiment work, we track changing values. In India, the family, education, savings, wealth, and the home are all seen as more important than they were two years ago. So too is “value for money,” reflecting the enduring power of paisa vasool, which we investigate in chapter 12. Other rising values include status, convenience, and wellness.
In China, wellness, the home, the family, spirituality (but not religion), and savings have become more important over the past two years. Other rising values include the environment, conviviality, education, friends, and wealth. This underlines the continuing influence of the Confucian notion of a xiaokang society—translatable as a well-off, harmonious society. These values both reflect the confidence of people who have grown up in an era of economic liberalization and greater social freedom and underpin people’s hopes and dreams. And, as we will see now, there are companies that are cashing in on this opportunity by providing better goods, more dependable distribution, and access to information about product safety and technical benefits.
Making Dreams Come True: Meeting the Needs of the New Consumers
Just as we started the book with a story of how a Chinese entrepreneur is serving the new appetite for haute cuisine, we will close the chapter with a story of how an Indian entrepreneur is serving the new appetite for healthy living.
Harsh Mariwala embodies the archetypical traits of an Indian entrepreneur—he is a man with an idea a minute, guided by a vision of growth and expansion and a sense that no barrier is too high. He joined Marico, his family business, in 1971, and today he is the chairman and managing director. He says he wakes up every day with the same energy that he had on his first day on the job. “I love the company, I love our achievements, and I love our future,” he says.
Mariwala has lived a life obsessed with the needs of the new consumers. His goal has been to provide them with products that are convenient, easy to use, affordable, and healthy. “We have unlimited opportunities,” he says, with animation. “We have always been a story about making decisions, taking action, thinking through the eyes of our consumers.”
He handed us a copy of his book, An Uncommon Journey. He then told us his saga of creating a publicly owned consumer goods and solutions company in beauty and wellness over the past forty years. This was a time in Indian history when the country went from being regulated, restricted, and antibusiness to being free-wheeling and celebrating the spirit of entrepreneurs. He is particularly