The $10 Trillion Prize. David Michael
in point-of-sale information technology, and efforts to expand internationally. “Forty years ago, we set off on a journey armed with nothing but our dreams,” he says. “We invented, we innovated, we twisted and turned to find supply, machinery, and distribution—and consumers who would buy our products.”
When Mariwala began at Marico, it was a small producer of bulk edible oils. Today, the business is a leader in hair care products as well as edible oils, functional foods, instant starch products, and, most recently, skin care services. He and his family own 63 percent of the shares. Over the past ten years, it has been one of the top-ranked FMCG (fast-moving consumer goods) companies in India on the basis of total shareholder return—above Nestlé, Hindustan Unilever, and Tata Tea. Its success has been built on a far-reaching sales and distribution network: 3.3 million retail outlets.
Mariwala is full of facts about his company. “We are the leading consumer of coconuts in India. One out of every twelve coconuts produced in India is sold to Marico,” he says. In the next sentence, he wants affirmation. “Haven’t we created something exciting here? We’re fast and decisive, and we know what our niche is.” Two of the company’s brands, Parachute and Saffola, are particularly successful. Parachute is a coconut oil packaged for a variety of consumer usages. Indians consume edible oils in prodigious quantities, and coconut oil is high in saturated fat. Saffola, an edible oil low in saturated fat, has been skillfully positioned as a product for a “healthy heart” and sells mainly to middle-class consumers.
Marico started as part of Bombay Oil Industries Limited, a company that has been in existence for more than sixty years. Only in the last three decades, under Mariwala’s direction, has the company evolved into one of the largest fast-moving consumer goods (FMCG) companies in India. Sales were about $700 million in 2011. The company has expanded internationally, with a large presence in Bangladesh, Egypt, parts of the Middle East, Southeast Asia, and South Africa.
“We will certainly continue to grow both domestically and abroad,” Mariwala says, beaming. “We won’t chase the biggest markets. We will enter the markets with an emerging middle class. We will be there for their beauty and wellness needs.”
Mariwala is proud that he has competed and won against Hindustan Unilever, a much larger consumer packaged goods competitor in the core oils business. To secure victory, he says, he “contemporarized” packaging, ramped up distribution, and improved quality. “It was the core business for us, so we had no choice but to win.” In the end, Marico acquired the Nihar brand of hair oil from Hindustan Unilever. He calls it “an emotional and psychological victory.”
“We will grow and expand the product line,” he says. “We know how to stay out of the bright lights of the multinationals. We know how to exploit niches. We know that our power is our extensive distribution. India will grow and develop tremendously over the next decade—roughly 10-plus percent compound annual growth. When Indian consumers want to spend their extra money on personal care and healthy food products, when they want a fix on skin or hair, we will be there.”
He says mind-set is critical—and he is a prime proponent of the accelerator mind-set, which we will explore in chapter 14. “Grow faster than you are comfortable,” he says. “Never stop seeking new opportunities. Push the envelope.”
“We have very high energy and amazing persistence,” he says. “I love it here. Our rapid-growth days are still in the future. You need patience, perseverance, perpetual reinforcement, and no escape buttons.”
The rise of the newly affluent consumers will have a double-edged effect. It will create new opportunities and, at the same time, give rise to a new era of competition. For those companies in the United States and Europe that are fast and resilient enough to take advantage of the market growth, there will be spectacular wealth: a share of the $10 trillion prize. For those that are not fast and responsive, there will be competitors that, having grown up in China and India, will attack with deadly force in Western markets with low-priced, high-quality goods.
To help companies, we have tried to fill The $10 Trillion Prize with an abundance of practical lessons and strategies. We believe that the newly affluent in China and India are different from those in the West. They grew up with nothing and suddenly find their lives filled with choice. They are careful buyers yet they want the recognition, respect, and sophistication conveyed by branded products. They are uniquely optimistic about the future. They expect to be richer and they expect to command a greater share of the world’s resources and income.
To win these new consumers, it is necessary to win them over—to captivate them. You can do this by focusing on six emotions:
Help fulfill their dreams—give them a moment of gratification and elevation.
Help brand them as in-the-know—discerning, informed, visibly affluent.
Help them live big, on less. Understand that they “work hard, spend hard”—every renminbi, every rupee, is precious and causes them angst as it leaves their pocket.
Understand that painful memories still haunt them. Almost every consumer we have talked with in China and India has either firsthand or family memories of deprivation and personal risk. You need to respect their history and provide them with an optimistic view of the future.
Earn their loyalty and reverence by aiding the advancement and health of their children.
Listen hard. The new consumer wants to engage in a dialogue and is looking for your respect and appreciation.
PART I
The Rise of the New Consumer in China and India
TWO
The New Revolutionaries
The Rise of the Middle Classes
Who the new consumers are, how they spend their money, and what companies should do to captivate nearly one billion people
GOVIND SINGH SHEKHAWAT does not look like a revolutionary. A hardworking forty-something who holds down two jobs in the sleepy Indian desert state of Rajasthan, he has the broad smile of a man who is happy with life. Ma Guojun does not look like a revolutionary, either. Younger than Govind by about ten years, he is an engineer and teaches at a university in Qinghai province in western China. Yet they unquestionably are part of a revolutionary movement: the rise of the Chinese and Indian middle class.
Throughout history, China and India have been sharply polarized countries, with a small elite of very rich at the top and an overwhelming majority of very poor at the bottom—and nothing much in the middle. Most people, whether in the cities or the countryside, scratched out a subsistence living. Over the past ten years, however, this has been changing, and dramatically so. In the next ten years, these two countries will have a substantial middle class for the first time in their history. In his 1947 speech “Tryst with Destiny,” Jawaharlal Nehru, the first prime minister of independent India, proclaimed that India “will awake to life and freedom.” A mere two years later, in October 1949, Chairman Mao proclaimed, “China has stood up.” In fact, it has taken more than sixty years for Chinese and Indian consumers to wake up, stand up, and start to earn and spend as never before.
As discussed in chapter 1, the number of middle-class households in China will nearly double during the current decade, rising to 202 million by 2020. This will be the largest group of middle-class consumers in the world. Likewise, in India, the number of middle-class households will nearly double to 117 million over the same period. These middle-class consumers will account for nearly half of consumer spending in the two countries by 2020 (figure 2-1). It is their newfound productivity and earning power that is underpinning the dramatic growth in consumer spending and providing people such as Govind and Guojun with their extraordinary ambition, drive, and optimism.
The level of household income defines this group of newly prosperous people—but it is not a homogeneous group. We segment households into lower, middle, and upper class.