HSC

Equities
Consumer and Retail
April 2019
By: Amit Sachdeva, Rahul Battulwar and Erwan Rambourg www.research.hsbc.com
Smartphones
India: Anatomy of Online food

ordering
the Consumer Health and

nutrition
Welcome to the land of middle-class optimists

Premium
Never mind concerns about a goods
Natural
slowdown – our survey results show products
that urban consumers are upbeat about
their future spending and income
We explain what this means for

grocery retail, online food ordering,
premiumisation, natural products, and
Upbeat
overall discretionary consumption
about the
future
We highlight key stock ideas related to
the survey findings
Value for
money
Supermarkets
vs online
Disclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it.
Equities ● Consumer and Retail
April 2019
Why read this report?
 We surveyed 1,000 members of India’s urban middle class, asking

50 questions about their consumption habits
 They are an optimistic group – they believe they will earn more and
spend more in the next 12 months (and they really like pizza)
 The survey results support the investment theses of our preferred
Buy-rated stocks, such as Avenue Supermarts, Jubilant Foodworks,
Nestle India, and Dabur India
Amit Sachdeva*
The key points
India Strategist and Consumer
and Retail Analyst
HSBC Securities and Capital India’s economy is in good shape and HSBC’s economists and equity strategists are bullish
Markets India Pvt Ltd about the country’s finances and its stock market. A strong economy is generally good news for
amit1sachdeva@hsbc.co.in
+91 22 22 681240 the consumer sector as people have more money in their pockets. This is particularly true for
the middle class, which is the main driver of discretionary spending in India.
* Employed by a non-US affiliate of HSBC
Securities (USA) Inc, and is not registered/ Recent comments by some consumer companies, suggesting that growth has slowed in the
qualified pursuant to FINRA regulations
March quarter, came as a bit of a surprise. So what better time to ask urban middle-class
consumers how they are feeling?
The message from our survey was clear: It found that 80% of the respondents are optimistic
about the economy for the next 12 months and 45% are very optimistic. Some 41% expect their
income to increase by more than 10% and another 39% expect an increase of at least 5% over
the next 12 months. Only 7% feel pessimistic about their economic circumstances.
The survey results provides insights into online retail trends, the increase in awareness about
healthy lifestyles, and product premiumisation, as well as autos, air conditioners and global
lifestyle brands.
1
April 2019
Contents
Why read this report? 1
Key data behind India’s

consumers 3
Key Buy-rated investment ideas 5
Ratings, valuations and

target prices 6
Related research 7
Meet India’s upbeat,

aspirational shoppers 8
Know your respondent 11
Demand outlook, the cycle

and equity strategy 13
Grocery retail 17
Quick service restaurants 23
Premiumisation 27
Natural products 30
Health and wellness 33
Indian autos 36
Air conditioners 39
Global lifestyle brands 42
Disclosure appendix 53
Disclaimer 56
2
April 2019
Key data behind India’s consumers

Shopping Food delivery
Consumers prefer to buy groceries
at supermarkets
77%
believe they have increased the
number of food orders over the past
87% two years; 44% order food for home

delivery at least once a week.
Economy c42%
of respondents exercise regularly
and monitor their nutritional intake
...pizza and Chinese dishes are the
most popular single good categories
ordered online
80%
of our respondents are optimistic about Natural products
the economy for the next 12 months,
45% are very optimistic
Packaged foods
and personal care
are the two c70%
categories where of respondents are highly likely to
consumers choose natural products if they are
associate higher offered by their trusted brand. About
prices with greater 50% are willing to pay a premium for
benefits these products
Preferred brands
Nike is most preferred About 25% of respondents indicated

sportswear brand while that they wanted to buy an Apple
American Tourister iPhone for their next smartphone;
stands out in luggage however, this was not matched by
their willingness to pay
Source: HSBC, Toluna
3
April 2019
Key Buy-rated investment ideas
Avenue Current price:  We like the company’s business model. Its focus on value retailing, using scale and cost
Supermarts INR1,423 efficiencies passes on the best prices to consumers, is its key competitive advantage.
DMART IN Target price:
 Our respondents prefer to shop in supermarkets, although ordering groceries online is
INR1,700
catching up. The company has this covered through its omni-channel play, DMART Ready.
Buy Up/downside:
13.9%  We expect same-stores sales growth (SSSG) to stay robust. Our target price of INR1,700
implies upside of 13.9% (page 50-52).
Jubilant Current price:  The company, the largest food retailing chain in India, operates the Domino’s Pizza franchise
Foodworks INR1,441 in the country. It is strong in many areas, including scale, integrated operations, cost discipline,
JUBI IN Target price: and delivery.
INR1,550
 Our survey results show that the habit of ordering online food has increased substantially.
Buy Up/downside:
7.5%
Pizza is the favourite order – good news for Jubilant.
 Despite the high base, we believe SSSG momentum will stay strong. Our target price of
INR1,550 implies upside of 7.5% (page 50-52)
Current price:  Nestle India’s focus on health and wellness is reflected in new product launches. The long-
Nestle India
INR10,787 term growth strategy is based on volume and innovation.
NEST IN
Target price:
 The survey results show that a substantial portion of urban consumers are very conscious
INR12,600
about their diet, health and nutrition. Premiumisation potential in nutrition and packaged food is
Buy Up/downside:
16.8%
also high, which should benefit Nestle, in our view.
 We have a target price of INR12,600, which implies upside of 16.8% (page 50-52).
Current price:  Dabur India’s core focus is Ayurveda (herbal products) and natural products, which is a rising
Dabur India
INR402 trend with Indian consumers. Its competitive strategy prioritises volume growth.
DABUR IN
Target price:
 Our survey results show that consumers are willing to switch to natural products if introduced
INR480
by their trusted brand. The majority are willing to pay a premium, which we believe should
Buy Up/downside:
19.4%
bring Dabur significant benefits.
 We have a target price of INR480, which implies upside of 19.4% (page 50-52).
Reliance Current price:  Reliance Industries is one of the largest companies in the organised retail market and the
Industries INR1,390 fastest-growing player in the grocery segment (CAGR of 37% over FY16-19e).
RIL IN Target price:
 It currently has 585 stores across the country and is looking to scale up its three grocery
INR1,500
formats – Reliance Smart, Reliance Fresh and Reliance Market. We forecast the grocery
Buy Up/downside:
7.9%
business to grow at a 22% CAGR over the next three years.
 We have a target price of INR1,500, which implies upside of 7.9% (page 50-52).
Priced at 2 April 2019

Source: Bloomberg, HSBC estimates
4
April 2019
Key Buy-rated investment ideas
Current price:  The stock has become cheap on the back of macro and forex headwinds, which could pose
Samsonite
HKD26.00 challenges for Samsonite’s growth in the short term. Still, we believe in Samsonite’s long-term
1910 HK
Target price: growth story and find the valuation compelling.
HKD32.00
 Our survey results support the idea that price conscious consumers prefer more affordable
Buy Up/downside:
23.1%
brands over higher end, more expensive brands. We see potential for premiumisation in India
as consumers trade up on luggage.
 We have target price of HKD32.00, which implies upside of 23.1% (page 50-52).
Current price:  We are optimistic about Puma’s ability to exceed its guidance for top-line growth in 2019,
Puma
EUR527.00 particularly as it has opportunities to grow across the world (notably in China and the US), has
PUM GR
Target price: a solid pipeline of new products to launch in fall 2019, and may have signed new initiatives
EUR625.00 and sponsorship agreements recently.
Buy Up/downside:
 Our survey results show that Puma is more popular in India than it is in other key markets we
18.6%
have surveyed. The strength of the sportswear market and recent initiatives by the government to
support fitness bode well for sportswear brands in India.
 We have a target price of EUR625.00, which implies upside of 18.6% (page 50-52).
Samsung Current price:  Samsung Electronics has a mandate to devote its resources to maintain its top brand value in
Electronics KRW45,750 India’s smartphone market. 32% of the respondents owned Samsung branded smartphones.
005930 KS Target price:
 Samsung is defending its brand value through an outstanding price-quality dynamic over other
KRW52,000
high-end competitors.
Buy Up/downside:
13.7%  We have a target price of KRW52,000, which implies upside of 13.7% (page 50-52).
Current price:  Xiaomi’s high-cost performance product features meet consumer demand in emerging
Xiaomi
HKD11.24 markets. The company is expanding its product portfolio into the Internet of Things (IoT) and
1810 HK
Target price: lifestyle segments.
HKD15.10
 Xiaomi is following the same model it used in China by initially focusing on the online sales
Buy Up/downside:
34.3%
channel and gradually extending its offline network. Accumulating a comprehensive user base
is an essential step for Xiaomi toward monetising its Internet services business.
 We have a target price of HKD15.10, which implies upside of 34.3% (page 50-52).

5
April 2019
Ratings, valuations and target prices
Key stock ideas

Mkt Cap Current Target Rating Upside ______ PE ______ Earnings growth _ _____ ROE _____
Company Ticker Currency (USDm) Price Price Downside 2020e 2021e 2020e 2021e 2020e 2021e
Avenue Supermarts* DMART IN INR 13,512 1,493 1,700 Buy 13.9% 71x 54x 33% 32% 21% 24%
Jubilant Foodworks* JUBI IN INR 2,750 1,441 1,550 Buy 7.5% 51x 41x 28% 24% 29% 29%
Dabur India* DABUR IN INR 10,298 402 480 Buy 19.4% 38x 33x 18% 17% 27% 27%
Future Retail* FRETAIL IN INR 3,404 467 480 Hold 2.8% 25x 24x 27% 6% 23% 20%
Reliance Industries* RIL IN INR 127,751 1,390 1,500 Buy 7.9% 17x 15x 29% 13% 14% 14%
Nestle India# NEST IN INR 15,083 10,787 12,600 Buy 16.8% 51x 44x 21% 16% 49% 49%
Puma# PUM GR EUR 8,897 527 625 Buy 18.6% 31x 24x 36% 26% 14% 16%
Samsonite# 1910 HK HKD 4,740 26.00 32.00 Buy 23.1% 15x 14x 29% 12% 15% 15%
Samsung Electronics# 005930 KS KRW 240,021 45,750.0 52,000.0 Buy 13.7% 11x 8x -34% 29% 12% 14%
Xiaomi# 1810 HK HKD 24,690 11.20 15.10 Buy 34.3% 19x 13x 37% 43% 15% 18%
#FY end is December and the estimates correspond to 2019e and 2020e.
*FY end is March and the estimates correspond to FY2020e and FY2021e.
6
April 2019
Related research
Recommended reading...
 India Grocery Retail: Finally, a winning formula: the right mix of scale and value, 4 July 2017
 India Consumer: What you can still buy, 21 January 2019
 Avenue Supermarts (DMART IN): Margin dip concern myopic, contrarian Buy rating,
18 March 2019
 Jubilant Foodworks (JUBI IN): Roaring ahead, 12 May 2018
 Nestle India (NEST IN): Value creation journey continues, 12 May 2018
Previous reports on Anatomy of the Consumer series

 UK: Anatomy of the Consumer 2019: Evolution of issues, 16 January 2019
 US: Anatomy of the US luxury consumer: US Holiday Deluxe, 3 December 2018
 Mexico: Anatomy of the Consumer: What do Mexican consumer want, 26 November 2018
 Brazil: Anatomy of the consumer: What do Brazilian consumers want, 13 April 2018
 Indonesia: Anatomy of the Consumer: Optimists, but no big spenders here,

