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M<br />
FOUNDATION<br />
This may have longer-term implications for earnings growth and<br />
stock valuations for listed consumer staples companies in India, as<br />
highlighted in our report Disruption Decoded: India Consumer: The<br />
Framework for Staples Disruption in India.<br />
In that report, we discussed our view that the next leg of growth will<br />
be led by smaller and more-agile companies launching innovative<br />
products in emerging categories, leveraging digital assets, and<br />
focusing on consumer acquisition closer to the point of sale.<br />
There are other factors unique to India...<br />
l Favorable demographics – a large population of the less brandloyal<br />
millennials<br />
l Fragmented distribution<br />
l Relatively high profit pools<br />
...and we think these will only further aid this disruption.<br />
What is interesting is that we are already seeing signs of the disruption<br />
currents under way in India: In modern trade and in categories<br />
with high growth potential, we find that emerging brands are<br />
challenging the large incumbent players and nibbling away market<br />
share. Our view is that this trend will only accelerate from hereon as<br />
proliferation of mobile Internet is reducing the barriers to entry<br />
within the consumer space. Digital marketing is enabling companies<br />
to build brands at relatively low cost and the rising importance of<br />
eCommerce is allowing pan-India distribution with high consumer<br />
engagement.<br />
MORGAN STANLEY RESEARCH 9
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