If leading the world out of the global economic downturn was the beginning of the recognition of the Asian might in the 21st Century, robust and healthy growth, especially in the consumer products and retail segments, is just its natural extension. According to a latest report compiled by consulting firm PricewaterhouseCoopers (PwC) in cooperation with the Economist Intelligence Unit, the Asian market will become almost as big as North American, Western European and Latin American markets put together in terms of sales by 2014. And India, along with China, is expected to drive this overall Asian growth story. However, across all categories, India is seen playing second fiddle to China. The report, Strong and Steady: 2011 Outlook for the Retail and Consumer Products Sector in Asia, discusses the outlook for various retail and consumer products sub-sectors in Asia.

India, being Asia?s third-largest retail market after China and Japan, is expected to clock an average annual retail sales growth of over 4% in 2010-2014, owing to rising incomes, rapid urbanisation and the growing interest of international brands in this massive market.

While from 2012-2014, India?s forecast is of more than 5.5% growth, 2010 plays the spoilsport with just a 1.5% increase, pulling the Indian average down for the whole forecast period. The report puts the blame on high inflation in India throughout 2010.

Asia overall is expected to register an average retail sales growth of about 6% through 2014, which is slated to be two-three percentage points higher than the expected global growth in this space. In value terms, retail sales in Asia are expected to grow to more than $8.5 trillion by 2014, swelling by over 57% of the current estimate of $5.4 trillion in 2010.

This growth would primarily be driven by China, as it is expected to register double-digit growth rates in the next four years, with retail sales more than doubling in the forecast, from $2.2 trillion in 2010 to $4.6 trillion in 2014.

The biggest draw in the exploding Indian marketplace would be consumer expendables, fast moving consumer goods (FMCGs) in industry parlance. The report forecasts for India a staggering 9.5% average growth in market demand through 2014 in the soaps & cleansers segment alone. However, India would, even in this segment, end up second to only China which is predicted to post a year-on-year average growth of 12% for the forecast period. The Asian average in the segment is expected to be a little over 6.5%. The other notable forecast for FMCG is in the private label segment. The report predicts that manufacturers would risk losing millions of future consumers if they are ‘unable to build brand loyalty among aspiring consumers who are moving to the cities’, as most of them would be tempted to go for inexpensive private-label products of large organised retailers.

The report quotes consultancy Datamonitor’s prediction that the share of FMCG private labels in Indian retail will grow from 7% to 12% in the next two years.

Equally exciting is the forecast for consumer durables and electronics, with average market demand rising by over 9% for the forecast period, substantially higher than the Asian forecast of average market demand rise by a little over 6%. However, it is the expected sales of audio-visual equipment in particular that is forecast to rule the roost. India is yet again second to only China with 10% average annual growth predicted from 2010-2014 in this segment. China is expected to outdo all others with as much as 14% of expected average growth in demand in the audio-visual equipment segment. Counting on the Indian consumers’ first priority on buying televisions before other durables like refrigerators and washing machines, the report definitely sees scope for a rise in the sale of white goods overall as a category. The number of television sets per-thousand population is expected to increase by over 53% by 2014 to reach 195 TV sets, as compared to just 137 in 2009.

In the food, beverage and tobacco sector, India is expected to see only a moderate year-on-year average growth in demand of around 3.2%, marginally lower than the forecast for Asia at 3.4%. China again tops the table with a 5.7% average growth rate forecast five years. While in percentage points the growth seems moderate, in value terms, the report predicts that food sales are expected to almost double in Asia from $2.7 trillion in 2010 to $4.6 trillion in 2014. It is further mentioned that processed foods, fast food, coffee and beer will be strong sellers in India in the forecast period. The report also mentions a positive forecast for branded sports and diet drinks, carbonated drinks, and spirits and whiskey in the years to come as lower tariffs and higher disposable incomes facilitate increased aspirational buying. Growth in demand is also on the cards in the Indian apparel market which the report considers ‘significantly smaller than these (China and Hong Kong) strongholds’.

Considering the fact that the Indian apparel market is largely untapped across segments, the forecast is of almost 8% average year-on-year market demand growth through 2014. The forecast for China is still better with an average growth of 10.86% expected for the forecast period. However, while China is set to take the crown of the largest luxury goods market in the world, the outlook for India doesn’t look great with the report observing that Indian consumers prefer to shop for luxury brands outside India for ‘higher-end experience’.

However, in organised retail, the report mentions that challenges for foreign retailers in entering the Indian market are significant due to FDI restrictions in the sector, and that such restrictions have precluded significant expansion for foreign retail companies. But it also sticks to the hypothesis that it’s just a matter of time before the sector gets fully liberalised. The report also observes on a positive note that local retail operators in India, like Bharti Retail, are expanding at a rapid pace, considering that modern retail chains in India only account for 5% of the total retail sales. In this sector again, China is leading the way for the whole of Asia as the country is witnessing an explosion in hypermarket expansion. The report considers both China and India as as markets with significant growth potential for this sector. Overall, the future of the Asian market looks bright, with the report calling a presence in Asia for many multinational companies as ‘fundamental to (their) strategic growth’. Notwithstanding the challenges of operating in Asia like diversified markets, weak infrastructure, and opaque and shifting regulations, it is predicted that the preferences of the Asian consumer ‘will shape the consumer goods and retailing sectors for many years to come’.