18 February 2019
 South Africa: Anatomy of the Consumer: Consumers are worried, 22 October 2018
 Russia: Anatomy of the Consumer: Feeling the pinch, 27 November 2018
 Poland: Anatomy of the Consumer: Optimism peppered with caution, 23 January 2019
 China: Anatomy of the Consumer: What young, wealthy Chinese aspire to now,
6 September 2016
7
April 2019
Meet India’s upbeat,

aspirational shoppers
A few consumer companies have flagged their concerns about a

possible temporary slowdown in consumption. However, the results
of our proprietary survey of urban middle-class consumers tell a
different story. These consumers believe they will earn more and
spend more in the next 12 months. They also prefer to shop in
modern supermarkets and really like ordering pizza for home
delivery. The survey findings also provide insights into online retail
trends, the increase in awareness about healthy lifestyles, and
product premiumisation. We also reveal what the survey results tell
us about autos, air conditioners and global lifestyle brands.
More pizza, please
We asked more than 1,000 consumers living in major cities in India 50 questions about their
The group is a bellwether for
spending habits. Their annual household income is above INR700,000 (USD10,000), which
consumption trends in India
makes them members of the urban middle- to upper middle-class demographic – nearly a
quarter of the whole middle class – a bellwether for consumption trends and behaviour.
The results are clear – these consumers are upbeat about the economy over the next
12 months. They expect to see healthy growth in their annual income and plan to spend more
money on retail products. The survey findings provide us with insights into a range of consumer
trends – from grocery shopping, dining out and ordering food online, to natural products,
premiumisation, autos, luxury goods, and mobile phones. We now look at the main findings of
the survey and what surprised us.
The surprises
 Recent comments by some consumer companies have suggested that there will be some
slowdown in the consumer sector in the coming quarter. Our survey results suggest that
urban consumers are upbeat about the next 12 months and the relative slowdown could be
temporary and may not last for the entire year 2019.
 In major cities, there is clearly a growing appetite for online grocery shopping, although it’s
not yet as popular as going to the supermarket. This contradicts the widely held view that
online business models will struggle. People like the convenience and the prices, too.
 Pizza is the most popular dish ordered for home delivery, beating even Indian cuisine.
Chinese food comes in third.
8
April 2019
 The majority of the respondents said that they are highly likely to consider buying a natural
personal care product. Natural products are a growing force in the market.
 India has one of the world’s highest incidences of diabetes. The middle-class consumer is
turning much more health conscious and is willing to spend accordingly.
 Another finding that surprised us was that “brand” was the second preference when it
comes to making decision about buying an air conditioner. Features topped the list.
 Our respondents are highly aspirational but also quite realistic in terms of how far their
income will stretch. They really want to buy Apple products, but their willingness to pay a
premium for them is low.
Key takeaways
Incomes are expected to rise

Consumers are upbeat
about their income  80% of the respondents are optimistic about the economy for the next 12 months; 45% are
very optimistic.
 41% expect their income to increase by more than 10% and another 39% expect an
increase of at least 5% over the next 12 months.
Grocery retail: most prefer supermarkets

Online threat should not be
taken lightly  75% prefer to buy a significant proportion of their groceries from large, modern
supermarkets. Superior discounts, a large range of products, and the availability of fresh
food items are key attractions.
 Online spending on groceries is rising. Convenience is the main attraction, but ticket sizes
tend to be lower. Home care and personal care items are the main products purchased.
 Neighbourhood stores are least preferred and consumers spend the least in this format.
Natural products are a rising force

Natural products are a
rising force  Nearly 70% said that it was highly likely they will choose a natural variant of skin care, hair
care and oral care products if their trusted brand offered these.
 Respondents also believe that it is critical that claims made by natural products come with
scientifically proven benefits. They prefer large national and multinational brands.
 Most consumers buy natural products in supermarkets or online.
Awareness of health and wellness is rising

Consumers are becoming
more health conscious  About 40% of the respondents exercise, monitor their nutritional intake, and are
calorie conscious.
 Our survey findings also show that people prefer established national and multinational
brands over local brands and, as with natural products, want health claims to be backed by
scientific studies.
Consumers are willing to pay a premium for several product categories

Packaged foods, skin and
beauty care have the most  Premiumisation is a structural trend in India, driven by the growing aspirations of the middle
premiumisation potential class as income levels rise.
 Our survey results indicate that categories, such as packaged food and personal care, have
the most potential for premiumisation, ahead of home care products. Within home care,
detergent is the main category where consumers see merit in paying a premium.
9
April 2019
Ordering food is fast becoming a phenomenon

Ordering food is a rising
phenomenon  About 40% of the respondents order food at least once a week. They believe their online
food orders have increased significantly over the past two years.
 Indian cuisine is the most popular, but pizza is the largest single category of food ordered.
Chinese food is the third largest category.
 Consumers want value and per-person spending is less when ordering food compared to
dining out.
Air conditioners: penetration levels are high at higher income levels

 With 90% of the respondents having one or more air conditioner (AC) units, they are a
Features are more important
than brand and risk from
necessity more so than a luxury for upper middle-class consumers.
Chinese brands is limited  Product features, brand and pricing are three highest rated buyer considerations in making
a purchase decision.
 A large part of buyers do not wish to buy an AC unit from a Chinese brand or expect significant a
discount on price on a comparable basis, which we believe is difficult to offer in this category.
Autos: aspiration to own a car is high

Aspiration to own a car is
high, especially a SUV  More than 85% of the respondents who don’t own a car aspire to buy one irrespective of
improving public transportation. Importantly, the preference for sport-utility vehicle (SUV)
models is clearly high as the segment continues to gain in popularity.
 Very few of the respondents expressed a lack of aspiration to own a car due to taxi
aggregators, such as Ola and Uber.
 Interestingly, two-wheeler (2W) survey results point to a significantly high propensity to
upgrade. The majority of the respondents aspire to buy a high-powered scooter or a
premium motorcycle.
Smartphones: aspiration is much stronger than the willingness to pay a premium

Aspiration to own an Apple
product is high, but…  99% of the respondents own a smartphone. The most popular brand is Samsung (32%);
however, the aspiration to own Apple, Google or Oneplus phones appears to be high.
 However, about 25% of the respondents who are eager to buy an Apple iPhone as their
next smartphone are willing to pay only USD150-425, well below the price of most iPhones;
c30% don’t intend to spend more than USD850.
Global lifestyle brands

Consumers have a
strong association with  American Tourister, VIP and Samsonite were the three most preferred luggage brands.
European brands The first two brands are in the affordable price range, indicating that consumers are price
conscious, in contrast to the other global surveys that we have conducted.
 73% of the respondents are willing to buy European luxury products, implying Indian
consumers already have a strong association with these brands.
 11% bought European luxury brands only when abroad, while close to half liked to
purchase the brands in India and overseas.
 Similar to all our global surveys, Nike (NKE US, USD84.47, Buy) and adidas (ADS GR,
EUR223.55, Buy) are the preferred brands in sportswear for Indian consumers.
10
April 2019
Know your respondent

Gender Age group
The survey consisted of
respondents with an annual
gross household income of
INR700,000 or above,
representing the top c25% of 12%
India’s middle class 18 - 34
40% 44%
35 - 54
60%
55 + 44%
Female Male
Source: HSBC, Toluna. Number of respondents: 1,048, 3 March 2019 Source: HSBC, Toluna. Number of respondents: 1,048, 3 March 2019
Region
North 26%
31%
South
East
West 9%
34%
Source: HSBC, Toluna. Number of respondents: 1,048, 3 March 2019
Annual gross household income Household size
Over INR3.0m 8%
INR1.6m to INR2m 9%
1%7%
18%
INR2.0m to INR 3.0m 12% 21%
22%
INR1.0m to INR1.6m 33%
31%
INR 0.7m to INR1.0m 37%

1 2 3 4 5 More than 5
0% 10% 20% 30% 40%
11
April 2019
A bellwether for consumption trends
Nearly one-third of India’s population resides in urban areas, but this segment is responsible for
60% of the consumption of fast-moving consumer goods (FMCG).
Our survey covers the urban middle- to upper middle-class demographic – nearly a quarter of
The share of discretionary
consumption in India has
the whole middle class – a bellwether for consumption trends and behaviour. This segment is
increased significantly also the key to rising discretionary consumption in India.
Discretionary consumption has increased significantly
Source: CEIC, HSBC
12
April 2019
Demand outlook, the cycle

and equity strategy
 Few consumer companies have highlighted concerns about a near-

term slowdown
 The major concerns are the rural sector, destocking and a high base
effect from last year
 However, our survey findings show that wealthier urban consumers
are optimistic about the next 12 months
Amit Sachdeva*
No significant risk of a sustained slowdown
and Retail Analyst
HSBC Securities and Capital Recent comments by consumer companies, including Dabur, suggest that growth has slowed in
Markets (India) Private Limited the March quarter. The main factors are distress in the rural sector, lukewarm urban demand,
+91 22 2268 1240 liquidity issues in the trade channel, which has led to destocking, and the base effect from last
Rahul Battulwar* year. This is probably affecting the lower end of the consumer market, in our view.
Analyst
HSBC Securities and Capital Given that this is an election year, there is a focus on boosting rural and lower middle-class
Markets (India) Private Limited
rahulbattulwar@hsbc.co.in incomes, a theme we believe will continue after the election. The government has announced
+91 22 6168 1224 assistance for low-income groups and farmers, but this is yet to be reflected at the retail level.
* Employed by a non-US affiliate of HSBC Investors are wondering if the slowdown is broad-based and whether it will have much impact
Securities (USA) Inc, and is not registered/ on sales volumes, the key metric in the consumer sector for a company’s valuation. We believe
our survey results shows that these concerns are overplayed. Urban consumers in the higher
income bracket – the drivers of discretionary spending – are largely optimistic about the outlook
for the next 12 months.
Urban consumers in the
higher income bracket are The survey covered c1,000 respondents with an annual household income level of INR700,000
largely optimistic and above. This means our respondents are members of the urban middle- to upper middle-
class demographic – a bellwether for consumption trends and behaviour. This segment is also
the key to rising discretionary consumption in India.
The message from our survey was clear: It found that 80% of the respondents are optimistic
about the economy for the next 12 months and 45% are very optimistic. Some 41% expect their
income to increase by more than 10% and another 39% expect an increase of at least 5% over
the next 12 months. Only 7% feel pessimistic about their economic circumstances.
The charts based on some of the answers to the key questions on the next two pages help tell
this story. We then discuss other data points that support out positive view about consumption.
13
April 2019
Q: How do you feel about the economy for the next 12 months?
Quite pessimistic 2%
Slightly pessimistic 5%
Roughly the same 14%
Slightly optimistic 35%
Very optimistic 45%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

80% of the respondents Q: How do you expect your income to change over the next 12 months?
expect a 5-10% rise in their
income in the coming year
I am uncertain 7%
Increase between 0% to 5% 12%
Increase between 5% to 10% 39%
Increase by more than 10% 41%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Q: What do you want to spend your money on over the next 12 months?
Two wheelers (motorcycle or a scooter) 3%
Entertainment such as movies, fun parks, theatres etc., 5%
Gems and jewellery 6%
Home appliances 6%
Apparels and accessories, personal grooming 8%
Premium phones/gadgets 8%
Home improvement and decorations 9%
Buying a car 9%
Buying a house or saving for buying a house 11%
Education and learning for self/children 16%
Domestic/Overseas Travel 18%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
14
April 2019
Travel, eating out and Q: Where do you cut spending when the money is tight (first choice)?
premium goods are
candidates for reduced Others 2.1%
consumption if
Household 9.1%
earnings shrink
Apparel 9.5%
Entertainment 16.3%
Eating out 16.5%
Premium goods and foods 17.5%
Traveling for leisure 29.0%
0% 5% 10% 15% 20% 25% 30% 35%

The RBI’s consumer confidence survey index

Consumer’s future expectations index recorded a strong uptick to reach at its highest since
November 2016, as per the results of the survey conducted in December 2018. The RBI’s future
expectations index also reflects optimism about the general economic situation and
employment. Respondents’ one-year expectations on income levels increased significantly to a
five-year high and employment expectations also surged m-o-m.
RBI consumer confidence index also suggests consumer confidence has inched up
60.0
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
Mar-13
Jun-13
Mar-14
Jun-14
Mar-15
Jun-15
Mar-16
Jun-16
Mar-17
Jun-17
Mar-18
Jun-18
Sep-12
Dec-12
Sep-13
Dec-13
Sep-14
Dec-14
Sep-15
Dec-15
Sep-16
Dec-16
Sep-17
Dec-17
Sep-18
Dec-18
General economic situation

Source: Reserve Bank of India
The HSBC view

Our economists also believe that the economy is in good shape, with GDP growth expected to
improve over the next few years. The RBI has announced a change in stance from ‘calibrated
tightening’ to ‘neutral’ and delivered a 25bp rate cut to 6.25% at its February meeting, citing
benign inflation. HSBC economist Pranjul Bhandari expects a 25bp rate cut at the RBI’s April
meeting and an additional 25bp cut in June, taking the policy repo rate to 5.75%, followed by a
pause (see RBI eases, more to come, 7 February 2019, and India: The great inflation escape,
29 March 2019).
15
April 2019
GDP growth is expected to be resilient
9%
8.2%
8% 7.4%
7.2% 7.2% 7.3%
7%
6%
5% 4.5% 4.3%
4.1%
4% 3.6%
3.6%
3%
FY17 FY18 FY19e FY20e FY21e
GDP growth % y-o-y CPI Inflation % y-o-y
Source: CEIC, HSBC estimates
Equity strategy thoughts
Four push and pull factors for the consumer sector

