Very few will dispute that after China, the next big emerging market is India. With 1.3bn population and possibly surpassing China in population by 2025, India will be in the next big market to watch in Asia.

On a macro level, about half of India’s population is under the age of 26; by 2020, the country’s median age will only be around 29 years whereas the median age in China will be 37 in the same year. Currently, the working-age population in China is already in decline. Every year, the labour pool shrinks by 0.5%. Meanwhile, 250 million people are set to join India’s workforce by 2030. The rise in the working population in India could lead to higher disposable income and consumption thus giving the Indian economy a real boost.

India’s consumption story will be shaped by its 440 million millennials and 390 million Gen Z (those born after 2000). With a young, tech-savvy population, improved education and rapid growth, India is creating a consumer market that could rival some of the biggest markets in the world. The growth in China in the past two decades is driven by an emerging Urban Middle class; whereas in India, opportunities is in the much larger Urban Mass. Urbanisation is driving consumption growth. The rural populations are also starting to seek the lifestyles of those in the cities, as they become more exposed to these trends and are increasingly targeted by consumer goods companies.

Urbanisation leads to smaller family nucleus: dual income and higher consumption of packaged goods. Decision makers in these nuclear household are younger, more modern and tend to make consumption decisions more on lifestyle consideration rather than on functional necessities. Currently, India’s Urban Mass will trade up into brands that offers the most incremental value; however, with raising incomes, they may move on to more aspirational brands. Maximum consumer spending is likely to occur in food, housing, consumer durables, and transport and communication sectors. The growing purchasing power and rising influence of the social media have enabled Indian consumers to splurge on more branded and packaged goods.

Rising affluence will make India the third-largest consumer market by 2025, making it imperative for companies to adapt their business models to meet the changing customer needs. Consumption expenditure will increase three times to hit $ 4 trillion by 2025, according to a report by the Boston Consulting Group.

The India consumer market is now at this pivotal point… almost the coming of age. In the next few decades, we will see some exponential growth in India. India consumer companies who are poised for this growth will benefit the most from the taking off of the Indian economy. It is with this in mind that Mandala Capital started investing in the India agro-processing sector in 2016. Mandala Capital’s portfolio is spread across the spectrum of food related businesses such as seeds, biotechnology, sugar, biochemical, irrigation, food processing, solar, agro-financing, logistics and cold chain, dairy, beverages and fresh produce.

One of Mandala’s investment is in Keventer Agro Limited (KAL), a leading Dairy & Beverage company in East India. KAL is present across categories like dairy, bananas, frozen foods, export of food commodities and franchisee for beverages. KAL owns Metro Dairy, a 22 year-old dairy company that holds 22% share in the pouch milk segment and around 40% share in ice cream in West Bengal. In addition, they are also the franchise bottler for Parle Juice for more than 30 years. Over the years, KAL has built a robust distribution network of distributors, C/F agents and more than 150,000 retail outlets across the Eastern region. With Mandala investment, KAL will invest in Value Added Dairy (VAP) and expand their distribution reach to the rest of East India. With the growing population in East India ( >250mil population; roughly the size of Indonesia) and renewed direct investments in the region, KAL is poised to be a major FMCG player in the Eastern region.

Another of our portfolio companies which is bigger in the Food-Agro FMCG space will be Jain Farm Fresh Foods Ltd (JFFFL), the agri-food unit of Jain Irrigation Systems Ltd. JFFFL is a leading fruits and vegetables processor and the world’s largest mango processor and onion dehydrators. The company sells its products under the Jain Farm Fresh brand, besides being a leading supplier of raw materials to global consumer companies including Coca-Cola, Frito-Lay, Nestle and Unilever, among others. JFFFL just started their B2C push this year with a frozen fruit dessert, ambient smoothie, dehydrated onions and will be launching a retail spice range towards end of this year. With their strong and established backend operations, it is a natural progression to forward integrate and move into the growing end-consumer market.

Another company we have invested in is Gati Kauser (GK), a one-stop service provider for cold storage solutions. With barely 5 percent of India’s USD 5 billion cold storage industry being organised. There is huge potential in the cold storage and logistics business. With improving macro-economic conditions, cold storage companies are moving towards becoming integrated service providers to capture this growing market for enhanced margins.

Sources: World Bank, The Economist, KPMG India, Times of India, Livemint, BCG India

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