Flip the numbers exercise - Marketing - 2009
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B2B MARKETING
Flip the Numbers If India were World and World were India
3/25/2009
This document aims at estimating the current Indian and World market sizes of a few products and then reversing the per capita consumption trend of Indian Consumption and World Consumption to arrive at figures of market sizes if India were to pick up the world consumption levels and vice versa. We would like to thank Prof. Sharad Sarin for equipping us for this effort.
Manish BallalNiraj Kothawade
Sairam IyerSandeep Vadnere
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Flip the Numbers
March 25, 2009
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If India were World and World were India
Introduction In this paper we have tried to study the current India and World market sizes of the products listed in the below table. The table has the market sizes of India and the World with current consumption levels in the first two columns. The 3rd and 4th columns have the market sizes of India and the World respectively if the consumption patterns were to reverse.
The product types chosen are generally consumed by the burgeoning middle class of India as they present a huge market in the near future for vast majority of companies. The Appendix at the end gives an idea about the market size of the growing middle class segment.
Markets India World India->World World->India Wine 90000 hl 277 mn hl 4.6 mn hl 5.4 mn hl Printers & Copiers $ 0.4 bn $60.9 bn $11.5 bn $ 2.68 bn Coffee 0.08 MT 7.5 MT 1.28 MT 0.46 MT Mobile Handsets $3.33 bn $150 bn $25 bn $19.5 bn
All figures mentioned are for 2008
Markets
Wine Market
Current Market Size The Indian wine market is miniscule compared to the markets of other spirits. It is well below the consumption of western countries such as France, Italy and the US. The current market size is about 1 million cases or about 90000 hectoliters. (Source: Economic Times)
Country Current Per Capita Consumption
India 10 ml per year
US 8 litres per year
France 60 litres per year
UK 25 litres per year
Spain 14 litres per year
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Flip the Numbers
March 25, 2009
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In 2005, world wine production was around 277 million hectoliters. Let’s just consider the middle class population for sanity of numbers. The world middle class is approximately 50% of world population so we can assume an average per capita consumption of 9.23 liters. Considering the Indian middle class size of about 50 million, the per capita consumption is about 0.18 liters. Source: http://www.wineinstitute.org/files/WorldWine%20ConsumptionbyVolume.pdf
Exchanging the consumption Levels • If we consider these consumption levels for India, the current market size would raise to 4.6 mn hl
currently, rising to the levels of 235.45 mn hl in 2015 and 538.30 mn hl in 2025. • If the converse were true the current world wine consumption would drop to 5.4 mn hl from the
current 277mn hl.
Effect of increased consumption in India: • Increased consumption of wines in India would directly affect the bottling industry. The number of
bottles required would increase as well as the number of corks and bottle openers. • The transportation business will be benefited due to the increase in consumption. • The restaurants and hotel would also be benefited from increased consumption; especially
restaurants serving Italian, French & Spanish cuisines. • A direct result would be the area under cultivation of grapes which would have to grow manifold.
Current area under cultivation of grapes is around 60000 hectares. That would benefit the laborers and farm owners and also employ more viticulture and horticulture specialists.
• It will also increase the consumption of water, seeds, fertilizers & insecticides. • Government might also be benefited due to the increase consumption as the level of taxation on
wines and spirits is the highest. Increased consumption would also mean increase in import of wines from abroad and these attract the highest amount of taxation; 550% in some cases. Increased import though could help the forwarding and transportation industry.
• But increased cultivation might also mean decrease in cultivation of other crops such as strawberries that grow in similar climate; even grains or fruits. That could have a negative effect on the already insufficient amount of food grains in the country. It could lead to import of such necessary items and thus drive up the price levels of essential food items.
Effect of decreased consumption on the world: • Considering the drop in world consumption levels the market size would shrink to a fraction of its
current level to 5.4 mn hl. This would largely reduce the current acreage of grapes and even put some wine growing areas into extinction. The current world acreage of wines is about 19,462,000 acres which would come down to about 379404 acres.