 Expectations for volume growth, earnings growth and valuations
 Whether the market’s preference for defensive qualities is changing

 Whether changes in consumer preferences or any other disruptions are emerging
 How companies are shaping their portfolios to secure long-term growth
The first two usually top the investor agenda. The sector has performed strongly in the last three
years, leading to a significant expansion of valuation multiples. This has raised the long-term
earnings growth expectations embedded in the valuations significantly. Any perceived
slowdown in volume or earnings growth could weigh on the sector.
Our equity strategy team recently moved India to overweight (from neutral) in a regional context.
We also think that risk tolerance is expected to rise and investors should prepare for a bull
market (see India Equity Strategy: Learn from history – get ready for a bull run). In this context,
consumer staples could underperform the market, but consumer discretionary is well-placed to
enjoy strong growth.
16
April 2019
Grocery retail
 We see this as an attractive long-term growth opportunity, driven by

the rise of modern trade
 Our survey results show that consumers prefer to shop at
supermarkets
 Online shopping is on the rise, although the basket size is quite small;
offline players need an omni-channel strategy to mitigate the risk
Grocery retail sales in India are worth cUSD400bn a year but organised food and grocery stores
Amit Sachdeva*
India Strategist and Consumer account for only c3% of sales. The balance is sold through traditional mom-and-pop stores.
and Retail Analyst
HSBC Securities and Capital
While traditional retail is growing at 9-10% a year, the modern retail channel is increasing at
Markets (India) Private Limited nearly 20%, driven by changing consumer preferences. The key question for the sector is
+91 22 2268 1240 whether online sales have the potential to disrupt the rise of organised retail.
Rahul Battulwar*
Analyst
HSBC Securities and Capital Food and grocery contributes around two- Organised stores contribute only 3% to
thirds of India’s total retail market (FY16) total grocery retail spend (FY16)
rahulbattulwar@hsbc.co.in
+91 22 6168 1224
Others 3% Food and Grocery 3%
Footwear 2% Pharmacy & Wellness 10%

Securities (USA) Inc, and is not registered/ Home & Living 10%
Pharmacy & Wellness 3%
Home & Living Others 12%
4%
Apparel & Accessories 22%
Consumer Electronics 6%
Consumer Electronics 25%
Jewellery & Watches 8%
Jewellery & Watches 27%
Apparel & Accessories 8%
Footwear 40%
Food and Grocery 67%
0% 10% 20% 30% 40% 50%
Organised food and grocery 0% 20% 40% 60% 80%
stores account for only about
3% of sales Source: Avenue Supermarts IPO prospectus Source: Avenue Supermarts IPO prospectus
17
April 2019
Supermarkets are the preferred choice

 87% of the respondents buy most of their groceries from supermarkets, followed by
ordering online (c70%).
 Cart sizes are also higher in supermarkets – 78% of the respondents spend a minimum of
INR1,000 – compared to online and neighbourhood stores.
 Key factors for buying from supermarkets include availability of fresh produce, discounts,
pricing, and the wide range of products.
 The convenience of home delivery is the key appeal for e-commerce, closely followed by
finding better prices.
 Neighbourhood stores have limited product choices and prices tend to be higher.
87% of the respondents buy a Q: Where do you buy most of your groceries?
significant amount of their
100%
groceries from supermarkets 13%
(first or second choice) 29%
80%
58%
45%
60%
29%
40%
26%
20% 42% 42%
16%
0%
Supermarkets Order online Neighbourhood stores
First choice Second choice Third choice
Lower ticket size is the key Q: When the cart size is a minimum Q: Cart size when buying from a
deterrent in the scalability of INR1,000? supermarket?
convenience store models
Less than
Neighbourhood mom and INR500
34% More
pop stores 4% INR500-
than
INR3,000 INR999
23% 18%
Supermarkets/Organised
78%
stores
INR2,000
Online (Amazon, Flipkart, - INR1,000
70%
Big Basket, Grofers) INR3,000 -
26% INR1,999
29%
0% 20% 40% 60% 80%100%
18
April 2019
Q: Cart size when buying groceries online? Q: Cart size when buying from
neighbourhood stores?
Less than More
More INR500 than
7% INR2,000 Less than
than INR3,000
INR500- - INR500
INR3,000 6%
INR999 INR3,000 36%
20%
Cart sizes are substantially 23% 9%
higher when the respondents
buy groceries from
INR1,000
supermarkets INR2,000
-
-
INR1,999
INR3,000 INR1,000 19%
24% - INR500-
INR1,999 INR999
26% 30%
Why supermarkets are preferred to e-commerce

 Product assortment: Supermarkets offer a larger product selection than e-commerce stores.
The availability of fresh produce and the opportunities for impulse shopping are also important.
 The key deterrents for online shopping are the delivery fees, the lack of physical display of
products, and the fear of products being mishandled.
 Skin care, beauty and home care are the preferred categories bought online. As these are
typically higher margin items, a retailer’s ability to provide discounts also tends to be higher.
Product assortment and

Q: What encourages you to buy groceries Q: What encourages you to buy groceries
from supermarkets? online?
pricing are the key reasons
why the respondents choose Store experience 11%
to buy from supermarkets
Combining it with mall
12%
outing
10%
Location 13%
14% 38%
Product assortment 19%
Discounts/offers/best
19% 38%
competitive prices
Availability of fresh
27%
produce
Pricing/discounts Convenience
0% 5% 10% 15% 20% 25% 30% Shopping experience Product assortment
19
April 2019
Q: What discourages you from buying groceries online?
Taking delivery and final audit 9%
Searching for products 11%
Delivery time 15%
Fear of mishandling or missing items 18%
Inconvenience of no physical display and inability to

21%
impulse purchase
Minimum cart size to qualify for free delivery 25%
0% 5% 10% 15% 20% 25% 30%

Q: Which of the following items are you most likely to buy online?
The minimum cart size
required to get free delivery Bakery items 5%
was an issue
Dairy items 8%
Fruits and vegetables 11%
Body wash 11%
Staple food 16%
Home care (detergents and cleaners) 24%
Hair, skin care and beauty products 26%
0% 5% 10% 15% 20% 25% 30%

Private labels – dairy and staples lead

 As grocery retail is a low-margin business, the ability to increase the sales of private labels
can be the key to higher margins. Respondents’ willingness to switch to private labels was
highest in dairy (31%) followed by staple food (26%), with home care the third choice.
 Supermarkets as well online players already have their own brands in staple foods, such as
wheat flour, rice, and pulses.
 However, the willingness to switch to private labels was much lower in personal care
products as consumers go for trusted brands.
20
April 2019
Q: In which of the following categories are you most likely to switch to a store brand?
Body wash 13%
Savoury snacks and biscuits 16%
Dairy, staple food and Beauty and Skin care 17%

homecare are the key
candidates for store brands Hair Care 18%
Home care 20%
Staple food 26%
Dairy 31%
0% 5% 10% 15% 20% 25% 30% 35%

Key stocks
Avenue Supermarts (DMART IN, Buy, TP INR1,700)

We like Avenue Supermarts’ business model. It operates primarily through supermarkets
(average store size of c30,000 sq ft) and has positioned itself as the value retailer of choice in
consumers’ minds. DMART uses its scale to achieve the best prices, while keeping its costs
low. We see pricing as the key competitive advantage, as reflected by its best-in-class
profitability among grocery retailers.
Our survey results corroborate this. Most respondents spend the most money in supermarkets,
DMART is a value retailing
which offer a wider range of products and better pricing. While consumers don’t attach too much
leader and its low-cost
business model is key to value to the in-store experience, they seek better value in their grocery basket. In this regard,
its success Avenue Supermart stands out.
Supported by its large scale and strong brand, we think DMART is well positioned to launch
private labels in some categories, where margins are higher. One area where we believe
DMART can improve is the amount of fresh produce it offers.
The survey findings also suggest that convenience and prices are key attractions for online
grocery shopping. DMART Ready stores already offer the convenience of online shopping, so
we believe pure play online grocery operators, which have smaller ticket sizes and high delivery
costs, are not a sustainable threat to DMART.
DMART’s sales per sq ft have been impressive
12,000
10,000
8,000
6,000
4,000
2,000
-
1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19
Quarterly sales/sqft (INR)
Source: Company data, HSBC
21
April 2019
Transaction size per bill for DMART
1,200 1,095 1,117

1,013
958
1,000 877
774
800 692
600
400
200
-
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Transaction size per bill (INR)
Future Retail (FRETAIL IN, Hold, TP INR480)

Future Retail runs the Big Bazaar chain of supermarkets, which we see as the main driver of the
company’s retail business, provided it can sustain a respectable SSSG at its large format stores.
Future Retail also runs a chain of smaller convenience stores under the Easy Day brand. It
plans to expand this chain; however, in our view, the store-level economics and consumer
preferences are not conducive to adding value. Consumers tend to spend much lower amounts
in these types of neighbourhood stores, as indicated by our survey results.
Rakesh Sethia* Reliance Industries (RIL IN, Buy, TP INR1,500)

Analyst, India Oil & Gas, Reliance Retail is one of the largest companies in the organised retail market, with a presence
Chemicals and Telecoms
HSBC Securities and Capital in groceries, fashion & lifestyle, and consumer electronics. RIL is the fastest-growing company
rakesh.sethia@hsbc.co.in
in the grocery segment.
+91 22 2268 1245
RIL has a two-pronged approach to growing its grocery business. Reliance Smart, the
* Employed by a non-US affiliate of HSBC supermarket format, and Reliance Fresh, a neighbourhood store concept, follow the value
Securities (USA) Inc, and is not registered/
qualified pursuant to FINRA regulations retailing model by offering competitively priced products. It also has a cash & carry format,
Reliance Market, which serves ‘mom-n-pop’ (Kirana) stores.
RIL is looking to scale up these formats in the coming years. It currently has 585 stores across
the country, and RIL's grocery business has grown at a CAGR of 37% over FY16-19e and we
Reliance Retail is the fastest-
growing company in forecast this will rise to a CAGR 22% over the next three years.
grocery segment
We have a Buy rating on RIL. Its energy business continues to generate strong free cash flow and
the growth outlook for Jio, its telecom operation, remains strong (See Multiple levers of growth in
play,18 January 2019, and Five surprises that could play out in 2019, 3 December 2018).
22
April 2019
Quick service restaurants
 Online food orders have increased significantly, driven by the rise of

food delivery start-ups
 Pizza is the favourite dish for hungry consumers
 Timely delivery, freshness, taste, and packaging standards are key;
Jubilant Foodworks excels in these areas
Amit Sachdeva*
A fast-growing industry
and Retail Analyst
HSBC Securities and Capital The sales value of India’s food service industry was put at USD54.4bn in 2017, with the top
Markets (India) Private Limited cities contributing c40%. In that context, food chains (USD3.8bn) and quick service restaurants
+91 22 2268 1240 (USD1.7bn) are relatively newcomers; however, they are growing fast, driven by the rise in the
Rahul Battulwar* consumer preference for ordering food online and the wide range of food delivery apps.
Analyst
rahulbattulwar@hsbc.co.in What have we learnt from the survey results?
+91 22 6168 1224
 Around three-quarters of the respondents believe that they have increased the number of
Securities (USA) Inc, and is not registered/ online food orders over the last two years; 44% order food at least once a week.
 This trend has been driven by the substantial increase in smartphone penetration and the
rising popularity of food aggregators, such as Swiggy, Zomato, UberEats and Foodpanda.
 Our survey findings show that 63% of the respondents prefer to use food delivery apps,
followed by specific restaurant apps.
 Jubilant Foodworks, the largest food chain in India that runs the Domino’s Pizza franchise,
is well placed to benefit, in our view. Its share of online orders to delivery sales increased to
73% in the most recent quarter from 41% in 2016; the contribution of mobile orders to
online orders has gone up to 88% from 38%.
44% of the respondents order

Q: How has your food ordering changed Q: How often do you order food?
over the last two years?
food at least once a week
Declined
Declined significantly I don't order food 3%
slightly 5%
Remained 4% Not more than once in six
Increased slightly 2%
the same months
33%
14%
More than once a week 18%
Not more than once in a

11%
month
Not more than twice a
22%
month
Increased significantly Once a week 44%

44%
0% 10% 20% 30% 40% 50%
23
April 2019
Q: How do you mostly order food?
Specific restaurant/food
18% 51% 31%
chain apps
Order directly from

restaurant over phone 19% 30% 51%
calls
Food delivery apps 63% 19% 18%
0% 20% 40% 60% 80% 100%

Choice 1 Choice 2 Choice 3
What do consumers look for while ordering food online?

