Rise of local brands reflects increased buying power of ‘the masses’
says a recent report. The story builds on two trends. One, the faster growth of smaller, local brands in comparison with big, national brands in the fast moving consumer goods (FMCG) segment; and two, a survey by Redseer which estimated that by 2030 the segment dubbed “the masses", with annual incomes of ₹2.5-10 lakh, will account for 65% of the market for consumer goods, up from 50% in 2016 and 53% in 2022.
A statistical projection is a statistical projection, and only as good as its assumptions, not to mention the reliability of the data used. Right now, when it comes to relatively large purchases, the low-income segments show signs of distress rather than robust energy. In housing, the action is in bigger and more luxurious apartments.
Two-wheeler sales are struggling, and in the latest results only TVS met analysts’ expectations, while both Bajaj and Hero disappointed. In passenger vehicles, the relatively expensive sports utility vehicle (SUV) segment zooms ahead while sales of entry-level cars refuse to move out of first gear. The signals emerging from these trends indicate that purchasing power at low income levels is not rising, which would seem to contradict Redseer’s optimism.
However, there are mitigating circumstances. One of these is higher interest rates in response to inflation and the need to bolster the rupee in the face of the US Fed’s rate hikes and consequent shifting of capital to dollar assets. Relatively expensive durables tend to sell among “the masses" only when financing is easy.
Higher interest rates thus hamper sales of, say, two-wheelers and cars, by the non-affluent. In the case of real estate, there is the additional factor of growing scarcity of space to build on. When extra land is
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