Don’t confuse sales data with consumer trends

It would have been better to survey, if these what is happening to household employment, income, sentiment and spending choices.

We should evaluate the factors affecting consumer demand otherwise, it will add to the existing confusion of different data sets pointing in different directions.

Conceptually, too, strategic choices made by companies of their choice of goods to be sold competitive activity, and internal execution issues hugely affect the quantum and profile of their sales, which cannot be seen as a pure reflection of the consumer demand environment.

In the past few quarters, “premiumisation” was identified as a consumer demand trend. “Premiumisation” happens in many ways and tells many different stories about consumer demand.

Sometimes, it results from companies making strategic choices to focus effort on higher-income consumers who buy higher performance at higher prices.

Often, there is clear evidence of higher price-performance (premium) segments in a category growing faster than the rest. It could mean that the category is indeed “premiumising” from the consumer’s end.

Rural recovery narrative

Retail audit data of the last few quarters. Shows that sales growth in rural areas has outpaced urban growth. However, this may not merit the automatic conclusion that all is well with rural demand, perhaps on the back of monsoons, Infrastructure, and government spending.

Prominent companies have been seeking volume growth by expanding direct distribution surpassing wholesalers to smaller villages. Earlier, this was not profitable, but today, because of population density being low, roads and logistics services being scarce, and digitalised processes to reduce costs, it is making sense.

Rural incomes may not have grown as much, but rural sales may grow from occasional users and by taking some share from regional and small players.

According to one set of data mixed farming in agriculture is increasing Incomes.

Urban demand examined

There are strong consumer-based reasons to explain the poor urban sales in mid-market categories. Households in the third and fourth-highest income groups have very little surplus income, and in high inflation times this is wiped out. They buy less, sadly for some companies, happily for some others, as people choose to buy economical goods.

The Indian consumer market is getting more complex. Old paradigms and dominant logic need to be replaced with a deeper, under- standing of cause and effect.