 31% spend INR200-400 per person when ordering food.
 26% spend more than INR500 per person; 22% spend less than INR200.
 When dining out, 44% were willing to spend more than INR500 per person.
 Indian cuisine was the most widely ordered cuisine, but pizza is the most widely ordered single
category food, followed by Chinese dishes.
 The freshness of the food delivered is the most critical factor for customer satisfaction,
which is usually associated with timely delivery.
 The quality of the packaging is as important as timely delivery. Jubilant focuses on the
quality of packaging, where we think food aggregators have room for improvement, which
will likely increase their delivery costs.
Responses indicate that

consumers look for value Q: What is your per person spend when you dine out/order a food delivery?
when ordering food
Dine out 44% 20% 24% 10%
Order Online 26% 21% 31% 19%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
More than INR500 Between INR401-INR500 Between INR200-INR400 Between INR101-INR199 Less than INR100
24
April 2019
Pizza is the largest single Q: What do you order the most? Q: How important are various delivery
category of food, followed by factors for you?
Chinese dishes
Others 7%
Other 2%
Continental food 9% Delivery personnel

16%
hygiene
Burgers, wraps etc., 10%
Quality of packaging -
21%
neat/clean and hygienic
Chinese 14%
Timely delivery 21%
Pizzas 35%
Freshness of food
40%
Indian cuisines 49% (served hot, crisp etc.,)
0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40%

Jubilant Foodworks (JUBI IN, Buy, TP INR1,550)

Jubilant Foodworks operates Domino’s Pizza, the largest quick service pizza chain in India with
a network of c1,200 stores across 271 cities.
Over the last 8-10 quarters Jubilant has seen a strong turnaround in SSSG. This has been
helped by changing its strategy from deep discounts on selected days to “every day value”
offers. For instance, it started offering two medium-sized pizzas for INR199 each. This is in line
with what most of the respondents (c50%) look to pay per person when they order food online.
The key question for Jubilant is that whether the high SSSG is sustainable, now that its base
Jubilant’s strong SSSG is
likely to be sustainable
has normalised. We think the answer is yes. Jubilant is likely to be the key beneficiary of the
rapidly expanding food delivery market. It has competitive advantages in the areas that
consumers value and are willing to pay for, such as timely delivery and the freshness of food
delivered. Jubilant is also working out the economics for new formats, such as Chinese food,
which our survey points out is the third most ordered cuisine.
Contribution of mobile orders to delivery sales has grown rapidly for Dominos
100%
88%
83% 85%
90%
78%
80% 69% 69% 71%
68%
70%
54% 56% 73%
60% 68%
63% 65%
50% 41% 60%
57%
40% 49% 51% 51%
47%
44%
30%
20%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Average online order contribution to delivery sales Mobile Ordering sales contribution to overall online orders
25
April 2019
Dominos same-store sales growth has turned around since FY18

30% 26.5% 25.9%
25% 20.5%
17.8%
20% 14.6%
15%
10% 6.5% 5.5%
4.6% 3.2% 4.2%
5% 1.9% 2.9%
0% -3.2% -3.3%
-7.5%
-5%
-10%
Same store sales growth

26
April 2019
Premiumisation
 The aspirational middle class wants to consume superior products

as incomes rise
 This boosts revenue growth, improves margins and can potentially
unlock volume growth even in mature categories
 Our survey findings highlight several categories where the
premiumisation potential is high
Amit Sachdeva*
Onwards and upwards
and Retail Analyst
HSBC Securities and Capital India’s per capita income has grown at a healthy CAGR of 11.3% over 2007-18, according to
Markets (India) Private Limited IMF estimates. As income levels rise, the middle class tends to consume superior products.
+91 22 2268 1240 This not only benefits revenue growth for consumer companies but also helps margins and can
Rahul Battulwar* potentially aid volume growth as well. The structural trend of premiumisation will, however, have
Analyst different implications for different product categories, in our view. Our survey results shed some
Markets (India) Private Limited light on for what consumers are willing to pay a premium.
rahulbattulwar@hsbc.co.in
+91 22 6168 1224
What we have learnt from the survey findings?

qualified pursuant to FINRA regulations  31% of the respondents believe that higher priced skin care products offer commensurate
benefits, which indicates that the potential to offer premium products in this category is high.
This is also validated by respondents’ willingness to buy private labels was one of the lowest.
Majority of the respondents
believe personal care and  Packaged food was the second most preferred category where respondents believe that higher
packaged food offer most
priced products are better. Premium food products are usually associated with better taste,
benefits when higher price
is paid quality of ingredients, and packaging (e.g., chocolates).
 Home care products are least preferred in premium grocery products. However, within home
care, consumers ascribe a significantly higher value to laundry care (40%) followed by home
insecticides (24%) and then floor and toilet cleaners (c20%).
 The premiumisation potential for laundry care (detergents) is because premium clothes need
milder and more effective detergents. Premium detergent sales have been growing faster than
the mid-range and mass variants over the last few years.
27
April 2019
Q: In which categories do you believe that, if you pay a higher price, the products come
with commensurate benefits that you value?
Floor cleaners 9%
Detergents 9%
Body wash 11%
Hair Care 14%
Packaged Food 25%
Skin Care 31%
0% 5% 10% 15% 20% 25% 30% 35%

 24% believe premium home insecticides offer better results, indicating a willingness to pay
a premium for products that are safer and more effective.
 However, the inclination to pay a premium for floor and toilet cleaners is low. We believe
there is room for improvement in the functionality levels of higher priced variants.
Q: In home care, in which of the following categories do you think premium-priced

products offer better results?
Floor cleaners 18%
Toilet cleaners 20%
Utensil cleaners 20%
Home insecticides 24%
Laundry detergents and bars 42%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

 The respondents believe nutritional supplements and health drinks offer more benefits as they
directly benefit a person’s health; the premiumisation potential is higher in these categories.
 If we gauge the responses from male and females separately, the first choice remained
nutrition for both, the second most preferred choice for females was ready-to-cook
packaged food; however, for males, the second most preferred choice was health drinks.
 This reflects the value of premium ready-to-cook items, which can be great time savers and
also taste good.
28
April 2019
The respondents believe Q: For which types of packaged foods do you perceive premium products are
premium nutritional commensurate with the benefits?
supplements offer the most
benefits in the food category
Ice creams 8%
Beverages such as tea and coffee 9%
Biscuits and bakery 9%
Ready to cook items 12%
Dairy products 13%
Chocolates and confectionaries 14%
Health drinks such as packaged fruit juices 15%
Nutritional supplements 19%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Q: Preferences of female respondents Q: Preferences of male respondents

Ready to cook items
Chocolates and
14% such as soups, noodles,
confectionaries
popcorn etc.,
Health drinks such as Chocolates and
14%
packaged fruit juices confectionaries
Ready to cook items
Health drinks such as
such as soups, noodles, 15%
packaged fruit juices
popcorn etc.,
Nutritional supplements Nutritional supplements
20%
(including baby food) (including baby food)
0% 5% 10% 15% 20% 0% 5% 10% 15% 20%
Source: HSBC, Toluna. Number of respondents: 424, 3 March 2019 Source: HSBC, Toluna. Number of respondents: 624, 3 March 2019
 Within hair care, shampoos (first) and serums (second) and hair colours (third) are the top
three preferred products with premium appeal, while conditioners, styling wax and gels and
hair oils are the least preferred.
 In skin care, consumers believe premium facial creams and beauty products offer the most
benefits compared to face/body wash, and body lotions are expected to benefit the least.
Q: In hair care, where do you perceive Q: In skin care, where do you feel higher
higher price products are commensurate prices are commensurate with better
with better benefits? benefits?
Hair styling wax and gels 13% Body lotions 13%
Conditioner 13%
Body wash 14%
Serums 15%
Face wash 15%
Hair colours 15%
Beauty products 26%
Hair Oil 17%
Shampoo 27% Facial creams 33%
0% 5% 10%15%20%25%30% 0% 10% 20% 30% 40%

29
April 2019
Natural products
 The rise of Patanjali in the last five years has highlighted the rising
consumer preference for natural products
 Our survey results corroborate that consumers increasingly look for
natural variants and are willing to pay a premium
 We also find the large national and international brands have
advantages in this area
Amit Sachdeva*
Patanjali, an Indian consumer goods company, has shaken up India’s consumer goods market
India Strategist and Consumer by focusing on natural products. Rival companies have responded and sales of this category of
and Retail Analyst
HSBC Securities and Capital products are growing rapidly, especially in areas like food, skincare, and hair and beauty
Markets (India) Private Limited products. The question now is how much of a premium are consumers willing to pay and is this
+91 22 2268 1240 a long-term structural growth story?
Rahul Battulwar*
Analyst What have we learnt from the survey findings?
rahulbattulwar@hsbc.co.in  A significant proportion of the participants (68%) highlighted that they are highly likely to
+91 22 6168 1224
choose natural-based personal care products if these are offered by their trusted brand.
* Employed by a non-US affiliate of HSBC  Health supplements are the most appealing natural/herbal products, followed by skin care
qualified pursuant to FINRA regulations and hair care products for which there is an equal preference.
 Over the counter (OTC) medicine, body and hair wash were the least preferred categories
of natural products.
 We believe this situation is likely to continue to benefit health supplements, such as honey,
chyawanprash (a type of Ayurveda jam) and other food items, more than the OTC
medicine categories.
Q: How likely are you to choose natural-based products in skin care, hair care, oral care
etc., if your trusted brand offers them?
Very unlikely 1%
Somewhat unlikely 3%
Somewhat likely 28%
Highly likely 68%
0% 10% 20% 30% 40% 50% 60% 70% 80%

30
April 2019
Foods and facial care are the Q: In which category do natural/herbal products appeal to you the most?
most preferred categories for
OTC herbal drugs 6%
natural products
Body wash 8%
Hair wash 10%
Oral care 10%
Hair care (oils and conditioner) 14%
Skin creams/lotions 14%
Face wash 17%
Food supplements 21%
0% 5% 10% 15% 20% 25%

 e-commerce and supermarkets are the preferred channels for purchasing natural products
as they typically offer a wider range than other retailers, including the most up to date and
premium products.
 Close to half of the respondents are willing to pay a premium for natural products; a further
third are willing to pay a premium but only if products offer proven benefits.
Q: Where do you usually buy natural Q: Are you willing to pay a premium for
products? natural/herbal product variants?
Neighbourhood stores 14% 19% Willing to pay premium

Willing to pay
if there are proven
a premium
benefits and real
Individual brand 52%
ingredients
22% 21%
outlets/Khadi stores 29%
Ecommerce/order online 33% 26%
Supermarkets 31% 35%

Not willing to pay any premium
0% 20% 40% 60% and buy only if available cheaper
First choice Second choice 19%
 47% of the respondents believe that it is very important that natural products are backed by
For the majority of
respondents, it is important
scientifically proven benefits. Around one third also indicated that they are highly likely to switch
that natural products come to natural products if these are offered by their trusted brands.
with scientifically
 Large and established companies are more likely to be able to afford such scientific
backed benefits
research and studies. This, coupled with consumers’ willingness to trust product ranges of
the brand they use, is likely to present an entry barrier for new companies.
31
April 2019
Q: How critical it is that natural products come with scientifically proven benefits?
Not critical if the product is Ayurveda based 7%
Not critical as I think natural products are generally

15%
beneficial
Somewhat critical 31%
Very critical 47%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Key implications and stock idea
We think natural products represent a large and long-term growth opportunity. Large national
and multinational brands with a large scale can monetise these trends by launching their own
brand extensions. Exploiting channels, such as online and modern retail, will also help augment
growth, in our view.
Dabur (DABUR IN, Buy, TP INR480)

