The sunny South beckons

Traditional, retiring and particular about every penny she spends — that is the stereotypical image, propagated by the popular media, that immediately springs to mind for most people at the mention of the ‘South Indian consumer'. However, Indian marketers, in recent times, are beginning to see beyond these stereotypes.

Keen to tap into the increasing affluence of the South Indian States, some companies have been actively redrafting their strategies and brands to cater to the value-conscious Southern buyer. Others have scratched the veneer to find that a big transformation is underway in South India too. A younger, more mobile and cosmopolitan workforce is driving demand for everything from cushy multiplexes to LED televisions and gold loans.

Earn more, spend more

There are enough statistics to prove that the region South of the Vindhyas is crucial to the marketing plans of any Indian company with sizeable aspirations. The four southern States, taken with Puducherry, are home to 21 per cent of India's population, but chip in nearly 24 per cent of the country's GDP.

What makes the region particularly attractive is that the story of demographic transition which is drawing so many global names to Indian shores is already well underway in the South. The 2011 Census notes how the southern States, in the last decade, have moved far ahead of other regions in the evolving theme of the Great Indian Middle Class.

In the South, birth rates are down, life expectancy is up and human development indicators, such as literacy and higher education, are on the ascendant, all adding up to more affluent consumers who are keen to upgrade their lifestyle. In 2010-11, per capita income (at current prices) in the southern States averaged Rs 70,222 a year — a good 28 per cent higher than the national average. Then, there is the fact that the actual consumer residing in the South is no longer the traditional ‘Madrasi'. Burgeoning employment prospects in the region have made it a magnet for youngsters from all over India seeking to make their fortune in skilled professions.

A recent McKinsey Report commissioned by CII (Retaining the Edge: Sustaining South Indian Growth Momentum) notes that South India generates a whopping 28 per cent of the employment in India, aided by high growth in skill-intensive industries such as automotive, manufacturing and sunrise sectors such as IT, ITES and biotech in this region.

Splurging in South

It is this teeming, mobile workforce and the increasingly cosmopolitan outlook of the consumers here that is busting the traditional myth of the frugal South Indian. Many consumer companies and brands that were earlier content to slug it out in the North and West have woken up to the affluent South, and are making a beeline for the region.

Finding that the Southern cities are thriving markets for processed foods, Dabur India is making a concerted effort to beef up its distribution network here. Thus, its decision to make a Rs 70-crore investment in a spanking new fruit-juice facility in Sri Lanka, to serve up Real fruit juice in the southern States.

After unveiling its first screen in New Delhi, multiplex major PVR has rolled out the majority of its new screens in the Southern markets in the last two years; it hopes to push up its overall growth rate through this rollout.

The Gurgaon headquartered Maruti Suzuki has been investing in a similar Southern push too; this has paid off in the form of higher growth rates in its car sales, with 28 per cent of its sales now reported to originate from the South.

Backed by a more evolved organised retail, the southern States have also become thriving markets for big-ticket consumer brands.

Consumer durable-makers such as Samsung and LG derive over 30 per cent of their sales from this market, while watch retailer Titan rakes in over a third of its watch sales from here.

Other leading Indian companies are turning the unique characteristics of the Southern consumer to their advantage. Talking of big- ticket splurging, gold and diamond jewellery has been one of the top-most categories for Indian spenders in the past couple of years, dwarfing every other asset.

Here, again, much of the action has been concentrated in the southern States, said to account for 75 per cent of India's jewellery purchases.

Big on borrowings!

If the South is spending more freely, it is also changing age-old savings and investment patterns.

Financial services firms such as stock brokers have traditionally thronged to the Western and Northern regions, in the belief that the Southerner is keen only on cast-iron investments such as fixed deposits. True, investors in this part of the country don't queue up to invest in initial public offers. Nor will you find big intra-day punters on the stock market based here.

However, with the stock market down in the dumps and retail interest in day trading fading in any case, the past couple of years have seen financial services firms shift to mutual funds, insurance products and such debt options as non-convertible debentures. Well, with plenty of money to spare, investors in the Southern markets do count in this space.

Though not a match for Mumbai with its big corporate treasuries, Chennai and Bangalore figure within the top five cities for mutual funds, by assets managed. Bangalore, Chennai and Hyderabad figure in the top ten cities. Industry experts note that, as fund houses make a big pitch for retail investors with products like systematic investment plans or liquid funds, salary-earners in the Southern cities will be key target groups.

New-fangled debt instruments, including non-convertible debentures and infrastructure bonds, also rely heavily on the Southern subscribers for collections. The entrepreneurs and salary-earners are a big draw for wealth management firms and investment advisors.

Investors in these States are not just salting it all away in safe havens. They're also rapidly shedding traditional taboos about “neither a borrower nor a lender be”. It is borrowers from the South who are lapping up a rising share of home-loan disbursements by leading home finance companies and actively raising loans against their gold jewellery.

Lending against gold is one of the fastest growing segments of credit for finance companies and banks in the past two years and the segment is simply dominated by the Southern states. In fact, while the Southern savers accounted for just 21 per cent of the deposit base of commercial banks in 2010-11, they took up as much as 27 per cent of the total loans given out by them. It is any wonder then that India's banks are beating a path to the South, locating 28 per cent of their branches in these States?

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