India's groceries thrive amidst weaker consumption
The sector is best equipped to address a higher demand for discounts.
Demand for consumer goods through wholesale mass grocery retail channels are expected to be on the rise, as Indian consumers are likely becoming more price-sensitive due to eroding purchasing power, according to Fitch Solutions.
India's real GDP is projected to fall 8.6% YoY in 2020, and is expected take until 2023 to recover to pre-pandemic levels. Thus, household disposable incomes will feel pressure over the medium-term (2020-2024).
Disposable incomes are tipped to grow at an average annual rate of 3.2% YoY over 2020-2024, compared to 11.8% YoY over 2015-2019. Meanwhile, inflation is projected to average 4.1% over the same period, outspeeding incomes.
As a result, nominal household spending over the medium term (2020-2024) is projected to average 3.2% YoY which represents a slowdown compared to the historic period (2015-2019) at 11.8% YoY.
With this, Fitch said that companies operating in India will have to navigate the challenges the country is facing: investment sentiment dampened and consumer appetite weakened.
However, the report noted that the mass grocery retail sector has a navigation tool at its disposal, as the sector is best placed to address a higher demand in discount.
Already, Metro Cash & Carry opened its 28th store in India in Karnataka in October. Siam Makro is also looking to open 12 wholesale distribution centres in the country over the next three years and invest over $150m over five years.
"India's discount and wholesale sector is developing with a number of international players having recently set up operations in the country. These companies continue expanding their discount and wholesale brands in India, with some developments already under way," the report stated.