 Dabur’s core focus is Aurveda and natural products, which are a rising trend with Indian
consumers. The company aims to launch several new products exploiting its core strengths.
Having learnt its lesson after competing with Patanjali, its competitive strategy prioritises
volume growth. We think Dabur is the potential structural winner of the natural product and
Ayurveda theme.
 Dabur is one of the largest natural products brands in India and is in a better competitive
position than new entrants, in our view. A significant portion of the respondents trust
established brands and products that are backed by scientifically proven benefits.
 The willingness of the majority of the respondents to switch to natural variants in the food
and skin care categories was high if these were offered by their trusted brand. Dabur is
likely to benefit from this as the consumer trend for natural products continues to rise.
32
April 2019
Health and wellness
 With the rise in per-capita income levels, consumers are becoming

increasingly health conscious
 Active monitoring of nutritional food intake and the tendency to
consume healthier food bode well for packaged food companies
 Nestle is, in our view, well placed to benefit from these trends,
backed by its portfolio of nutritional and packaged food products
With growing per-capita income, consumers are becoming more conscious about their health
Amit Sachdeva*
India Strategist and Consumer and wellbeing and increasingly prefer healthier lifestyles, foods and beverages with more
and Retail Analyst
functional benefits.
+91 22 2268 1240
Key findings from our survey results
Rahul Battulwar*
Analyst
HSBC Securities and Capital  Urban consumers are more health conscious than we had expected. A large portion of the
rahulbattulwar@hsbc.co.in respondents said that they actively monitor what they consume and also exercise regularly.
+91 22 6168 1224 Those who do not actively monitor their nutritional intake are still conscious about what
they consume.
Securities (USA) Inc, and is not registered/  This not only implies that demand for healthier foods and beverages is likely to grow faster,
but also that consumers are likely to be willing to pay a premium.
 We also found that the respondents aged 35 years or older are more health conscious than
the younger respondents, signifying that people tend to pay more attention to their
wellbeing as they age.
Q: How health conscious are you?
I am not very health conscious 4%
I think being healthy is the new cool, it makes a personal

9%
statement, and I put lot of effort and resources into this
I exercise occasionally 14%
I exercise occasionally and I am conscious about what I eat 31%
I exercise regularly and actively monitor my nutritional

42%
intake
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

33
April 2019
 About 60% are conscious of the calorie content of products; however, only a quarter
actually follow a low-calorie diet.
Q: How calorie conscious are you?
Very conscious and actively follow a low-calorie diet 24%
Very conscious 24%
Somewhat conscious 38%
I make choices based on taste and do not monitor calories 15%
0% 5% 10% 15% 20% 25% 30% 35% 40%

 Surprisingly, c60% of the participants believe that they consciously eat balanced meals to
meet their protein and other nutritional requirements. This indicates an awareness of
necessary daily nutrition levels and an intention to achieve these requirements.
 One-third of the respondents believe that their regular meals do not cover their
nutritional requirements.
 A substantial portion of the higher income respondents felt that their daily meals are unable
to cover their nutritional needs, implying that the propensity to consume supplements is
higher as income levels rise.
Q: What is your perception of the nutritional value of your usual daily food intake?
I haven’t thought about this aspect 7%
I feel my meals and snacks are unable to cover all the

31%
nutritional needs such as proteins, vitamins and minerals
I consciously eat balanced meals and snacks to fulfill my

62%
nutritional and protein requirements
0% 10% 20% 30% 40% 50% 60% 70%

 We believe multinational (MNC) and large national brands are better placed to capture the
opportunities in the health and wellness products market as consumers have greater trust
in them.
34
April 2019
Q: Whose health claims on packaged food products do you trust the most?
I am more keen in the ingredients and not very brand

36%
conscious
I can trust store/private brands too 33%
I also trust large national brands 61%
I trust mostly established MNC brands 54%
0% 10% 20% 30% 40% 50% 60% 70%

Stock implications
Nestle India (NEST IN, Buy, TP INR12,600)

 Structurally, we view Nestle India as an opportunity on growth in India’s consumption as
per-capita income increases. Nestle India is likely to be the key beneficiary of the trends of
rising consumption of premium packaged food and consumer interest in nutrition as its
product portfolio is focused on the urban market and leans towards discretionary spending.
 Nestle India has become aggressive towards new product launches and innovation in its
ready-to-cook packaged food, chocolates, confectionery and nutrition product ranges. For
instance, in 2018, it launched a breakfast cereal brand NesPlus, nutritional supplements for
children (Ceregrow), and products for adults with specific nutritional requirements (e.g., high
protein diets, suitable for diabetics or dialysis patients).
 Nestle India will be a significant beneficiary of the rising health and wellness trend, in our view.
Our survey results show that the consumer’s willingness to trust product claims and pay a
premium for products is substantially higher for large national and multinational brands.
35
April 2019
Indian autos
 Discretionary expenditures on travel and premium phones are

gaining importance over vehicle purchases
 The aspiration to upgrade vehicles continues to drive replacement
demand
 SUV models and high-powered scooters are the most popular choices
Yogesh Aggarwal*
Key conclusions
Head of Research, India
Markets (India) Private Limited Vehicle purchases are not a high priority
yogeshaggarwal@hsbc.co.in In our survey nearly a sixth of the respondents said that expenditure on travel was their top
+91 22 2268 1246
priority. Expenditures on phones, new gadgets, and home decor are priorities for many others.
Vivek Gedda*
Analyst, IT Services & Autos
As discussed in Who needs a car when you can buy a phone (16 October 2018), we believe
HSBC Securities and Capital consumer behaviour has changed in recent years. The rise in e-commerce and the availability
vivekgedda@hsbc.co.in of financing has had a positive impact on the demand for products, such as air conditioners and
+91 22 6164 0693 smartphones. In our view, the shift in discretionary expenditure has slowed the growth in the
sales penetration of passenger vehicles.
Customers prefer to spend on travel and gadgets, leaving a lower share of discretionary
expenditure for vehicle purchases
Two wheelers (motorcycle or a scooter) 3%

Entertainment such as movies, fun parks, theatres etc., 5%
Gems and jewellery 6%
Home appliances 6%
Apparels and accessories, personal grooming 8%
Premium phones/gadgets 8%
Home improvement and decorations 9%
Buying a car 9%
Buying a house or saving for buying a house 11%
Education and learning for self/children 16%
Domestic/Overseas Travel 18%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
But buying their first car is an aspiration for many

More than 85% of the respondents who don’t own a car said that they aspire to buy one. There is
an increasing preference for the SUV segment (28.5%), followed by sedans (23.9%), hatchbacks
(19.8%), and entry cars (13.2%). Of the respondents who did not aspire to buy a car, nearly 5%
were discouraged due to poor road infrastructure and the limited availability of parking.
36
April 2019
For 61% of the respondents who did not aspire to own a car, traffic issues and the convenience
of taxi aggregators (Ola and Uber) were the key reasons. In our view, car hailing companies
(Ola and Uber) have impacted the growth of the auto industry by 3-4% in FY18-19 (see Bruised
with a thousand cuts, 6 March 2019.
Q. What would you want to buy as a first car? Why would you not buy a car?
30.0%
>85% of respondents aspired Nearly 5% of the respondents saw
25.0% 28.5% 23.9%
to buy a car infrastructure as a bottleneck
20.0% 19.8%
15.0% 13.2%
10.0% 5.8% 5.4%
3.4%
5.0%
0.0%
SUV Sedan Hatchback Entry car Ola / Uber / Traffic / Others
segment Public Infrastructure
transport issues
Aspiring to buy a car : product preference Not aspiring to buy a car : Key reasons
Motor scooters: a small but fast-growing segment

The survey showed that 31% of the respondents were keen to buy a high-powered scooter
(125cc). This is a small but fast-growing segment. It accounts for 20% of the domestic scooter
market and is seeing strong double-digit growth, compared to 2% YTD FY19 for overall scooters.
Some 23% of the respondents were keen to own a premium bike rather than a commuter
segment bike, which, in our view, indicates the aspiration to upgrade as per-capita income rises.
Q. Which two-wheeler would you prefer to own?
Scooter (100cc - Price less than INR60,000)

6% 12%
5%
Scooter - higher powered (125cc - Price > INR
65,000)
Super Premium Motorcycle (INR 100,000 +) 23%
Premium Motorcycle (INR75,000 to INR 31%

100,000)
Commuter Motorcycle (INR <65,000)
23%
None of these
A price premium of 10-20% for a like-for-like electric vehicle appears to be acceptable for two-
thirds of the respondents. The price of a like-for-like comparable e-scooter is INR40,000 higher
than the comparable standard model. As e-scooters become more commonplace, we think the
willingness to pay a higher premium will improve.
37
April 2019
Q. What is the maximum premium you can afford/are willing to pay for a like-for-like
electric vehicle?
10-15% 15-20% 20-30% More than 30% Less than 10%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Cars 30% 29% 20% 9% 12%
Two wheelers 36% 25% 15% 8% 16%
38
April 2019
Air conditioners
 With 90% of respondents having AC, it is a necessity more than a

luxury for upper middle-class consumers
 Product features, followed by brand and value, are the most
important considerations; the threat from Chinese brands is limited
 India’s room AC industry offers a multi-decade double-digit volume
growth opportunity
Shrinidhi Karlekar*
Penetration level
Analyst, Industrials
Markets (India)
Almost 90% of the respondents have one or more AC units at the place where they are currently
Shrinidhi.karlekar@hsbc.co.in living. While that number looks high – the national average is c6-7% – it makes sense as the survey
+91 22 6164 0689
sample was the upper 8-10% of India’s households in terms of income. More importantly, 60% of the
households that have air conditioners have two or more. High electricity bills and the availability of
Securities (USA) Inc, and is not registered/ alternatives for cooling needs (fans and air coolers) are key reasons for not owning an air
conditioner, according to the respondents who do not have air conditioners.
Inferences
1. Households earning INR700,000 per annum characterise AC buyers in India
2. Second or more time buyers represent a large constituent group of AC buyers (c40- 50%)
3. As incomes rise, the premiumisation of cooling needs from fans/coolers to air conditioners
even in relatively cool ambient temperature cities is evident
Q: How many AC units are installed at the Q: What are the key reasons for not
place where you currently live? owning an AC unit?
Reason for not owning an AC %
High electricity bill 71%
Cooling need well satisfied by fans/ air coolers 68%
Summer isn’t that harsh 53%
Prices of ACs are high for current income 36%
None 18% 11%
Live in a rented apartment and don’t want to spend on
One air conditioner installation costs 28%
Availability of power/ electricity 27%
Two 34%
Lack of consumer financing scheme 13%
37%
More than two Availability of product in near vicinity 8%
Any other 18%
39
April 2019
AC penetration level across cities as India’s annual sales of AC units and fans
indicated by the survey (FY18, millions)
100% 89% 91% 94% 96% 95% 96% 70

60
60
80% 67% 71%
50
60%
40
40%
30
20%
20
0%
10 6
Pune
Mumbai
Kolkata
Chennai
Bangalore
New Delhi
Hyderabad
Total Survey
0
Fans Air conditioners
Source: HSBC, Toluna. Number of respondents: 1,048, 3 March 2019 Source: Company data, HSBC
Buyer considerations
To gauge Indian AC buyers’ behaviour, we asked the respondents to rate the importance of six
considerations (1 being most important in ranking). Features offered by the AC unit apart from
the star rating came out as the factor with the highest importance and was followed by
characteristics, such as brand and value proposition.
Q: Which are the most important factors for you when buying an air conditioner?
Distributor’s suggestion 7% 8% 11% 17% 22% 36%

Brand reference from
9% 16% 16% 23% 22% 14%
someone you know
Availability of the product in
9% 11% 15% 22% 24% 19%
near vicinity
Features offered by the AC
33% 20% 18% 11% 9% 9%
apart from star rating
Pricing of the product 14% 23% 26% 15% 11% 10%
Brand 27% 21% 15% 12% 12% 13%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5 6
Risk of Chinese competition is less significant
Chinese products have caused considerable disruption in parts of India’s consumer market. We
have attempted to gauge the level of this risk in the AC category by asking what discount a
potential buyer would expect from a Chinese brand for a comparable product being sold for
INR35,000 by Korean, Indian and Japanese brands.
Around 30% of the respondents said they would not consider a Chinese brand when buying an
AC unit irrespective of the price (discount) being offered. Only 15% of the respondents do not
expect any sort of discount to consider a Chinese brand AC unit. A large portion of the respondents
expect significant discounts to switch to Chinese brands in buying an AC unit. We believe offering a
40
April 2019
material discount in this category is difficult due to low gross margin, low advertisement and sales
promotion done by incumbent companies coupled with fact that India is already exploiting China’s
economy of scale due to high import content in the manufacturing supply chain.
Q. Expected discount to consider a Typical margins of an AC company in India

