Reason for slowdown on Brand Consumption

Since the beginning of 2019, our economy has been going slow on consumption. Questions of why people are not consuming? Are they not having money? Is there a recession looming at our economy?

Media had been creating more and more fear in people’s mind that our economy is doomed. Was all these news true?

Consumption has gone down not because people don’t have money to spend. If it was true, the recent IPO’s in the stock market for IRCTC and UJJIVAN together have mopped up more than 1 lakh crores where only a little more than 1000 crores was required.

There is plenty of money with people. They are not spending? Why, do they not have a requirement?
There is requirement, while not very essential. All those that are essential is getting consumed, where there cannot be big growth because we have kind of reached a peak with the present population. And population growth is slowing down.

Here is one example showing consumption. All the businesses of Atta, Snacks, Spices, Tea & Edible Oils have registered good growth in the branded segment. While there is a big decline in the unbranded segment.

There are 2 reasons for this change. One, GST has forced businesses to get organised and many of them are moving to organised. Those who did not have been losing business.

Two, people are also getting conscious about using branded products. Which is a natural phenomenon in any country that is getting rich. Our country is getting rich. Think of income levels 15 years back, you will realize that your spending patterns have changed. You don’t buy a ₹2 pack of biscuits anymore, you prefer a ₹ 10 pack. In the same manner all the spending patterns have grown 5X.

It is obvious that people will prefer quality and brands. Manufacturers in the un organised sector who did not transform, are taking a hit. This has caused un-employment. When there is fear of un-employment, it is general to defer purchases.

The way we were doing business and doing it now is changing rapidly. Companies are in the situation to adapt to this change. While they have been constantly blaming the government and have not been taking responsibility for the situation.

There is no compelling need for people to spend, unless there is no new user experience created by manufacturers, consumption will not improve. Government have been doing all that it can, industry has to adapt and get ready to change.

Looks like it is time for them to realize and work on the required change, in about a year from now, we are sure to have some unique experiences of living standards in India. Which all of us will love and splurge to have a part of that experience to ourselves. Then consumption will grow and bring a new twist to the growth that India will have.

The stage of transformation brings pain, once it is through, there is abundant joy waiting to come. Enjoy the good times.

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Ramesh Sigamani

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