• The countries depending on wine production & export such as France, Spain & Italy would be affected and would need to find other areas of employment for people under this industry such as farmers & viticulture specialists. This would also affect the educational institutions that teach viticulture.
• The bottling and cork making industries as well as the transportation & shipping industries would get severely affected. Agricultural necessities such as fertilizers & seeds would experience a decrease in consumption.
• Tax revenues of the governments would be reduced which would imply higher incidence of taxation on other products.
• On the other hand such a huge amount of land resources would be set free for utilization to produce other agricultural products such as food grains and fruit crops. This would drive down the prices of essential food items and probably reduce the malnutrition levels in the world.
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Flip the Numbers
March 25, 2009
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Printer and Copier Market
Current Market Size Worldwide end-user spending for printers, copiers and multifunction products will increase by 7% from $58.4 bln in 2005 to $62.6 bln in 2010, spurred by strong growth in Latin America and Asia/Pacific, as per Gartner. If we consider an average growth of $0.84 bln per year, then the 2008 market size stands at $60.9 bln. Indian Printer and Copier Market size stands at Rs 1800 crores in 2008 or roughly about $0.4 bln. Source: Business Line 31 July 2008; http://www.itfacts.biz/global-printer-and-copier-market-to-generate-626-bln-by-2010/6901 Considering the above values the per capita consumption of printers and copiers for the world is about $8.95 per year whereas for India it turns out to be a lowly $0.35.
Exchanging the consumption Levels • If we consider the world consumption levels for India then the market size turns out to be around
$11.5 billion. • Conversely considering the Indian consumption levels for the world market sizes it to about $2.68
billion.
Effect of increased consumption in India: • Increased consumption levels of printers and copiers would mean increased consumption of paper.
This would mean increase in the demand for office paper and other stationeries. • A large number of toners & cartridges would be needed. • This would also increase the demand for high quality plastics for manufacturing printers, cartridges • This would cause an increase in the demand of chips, circuits, & other hardware products such as
wires & plugs. • An increased number of software products would be required. • An increase in energy consumption levels due to the greater no of printers & copiers. • A larger number of printouts and copies could mean lesser amount of handwritten work and thus
decrease in the consumption levels of writing instruments. • Environmentally, the increased paper production can be only detrimental to the already dwindling
forest cover. • The increased consumption could also boost the e-waste management business.
Effect of decreased consumption on the world: • The decreased consumption would cause a decrease in all complementary products such as paper,
toners, cartridges, plastics, chips, wires, plugs, software, etc. • It would also decrease the energy consumption levels by a good amount. • It could prove to be an environmental boon as it would save a considerable number of trees. It
would also mean lesser dumping of e-wastes into the system.
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March 25, 2009
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Coffee Market
Current Market Size • Indian Coffee Markey Size: 0.084 MT • World Coffee Market Size: 7.44 MT
The Coffee Market is concentrated in the Americas with the South American countries being the largest exporters and North America being the largest importer. Although India produces small amounts of coffee much of it is exported probably due to the Tea culture. This has begun to change a little atleast in the urban areas with new chains such as Mocha and Barista coming up.
The per capita consumption comes to about approximately 1.2 kg per year for the world and 0.07 kg per year for India.
Exchanging the consumption Levels If we reverse the numbers then the Indian coffee market amounts to about 1.28 MT. Conversely the world market would amount to 0.45 MT.
Effect of increased consumption in India: • Instead of currently exporting coffee India would have to import large amounts of coffee from
abroad to meet the increased demand. • This would give a boost to the packaging industry in various forms of coffee packets and bottles. • Since this might push up the coffee prices more people might move into coffee production. • In fact, due to the increased demand more of the areas in the western ghats and Nilgiri mountains
might be brought into coffee cultivation. This could mean deforestation in the ghats. Hwever, it might increase the employability in the area as also increase the demand for agricultural products.