Chinese AC brand?
INR' 000
35% Retail price 35.0
30% GST 7.7
30% Realisation of Distributor 27.3
Channel Gross Profit 3.3
25% OEM realisation 24.1
17% Cost of goods sold 19.3
20%
15% 15% Gross Profit 4.8
15% Gross Profit margin (%) 20%
11% 12% SG&A- Fixed 2.4
10% EBIT 2.4
EBIT margin (%) 10.0%
5%
0%
No 2,000 5,000 7,000 10,000 Won't
discount consider
Source: HSBC, Toluna. Number of respondents: 1,048, 3 March 2019 Source: HSBC
Conclusions
With air conditioners already being in the highest sales tax category (28% GST rate) and the
Energy Efficiency Ratio of products already high – two important factors determining pricing of
product apart from the commodity costs – we think the affordability of air conditioners in India
will keep improving in real terms due to increased localisation trends. We believe the numbers
in our survey point to a double-digit volume growth opportunity over the next decade as AC
becomes a necessity with rising incomes.
41
April 2019
Global lifestyle brands
 European luxury brands have made a favourable and strong

impression on urban consumers in India
 Nike and adidas are sportswear favourites; Samsonite falls behind
American Tourister in luggage preferences
 Aspiration for the iPhone remains high; however, it may not
necessarily translate into imminent demand for flagship models
Erwan Rambourg
It’s all about the brands
Global Co-Head of Consumer and
Retail Research
HSBC Securities (USA) Inc. Why we asked these questions
erwanrambourg@us.hsbc.com As this is the first time HSBC Global Research has conducted a consumer survey in India, we
+1 212 525 8393
were interested to see the consumer preferences for luxury, sporting goods, luggage, and
Sunil Rajgopal
Analyst, Global Telecoms
technology, particularly how Indian consumers perceived European luxury brands. We have
HSBC Securities (USA) Inc. asked most of these questions in other surveys (including China Deluxe in 2019 and US Holiday
sunilrajgopal@us.hsbc.com
+1 212 525 0267 Deluxe in 2018, among others), so we can see how India’s consumer preferences stack up
relative to those in the US, China, and many other countries.
Nicolas Cote-Colisson*
Head of European Telecoms
Equity Product
HSBC Bank plc
nicolas.cote-colisson@hsbcib.com What are the insights we gained from the survey?
+44 20 7991 6826
Luxury
* Employed by a non-US affiliate of HSBC 73% of the respondents in the survey said that they would buy European luxury products,
qualified pursuant to FINRA regulations highlighting to us that many consumers in India have already had a positive experience with
European luxury brands. Although Indian consumers do not drive luxury consumption to the
same level that Chinese and US consumers do, a positive brand perception can only bode well
for European luxury brands. Well over half said that they buy luxury products and like to
purchase European brands both abroad and in India. Another 28% said that they only purchase
these brands in India and 11% of the respondents only bought luxury products abroad, implying
that 89% are willing to buy European brands locally.
Of the c30% that do not buy European luxury products, over half were constrained by price – either
thinking that the price was not worth the quality (31%) or because they couldn’t afford them (24%).
For those that didn’t care about price, they preferred to spend their money on other things (39%).
Sporting goods
As in all of our consumer surveys globally to date, Nike (NKE US, USD84.47, Buy) and adidas
(ADS GR, EUR223.55, Buy) are the most preferred brands in sportswear for Indian consumers
(both with 51% of the respondents ranking them as one of their top three brand preferences). We
were surprised to see that Reebok and Puma (PUM GR, EUR533.00, Buy) had a strong showing
as well (44% and 37%, respectively), as these brands’ preference tends to vary significantly by
country. Reebok’s preference was the highest in India (44%) vs China, the UK, the US, and Brazil,
and Puma was the highest in India and Mexico (37% for both) compared to our other surveys.
42
April 2019
Reebok was most popular among those aged 55 years or older (59% vs 40% for millennials). Both
Reebok and Puma have sponsored many key cricket players and football teams in India, which
could explain the higher visibility they have in India relative to other countries.
Luggage
The top three most popular luggage brands were American Tourister (55%), VIP (a local brand,
49%), and Samsonite (36%). The top two most highly preferred brands were both at the more
affordable end of luggage brands, indicating a price consciousness that has not been as evident
in other consumer surveys we have conducted. The preferences were largely homogenous
across gender and age group. We were surprised to see that millennials preferred local brands
much more than Samsonite. Instead, the most popular brands for millennials were American
Tourister (55%), VIP (local, 48%), Safari (a local brand, 32%), Wildcraft (local, 28%), Aristocrat
(local, 24%) and then Samsonite (22%). In the other age groups, Samsonite came in second for
the respondents aged 55 years of older and third for the respondents aged 35-54 years old.
Rimowa and Tumi were both relatively unknown, with only 6% and 4% of respondents ranking
them as one of their top three preferred brands, respectively. By country, Samsonite’s brand
preference has generally been stronger in other regions and more affordable American Tourister
has usually fallen farther behind in preferences.
Smartphones
99% of the respondents owned a smartphone; of those 8% owned both a smartphone and a
feature phone. While Samsung clearly stood out with 32% of the respondents owning Samsung
branded smartphones, aspiration for Apple, Google and Oneplus branded phones appeared to be
high. While Apple branded smartphones appear to have higher aspirational value among the
respondents versus the Chinese consumers (see China Deluxe, 19 February 2019), this may not
necessarily translate into imminent demand; c25% of the respondents who indicated that they
wanted to buy an Apple iPhone for their next smartphone were only willing to pay between
INR10,000 and INR30,000 for their next smartphone – i.e., cUSD150-425, well below the typical
price range of most iPhones. An additional 30% were willing to pay no more than USD850. 62% of
the respondents upgrade their phones at least once every two years. The survey also indicates
that: a) men are more likely to a premium greater than 10% for their next smartphone than women;
b) millennials are more willing to pay at least INR30,000 for a smartphone (c40% vs 22% for the
respondents aged 55 years or older), and c) millennials were more likely to replace their phones
every year (29%) than respondents aged 55 years or older (3%) and aged 35-54 years (17%).
What are the implications?
Luxury
Anne-Laure Bismuth* For European luxury brands, India is a new market that already has positive brand awareness,
Analyst, Global Consumer and as evidenced by the survey results. While India currently does not represent a significant
Retail
HSBC Bank plc proportion of sales, it is a growing, predominately in the youth market, and the potential
annelaure.bismuth@hsbcib.com purchasing power of future consumers is high.
+44 20 7991 6587
Antoine Belge* Sporting goods

Global Co-Head of Consumer and
Retail Research
Fitness has been on the rise in India in the past five years and the predominately young
HSBC Bank plc, Paris branch demographics (an estimated 64% of the population will be working age by 2020) mean that this
antoine.belge@hsbc.com
+33 1 56 52 43 47 is a growing market for sportswear (Business of Fashion, 15 February 2017). In 2014, India’s
government began building public fitness facilities like tracks and pools to encourage physical
* Employed by a non-US affiliate of HSBC activity, and the same report estimated that the number of gyms would grow 7% y-o-y from
2017 to 2020. In 2017, Business of Fashion estimated that Nike, adidas, Puma and Reebok had
a combined 80% share of the sportswear market in India, with adidas accounting for 45% of the
total market share.
43
April 2019
Puma believes that India will become one of its top five markets by 2020 (vs the eighth largest
in 2016), off a strong performance in 2018 (The Economic Times1, 24 February 2019) (see
Future Consumer (2 April 2019) for more on Puma).
adidas and Nike both stand out in these results. For more on Nike and adidas, refer to Nike:
Upgrade to Buy: The digital revolution is coming (8 January 2019) and adidas: Buy: We do not
share recent negativity on the stock (3 March 2019).
Luggage
The theme of premiumisation has been supported in many of our other surveys and, for luggage
brands, the potential to trade up from more affordable brands is present. We note that American
Tourister has a c20% lead over Samsonite in India, according to the survey respondents’ brand
preferences, but American Tourister also had a 8% lead on Samsonite in our first edition of our
China Deluxe survey in 2018, coming in first place vs Samsonite in fourth. That trend reversed in
our 2019 survey, and Samsonite came in first. India only accounted for c4% of Samsonite’s total
sales in 2018 and is, therefore, unlikely to significantly move the needle, but it will be interesting to
watch the opportunity for premiumisation become more evident in India’s luggage preferences.
Smartphones
While Apple had a higher aspirational value among Indian consumers versus Chinese consumers
(see China Deluxe, 19 February 2019), this may not necessarily translate into imminent demand.
As we mentioned above, a quarter of the respondents who indicated that they wanted to buy an
Apple iPhone for their next smartphone were only willing to pay between USD150-425 for their
next smartphone, and another 30% were only willing to spend no more than USD850.
A mid-priced iPhone specifically for India could resonate greatly, but it would not be in line with the
company’s strategy.
Key ideas
Samsonite (1910 HK, Buy, TP HKD32.00)

In Macro continues to hit but stock remains cheap (4 February 2019), we lower our short-term
estimates due to the global macro concerns and FX headwinds we think could challenge
Samsonite’s growth in the short term. However, we still believe in Samsonite’s long-term growth
story and still find the stock’s valuation compelling, currently at a six-year low. We maintain our
Buy and our current target price of HKD32.00.
Puma (PUM GR, Buy, TP EUR625.00)

We outlined in Less cautious than the initial guidance (25 March 2019) that Puma has
opportunities across the world to grow, particularly in China and the US. We still maintain that
there is good visibility on Puma’s strategy to triple EBIT from 2017 to 2022. We think Puma is likely
to exceed its 10% organic sales growth guidance for FY19, particularly as Puma should continue
to benefit from the strength of the sporting goods industry as Chinese people are increasingly
willing to adopt a healthier lifestyle, a solid pipeline of new products planned for fall 2019, and
many new initiatives and sponsorship agreements. We maintain our Buy rating and our target
price of EUR625.00.
______________________________________
1 Puma edges past rivals in India sales to emerge as top sportswear brand, 24 February 2019, Economic Times
44
April 2019
Samsung Electronics (005930 KS, Buy, KRW52,000)

Ricky Seo*
Analyst, Semiconductor and Samsung Electronics has a mandate to devote its resources to maintaining its top brand value
OLED in India’s smartphone market. Currently, Samsung Electronics looks to be defending its brand
The Hongkong and Shanghai
Banking Corporation Limited, Seoul value through outstanding price-quality dynamics over high-end competitors. However, its brand
Securities Branch
loyalty looks to be vulnerable and could be easily abandoned if Samsung Electronics ignores
rickyjuilseo@kr.hsbc.com
+82 2 3706 8777 the warning signs evident in this survey. We believe Samsung Electronics will improve its value
to customers through faster innovation in the smartphone form factor. Foldable smartphones is
* Employed by a non-US affiliate of HSBC one example of these innovations (see Korea tech report, At the forefront of smartphone form
qualified pursuant to FINRA regulations factor change, 21 February 2019).
Frank He* (S1700517120005)

Xiaomi (1810 HK, Buy, HKD15.10)
Head of A-share Technology Xiaomi’s high-cost performance product features meet consumer demand in emerging market.
Hardware Research
HSBC Qianhai Securities Limited It is expanding its product portfolio to the IoT and lifestyle segments. In India, Xiaomi is
frank.fang.he@hsbcqh.com.cn replicating the model is used in China by initially focusing on its online sales channel and
+86 755 8898 3136
gradually extending offline networks.
Q: What is your experience of European luxury brands?
I only purchase luxury brands in India
28%
I only purchase luxury brands abroad
61%
11%
I purchase luxury brands in both India

and abroad
Q: Why don’t you purchase European luxury brands?
I don’t purchase luxury brands because I

can’t afford them
24%
I don’t purchase luxury brands as I don’t
believe the quality justifies the price 39%
I don’t purchase luxury brands as I would

feel vain
6% 31%
I don’t purchase luxury brands as I would
rather spend my income on other things
45
April 2019
Q: In sportswear, which brands do you prefer?

Nike
adidas
Reebok
Puma
Skechers
Decathlon
Lacoste
UnderArmour
Power
Jordan
Converse
Asics
New Balance
Vans
Champion
Brooks
Mizuno
Lululemon
Merrell
0% 10% 20% 30% 40% 50% 60%
1st choice 2nd choice 3rd choice
Reebok and Puma are much higher in India and the UK than they are in China, the US,
Mexico, and Brazil; Nike and adidas are still high
80%
70%
60%
50%
40%
30%
20%
10%
0%
India 2019 China 2019 UK 2019 US 2018 Mexico 2018 Brazil 2018
Nike adidas Reebok Puma
Q: Which luggage brands are your favourites? Please rank your top three choices
American Tourister
VIP
Samsonite
Safari
Aristocrat
Wildcraft
Delsey
TravelPro
Globe-Trotter
Briggs & Riley
Victorinox
Rimowa
Longchamp
Le SportSac
Hartmann
Bric's
Liapult
Tumi
MCM
0% 10% 20% 30% 40% 50% 60%
1st choice 2nd choice 3rd choice
46
April 2019
American Tourister was the most highly preferred brand in India; Tumi and Rimowa
preference is similar to that in Brazil, Mexico, and the UK
70%
60%
50%
40%
30%
20%
10%
0%
India 2019 China 2019 UK 2019 US 2018 Mexico 2018 Brazil 2018
Samsonite American Tourister Tumi Rimowa
Q: Which brand is your current smartphone? Which brand will you buy for your next
smartphone?
Samsung
Xiaomi
Apple
Other
Oppo
Vivo
OnePlus
Huawei
Google
Asus
LG
Sony
Honor
0% 5% 10% 15% 20% 25% 30% 35%
Current smartphone Next smartphone
Q: If you own a mobile phone, which of the Apple’s market share is strongest in the US,
following do you own? but the aspirational spread is higher in India
100% 80%
80% 60%
60%
40%
40%
20%
20%
0% 0%
Respondents India 2019 China 2019 US 2018
A smartphone A feature phone Current smartphone Next smartphone
Source: HSBC, Toluna. Number of respondents: 1,048, 3 March 2019 Source: HSBC, Toluna
47
April 2019
Q: What is the highest amount you would pay for your smartphone?
Less than INR10,000

10% 6%
Between INR10,000 and INR30,000
30%
Between INR30,000 and INR60,000 54%
More than INR60,000
Q: For my next smartphone, I would...
Be willing to pay the same price as last time but

would expect some upgrades
4%
23%
Be willing to pay a premium of UP TO 10% more for
better features than what I paid for my current 30%
smartphone
Be willing to pay a premium of MORE THAN 10%
more for better features than what I paid for my
current smartphone
Be happy to keep existing attributes in my next 43%
smartphone but would expect to pay less than what
I paid for my current device
Q: India’s consumers are more willing to pay up for their next smartphone than Chinese
or American consumers
100%
80%
60%
40%
20%
0%
India 2019 China 2019 US 2018
Be happy to keep existing attributes in my next smartphone but would expect to pay less than what I paid for my current device
Be willing to pay a premium of MORE THAN 10% more for better features than what I paid for my current smartphone
Be willing to pay a premium of UP TO 10% more for better features than what I paid for my current smartphone
Be willing to pay the same price as last time but would expect some upgrades
48
April 2019
Q: How frequently do you upgrade your smartphone?
Every year
9%
21%
Between 1-2 years after purchasing

29%
41%
49
April 2019
Valuation and risks
Valuation Risks
Avenue Current price: We value the company using a DCF model with a cost of equity of 11%, Key downside risks: (1) further margin dip due to
Supermarts INR1,493 which includes a risk-free rate of 3.0%, a market risk premium of 6.0%, a prolonged price-based competition (including increased
DMART IN beta of 1.3 and a terminal growth rate of 4.5%. Our target price of INR1,700 competition from e-commerce companies) leading to
Target price:
implies upside of 13.9% from the current share price, and we have a Buy pressure on SSSG and gross margin; 2) failure to
INR1,700
rating on the stock as we believe DMART’s low-cost model of passing the consistently achieve network rollouts; and (3) a severe
Buy Up/downside: best prices to consumers will continue to benefit it in the long run. macroeconomic slowdown weighing on demand.
13.9%
Amit Sachdeva* | amit1sachdeva@hsbc.co.in | +91 22 22 681240
HSBC Securities and Capital Markets (India)
Jubilant Current price: We value the company using a DCF model, which is based on a cost of Key downside risks: (1) failure to sustain momentum in
Foodworks INR1,441 equity of 10.6%, with a risk-free rate of 3.0%, a market risk premium of SSSG, impacting both growth and margins; (2) new
JUBI IN 6.0%, a beta of 1.25 and a terminal growth assumption of 5.0%. Our entrants; and (3) an inability to execute the
Target price:
target price of INR1,550 implies upside of 7.5% from the current share network expansion.
INR1,550
price. We have a Buy rating on the stock as we believe the SSSG
Buy Up/downside: trajectory is likely to stay robust.
7.5%
Current price: We value the company using a DCF model to derive our target price. Key downside risks: (1) failure to sustain new
Nestle India products launch momentum and gain traction in the
INR10,787 We apply a cost of equity of 9%, with a risk-free rate of 3.0%, a market
NEST IN risk premium of 6.0%, and a terminal growth rate of 3.0%. Our target recent launches of nutrition and breakfast cereals; (2)
Target price: increased competitive intensity in key categories
price of INR12,600 implies upside of 16.8% from the current share price.
INR12,600 leading to a loss of market share and, as such, lower
We have a Buy rating on the stock, driven by Nestle India’s strong focus
Buy Up/downside: revenue growth; (3) Maggi noodles volume growth
on volume-led profitable growth and its significantly under-penetrated
16.8% acceleration coming in below our estimates; and (4) a
portfolio, which offers headroom for long-term structural growth. sharp increases in input prices.

Current price: We value the company using a DCF model to derive our target price. We Key downside risks: (1) failure to generate significant
Dabur
INR402 apply a cost of equity of 9%, with a risk-free rate of 3.0%, a market risk momentum in the natural portfolio other than oral care
DABUR IN premium of 6.0%, and a terminal growth rate of 3.5%. We have a target (as the perceived Patanjali threat seems to have
Target price:
price of INR480, which implies upside of 19.4% from the current share abated and the stock has run up on these
INR480
price; we have a Buy rating on the stock as we expect Dabur to benefit expectations); and (2) continued struggles in the
Buy Up/downside: from the strong momentum in the natural category. international portfolio.
19.4%
Reliance Current price: We value RIL on a sum-of-the-parts (SOTP) basis. We value RIL’s Key downside risks: (1) lower refining and/or
Industries INR1,390 telecom business at an EV of USD47.7bn (INR571 per share). Our petrochemical margins than our assumptions; (2)
RIL IN valuation of the telecom business implies an EV/IC of c1.1x. We value slower acquisition of paying subscribers by Jio and
Target price:
RIL’s retail business at USD22.7bn using a target EV/sales multiple of increased intensity competitive conditions in the
INR1,500
1.4x. The other components of our valuation are as follows: a) telecom industry that result in lower ARPUs; (3) lower-
Buy Up/downside: Petrochemical is valued at 8x EV/EBITDA and refining at 7x EV/EBITDA than-expected benefits from downstream projects; and
7.9% as we expect a downstream ROCE of 20%+; b) upstream is valued on a (4) potential exclusion of hydrocarbon-related stocks
DCF model (9% WACC, RFR 3.0%, ERP 6.0%, beta 1.0); and c) from equity portfolio performance benchmarks.
telecoms on a DCF model (11% WACC, RFR 3.0%, ERP 6.0%, beta
1.5). We have a target price of INR1,500, which implies upside of 7.9%
from the current share price. We have a Buy rating on the stock as we
remain confident that growth projects coupled with a strong margin
environment can drive an 18% earnings CAGR for FY18-21e.
Rakesh Sethia* | rakesh.sethia@hsbc.co.in | +91 22 22 681245

*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations
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April 2019
Valuation and risks
Valuation Risks
Current price: We value the company using a DCF model. We assume a 3.0% risk-free Key downside risks: (1) any further allegations
Samsonite
HKD26.00 rate, a 4% equity risk premium and 1.2 sector beta to take into account the negatively impacting the underlying fundamental story
1910 HK limited barriers to entry in the sector. We use a company-specific beta for the and becoming a distraction to management; (2) worse-
Target price:
shares of 1.2. Our target price of HKD32.00 implies 23.1% upside from the than-expected sales in key regions; (3) unfavourable
HKD32.00
current share price and we have a Buy rating on the stock. currency moves (i.e., a stronger USD); (4) macro
Buy Up/downside: threats to travel (security issues, recession, and
23.1% epidemics); (5) commoditisation of the luggage market;
(6) execution of M&A integration; (7) a spike in raw
material prices, as well as (8) concerns around tariffs.
Erwan Rambourg | erwanrambourg@us.hsbc.com | +1 212 525 8393
HSBC Securities (USA) Inc.
Current price: We value the company using a DCF model, which is based on a WACC of Key downside risk: (1) loss of the key
Puma EUR527.00 7.95%, with a risk-free rate of 3.0%, an equity risk premium of 5.0% and a partnerships/sponsorships that have been instrumental
PUM GR beta of 1.10. Our target price of EUR625.00 implies upside of 18.6% from the to the brand revival; (2) failure to implement the next
Target price:
EUR625.00 current share price, and we have a Buy rating. steps of the Puma brand revival; (3) shifts in consumer
trends, resulting in market share losses; and (4) a
Buy Up/downside: stronger USD vs the EUR.
18.6%
Anne-Laure Bismuth* | annelaure.bismuth@hsbcib.com | +44 20 7991 6587
HSBC Bank plc
Current price: We derive our target price of INR480 from a DCF model. We assume a cost Key upside risks: (1) large stores SSSG surprising on the
Future Retail INR467 of equity of 10.8%, driven by a risk-free rate of 3.0%, a market risk premium positive side, led by a better product mix; and (2) small
FRETAIL IN of 6.0% , a beta of 1.3 and a terminal growth rate of 4% (in line with the format stores retuning to breakeven faster than expected.
Target price:
INR480 HSBC Global Equity Strategy team’s RFR and MRP assumptions). Our Key downside risks: (1) prolonged price-based
target price of INR480 implies upside of 2.8% over the current share price; we competition (including increased competition from e-
Hold Up/downside: rate the stock Hold on concerns over scalability of the Easyday format and commerce), leading to pressure on SSSG and gross
2.8% the lack of an immediate catalyst. margin; (2) a significant loss of market share to other
organised and unorganised companies; (3) increased
rental and cost escalation impacting the EBITDA
margin; (4) convenience stores and FBB formats falling
short of growth and margin expectations; and (5) a
severe macroeconomic slowdown, leading to a fall in
discretionary spending and a decline in apparel sales.
Current price: We use a DCF model to value Xiaomi, given: (1) the company is still at the Key Downside risks: (1) foreign exchange risk:
Xiaomi
HKD11.24 early stage of a fast-growth cycle, which means investors assign a valuation Xiaomi’s revenue is mainly generated from China and
1810 HK premium against peers on Xiaomi’s 2019-21e earnings estimates. We think India. Xiaomi’s key hardware components costs are
Target price:
the long-term earnings trajectory will become more relevant in determining settled in USD, which means fluctuations of the USD
HKD15.10
Xiaomi’s fair value; (2) Xiaomi has healthy operating cash flow and should and INR FX rate could affect Xiaomi’s revenue, margin
Buy Up/downside: have positive free cash flow from 2019e, which is suitable for a DCF and earnings; (2) cyclical nature of smartphone sales:
34.3% approach; and (3) the earnings profile is gradually transforming to come more The smartphone industry is competitive with fast-
in line with Internet companies, which could provide a buffer against the changing design innovation and consumer preferences.
cyclical nature of the smartphone industry. We use a three-stage DCF model, Failure to consistently deliver competitive products may
with a terminal growth rate of 2% to value the stock. Based on our projected lead to lower-than-expected revenue and earnings; (3)
free-cash flow, 9.7% WACC and 2% terminal growth rate, the implied equity competition in IoT: Given competitors, such as Huawei
value per share for Xiaomi stands at HKD15.10, implying 34.3% upside from and Lenovo’s established user base in IoT business, we
the current share price, and we have a Buy rating on the stock. see potential competition with Xiaomi; (4) competition in
Internet services. Most Xiaomi’s competitors are
specialists and have a certain competitive edge. Xiaomi
is a follower in most categories, and we think failure to
catch up with peers may lead to unsuccessful execution
of its monetisation strategy; and (5) lower ARPU and
margin for Internet service. Competition and the growing
presence of overseas markets may lead to lower ARPU
and, as such, be a drag on margin for Internet service.
Frank He* | frank.fang.he@hsbcqh.com.cn| +86 755 8898 3136
HSBC Qianhai Securities Limited
51
April 2019
Valuation Risks
Samsung Current price: We base our rounded target price on a PB valuation multiple of 1.5x Key downside risks: (1) further slowdown in the
Electronics KRW45,750 applied to our 2019e BVPS estimate of KRW35,779, reflecting the macro environment due to US-China trade tensions;
005930 KS fundamental change in the memory industry (the mid-cycle correction and (2) continued delays in new tech commercialisation
Target price:
falling ROE). For the reference multiple, we take the average of mid- progress; (3) fall in demand caused by a global
KRW52,000
range PB for the years 2005-07, 2009-11, 2014, and 2017 when the ROE economic slowdown or KRW appreciation could lead to
Buy Up/downside: ranged between 15% and 21%, considering Samsung’s ROE decline in weaker earnings; (4) further competition from emerging
13.7% 2019. Our target price of KRW52,000 implies 13.7% upside from the mobile companies/potential competition in NAND; (5)
current share price and we have a Buy rating on the stock as we: (1) unexpected difficulty in mass-producing foldable
expect a 2H earnings recovery on memory price stabilisation; 2) still see smartphones; (6) weaker-than-expected smartphone
an undemanding valuation; (3) see a relatively stable earnings outlook growth, especially in the high-end segment; and (7)
among IT peers; and (4) improving shareholder returns. weaker-than-expected traction of foldable smartphones
among end-users.
Ricky Seo* | rickyjuilseo@kr.hsbc.com | +82 2 3706 8777
The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch

*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations
52
April 2019
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)
whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering
analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or
issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other
views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect
their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Amit Sachdeva, Rahul Battulwar, Rakesh Sethia, CFA, Erwan
Rambourg, Sunil Rajgopal, Ricky Seo, Frank He, Shrinidhi Karlekar, Yogesh Aggarwal, Vivek Gedda, Anne-Laure Bismuth,
Antoine Belge and Nicolas Cote-Colisson
Important disclosures
Equities: Stock ratings and basis for financial analysis
HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stock should
depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that
investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or
relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in
each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating
because research reports contain more complete information concerning the analysts' views and the basis for the rating.
From 23rd March 2015 HSBC has assigned ratings on the following basis:
The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12
months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will
be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a
Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between
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Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change
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Prior to this date, HSBC’s rating structure was applied on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,
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the potential return, which equals the percentage difference between the current share price and the target price, including the
forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12
months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was
expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage
points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.
*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months
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volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
53
April 2019
Rating distribution for long-term investment opportunities

As of 04 April 2019, the distribution of all independent ratings published by HSBC is as follows:
Buy 54% ( 29% of these provided with Investment Banking Services )
Hold 37% ( 28% of these provided with Investment Banking Services )
Sell 9% ( 20% of these provided with Investment Banking Services )
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current
rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy
= Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial
analysis” above.
For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at
http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.
To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please
use the following links to access the disclosure page:
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HSBC & Analyst disclosures

Disclosure checklist
Company Ticker Recent price Price date Disclosure

AVENUE SUPERMARTS AVEU.NS 1478.55 03 Apr 2019 7
DABUR INDIA DABU.BO 403.45 03 Apr 2019 6, 7
JUBILANT FOODWORKS JUBI.BO 1423.15 03 Apr 2019 7
PUMA PUMG.DE 533.00 03 Apr 2019 6, 7, 11
RELIANCE INDUSTRIES RELI.BO 1375.20 03 Apr 2019 5, 6, 7
SAMSONITE INTL SA 1910.HK 25.95 04 Apr 2019 1, 4, 5, 6, 7
XIAOMI 1810.HK 11.84 04 Apr 2019 1, 5, 6, 7, 11
Source: HSBC
1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months.
2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3
months.
3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
4 As of 28 February 2019, HSBC beneficially owned 1% or more of a class of common equity securities of this company.
5 As of 28 February 2019, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of investment banking services.
and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
and/or paid compensation to HSBC in respect of non-securities services.
8 A covering analyst/s has received compensation from this company in the past 12 months.
9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below.
11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company
12 As of 01 Apr 2019, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share
capital, calculated according to the SSR methodology.
54
April 2019
13 As of 01 Apr 2019, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share
capital, calculated according to the SSR methodology.
 Ricky Seo’s household member is employed with Samsung Electronics in a non-executive and non-managerial position
HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt
(including derivatives) of companies covered in HSBC Research on a principal or agency basis or act as a market maker or
liquidity provider in the securities/instruments mentioned in this report.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking,
sales & trading, and principal trading revenues.
Whether, or in what time frame, an update of this analysis will be published is not determined in advance.
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Additional disclosures
1 This report is dated as at 08 April 2019.
2 All market data included in this report are dated as at close 02 April 2019, unless a different date and/or a specific time of
day is indicated in the report.
3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of
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5 As of 22 Mar 2019 HSBC owned a significant interest in the debt securities of the following company(ies): RELIANCE
INDUSTRIES
6 HSBC Trinkaus & Burkhardt acts as a designated sponsor to the following companies, and as such has an agreement with
such companies to engage in market making activities and/or to publish research in connection with the securities of the
following company(ies): PUMA
Production & distribution disclosures

1. This report was produced and signed off by the author on 05 Apr 2019 07:02 GMT.
2. In order to see when this report was first disseminated please see the disclosure page available at
https://www.research.hsbc.com/R/34/pGgWjns
55
April 2019
Disclaimer
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[1117484]
56
Global Consumer Brands & Retail
Research Team
Asia Alessia Maria Apostolatos +1 212 525 7457
Europe
alessia.m.apostolatos@us.hsbc.com
Consumer Brands & Retail Consumer Brands & Retail
Alexis Cooper +1 212 525 4394
Global Head of Consumer Retail Research Head of Consumer Brands and Retail Equity alexis.cooper@us.hsbc.com
David McCarthy +44 207 992 1326 Research, Asia-Pacific
david1.mccarthy@hsbcib.com Karen Choi +822 3706 8781
karen.choi@kr.hsbc.com Agribusiness
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Research Analyst Alexandre Falcao +1 212 525 4449
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Analyst
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Anne-Laure Bismuth +44 207 991 6587 Eddie Huang +8862 6631 2870 augusto.a.ensiki@us.hsbc.com
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Analyst Analyst
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andrew.porteous@hsbc.com Lina Yan +852 2822 4344 mauricio.arellano@hsbc.com.mx
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Analyst Analyst
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nigel.kiernan@hsbc.com.sg
Analyst Analyst, LatAm Airlines, Healthcare, Education
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Analyst
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Joe Thomas +44 20 7992 3618
joe.thomas@hsbcib.com Gaming
Analyst Head of Gaming Research, Asia-Pacific
Ali Naqvi +44 20 3359 4068 Charlene Liu +65 6658 0615
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CEEMEA North & Latin America
Consumer Brands & Retail Consumer & Retail

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shaun.chauke@za.hsbc.com Felipe Cassimiro +52 55 5721 2422
felipe.cassimiro@hsbc.com.mx
Analyst
Ankur P Agarwal +971 4 423 6558 Analyst
ankurpagarwal@hsbc.com Thor Solanes +52 55 5721 2308
thor.solanes@hsbc.com.mx
Food & Beverage

Global Head of Beverages Research
Carlos Laboy +1 212 525 6972
carlos.a.laboy@us.hsbc.com
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Main contributors
Amit Sachdeva* Erwan Rambourg
India Equity Strategist, Consumer & Global Co-Head of Consumer and
Retail Analyst Retail Research
HSBC Securities and Capital Markets (India) HSBC Securities (USA) Inc.
Private Limited erwanrambourg@us.hsbc.com
amit1sachdeva@hsbc.co.in +1 212 525 8393
+91 22 2268 1240
Rahul Battulwar* Anne-Laure Bismuth*

Analyst Analyst, Global Consumer and Retail
HSBC Securities and Capital Markets (India) HSBC Bank plc
Private Limited annelaure.bismuth@hsbcib.com
rahulbattulwar@hsbc.co.in +44 20 7991 6587
+91 22 2268 1224
Yogesh Aggarwal* Antoine Belge*

Head of Research, India Global Co-Head of Consumer and Retail
HSBC Securities and Capital Markets (India) Research
Private Limited HSBC Bank plc, Paris branch
yogeshaggarwal@hsbc.co.in antoine.belge@hsbc.com
+91 22 2268 1246 +33 1 5652 4347
Vivek Gedda* Sunil Rajgopal

Analyst, IT Services & Autos Analyst, Global Telecoms
HSBC Securities and Capital Markets (India) HSBC Securities (USA) Inc.
Private Limited sunilrajgopal@us.hsbc.com
vivekgedda@hsbc.co.in +1 212 525 0267
+91 22 6164 0693
Frank He* (S1700517120005) Nicolas Cote-Colisson*

Head of A-share Technology Hardware Head of European Telecoms Equity Product
Research HSBC Bank plc
HSBC Qianhai Securities Limited nicolas.cote-colisson@hsbcib.com
frank.fang.he@hsbcqh.com.cn +44 20 7991 6826
+86 755 8898 3136
Ricky Seo* Shrinidhi Karlekar*

Analyst, Semiconductor and OLED Analyst, Industrials
The Hongkong and Shanghai Banking Corporation HSBC Securities and Capital Markets (India)
Limited, Seoul Securities Branch Private Limited
rickyjuilseo@kr.hsbc.com shrinidhi.karlekar@hsbc.co.in
+82 2 3706 8777 +91 22 6164 0689
* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered / qualified pursuant to FINRA regulations
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Equities

Consumer and Retail

India: Anatomy of Online food

the Consumer Health and

Welcome to the land of middle-class optimists

We explain what this means for

Why read this report?

 We surveyed 1,000 members of India’s urban middle class, asking

Why read this report? 1

Key data behind India’s

Key Buy-rated investment ideas 5

Ratings, valuations and

Meet India’s upbeat,

Know your respondent 11

Demand outlook, the cycle

Quick service restaurants 23

Health and wellness 33

Global lifestyle brands 42

Key data behind India’s consumers

87% two years; 44% order food for home

Nike is most preferred About 25% of respondents indicated

Source: HSBC, Toluna

Key Buy-rated investment ideas

Priced at 2 April 2019

Key Buy-rated investment ideas

Priced at 2 April 2019

Ratings, valuations and target prices

Key stock ideas

 India Consumer: What you can still buy, 21 January 2019

Previous reports on Anatomy of the Consumer series

 US: Anatomy of the US luxury consumer: US Holiday Deluxe, 3 December 2018

 Indonesia: Anatomy of the Consumer: Optimists, but no big spenders here,

 Russia: Anatomy of the Consumer: Feeling the pinch, 27 November 2018

Meet India’s upbeat,

A few consumer companies have flagged their concerns about a

More pizza, please

Incomes are expected to rise

Grocery retail: most prefer supermarkets

Natural products are a rising force

Awareness of health and wellness is rising

Consumers are willing to pay a premium for several product categories

Ordering food is fast becoming a phenomenon

Air conditioners: penetration levels are high at higher income levels

Autos: aspiration to own a car is high

Smartphones: aspiration is much stronger than the willingness to pay a premium

Global lifestyle brands

Know your respondent

Source: HSBC, Toluna. Number of respondents: 1,048, 3 March 2019

Annual gross household income Household size

INR2.0m to INR 3.0m 12% 21%

INR 0.7m to INR1.0m 37%

A bellwether for consumption trends

Discretionary consumption has increased significantly

Source: CEIC, HSBC

Demand outlook, the cycle

 Few consumer companies have highlighted concerns about a near-

Roughly the same 14%

Slightly optimistic 35%

Very optimistic 45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Increase between 0% to 5% 12%

Increase between 5% to 10% 39%

Increase by more than 10% 41%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%