Effect of decreased consumption on the world: • A huge world market would be lost and that would mean a severe impact on shipping and
transportation industry. The world employment would come down. • A large area in the South Americas and Africa would be free for cultivating other crops. Farmers
would have to move onto other crops. • Prices of coffee will go down and a lot of people would be forced into other occupations. • The packaging and bottling industries would be hampered. • It will also hamper the coffee grinder and other complementary products around the coffee supply
chain.
Mobile Handset Market
Current Market Size • Indian mobile handset market size: Rs 15,000 crores; Source: ET 26 July 2008 • Total Mobile users in India: 270 million; Source: ET 24 June 2008
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March 25, 2009
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The sales of Nokia were about $60 bln in 2008 and it had captured 40% market share in 2008. That makes the world figures stand at about $150 bln. The average per capita consumption comes to about $22. Now considering the Indian market size of about $3.33 bln, the average per capita consumption comes to around $2.89.
If we consider the number of handsets then Nokia sold about 480 million handsets in 2008. Considering the same 40% market share for simplicity the total number of handsets sold around the world are about $1.2 bln. As against these, the number of handsets sold in India in 2008 stand at 124 mn. (10% world share)
Exchanging the consumption Levels If we reverse the numbers then the current Indian mobile handset market size would figure around $25 bln and the world market size would figure around $19.42 bln
Effect of increased consumption in India: • Although being one of the fastest growing markets in the world, the market penetration of mobile
phones is quite low compared to the developed world. An increase in the number of mobile phones would mean increase network traffic and hence more business for traffic management companies such as Siemens. This would entail investments into creating & maintaining the infrastructure for backbone support of these mobile services. Installing the infrastructure would mean higher levels of consumption of construction materials such as steel & cement, communication equipment such as transponders & receivers.
• This would also usher in the entry of a plethora of m-commerce applications. • An increase in the number of handsets would obviously help ancillary industries such as chips,
battery manufacturers, SIM card manufacturers, etc. • The 3G phones market would increase the applications of mobile phones helping people to use
them for internet access, voice-chat, video streaming, etc. • This would also add to the pockets of marginal retailers that sell SIM cards and pre-paid services.
The franchises that sell mobile phones and accessories would get a boost. • The credit card business could also increase as users start paying their bills by credit cards. • It would lead to overall development of the country. A study by London School of Economics
professor Leonard Waverman has found that 10% extra mobile penetration may result in as much as 0.6% of additional GDP growth.
Effect of decreased consumption on the world: • A decrease consumption of the world would although reduce the consumption of a lot of natural
resources such as steel & other metals. • It would also reduce the business of other ancillary industries & m-commerce applications. • However, this would not help the growth cause in the developing world. As proven by several
studies and practical knowledge mobile phones have caused a lot of development in the impoverished areas of the world by empowering the common man. e.g Grameen Bank
• Africa, currently being the fastest growing market might lose a good chance to usher development.
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March 25, 2009
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Appendix: Consumption Forecasts for India Currently India is ranked as the 12th largest consumer market in the world. Close on heels of India becoming the world's 12th trillion dollar economy last week, comes the report from McKinsey Global Institute (MGI), the economics research arm of McKinsey's, predicting that India is well on its way to become the world's 5th largest consumer market by 2025. According to MGI forecast, if the country's growth rate continues to remain as high as now (9%), aggregate consumption in real terms in India will grow two fold from Rs 17 trillion today to Rs 34 trillion by 2015, and Rs 70 trillion ( € 1.25 T) by 2025. The consumption level will equal that of Italy by 2015, and Germany by 2025.
Source: BRICs Report, Goldman Sachs
The middle class will multiply from current 50 million to 255 million by 2015 and 583 million in 2025. More than 291 million Indians will move from poverty to a more sustainable life. Urban population would account for 2/5th of the total. Source: http://www.indianwineacademy.com/India_to_outstrip.asp