a range of consumer categories and is becoming more widespread: for instance, since 2005, the number of households buying coffee, milk powder, biscuits, ketchup, toothpaste, washing powder, and even toilet cleaner from large or national brands has risen to well over 50 percent. According to one study, the top three brands in the country are Amul, a farmers’ milk cooperative; LIC (Life Insurance Corporation of India), a state-run insurance company; and Nokia, the Finnish mobile phone manufacturer. D. Shivakumar, head of Nokia’s newly formed India, Middle East, and Africa region, told us, “Rich people buy brands for vanity and poor people buy brands for security. India is a brand-led market, and the guy with the lowest price is not always the market leader.”
Although there are broad buying habits shared by all of India’s middle-class consumers, there are subtle differences in the way that the urban and the rural middle class spend their money. Overall, as we have seen, middle-class consumers spend the largest part of their budget on food; for the rural middle class, this eats up 35 percent of total consumption spending, compared with 31 percent for the urban middle class and 17 percent for educated professionals.3
For educated professionals, the largest category of spending is housing and consumer durables, accounting for a fifth of their budget. It is also a major outlay for the urban middle class, accounting for a fifth of their budget, too. For the rural middle class, the second-biggest priority after food is the education of their children, which accounts for 13 percent of this group’s disposable income.
These spending priorities explain some striking differences in consumer attitudes about the future. Some 88 percent of educated professionals expect their lifestyle and finances to be even better in the next two years. The next-most-optimistic group is the urban middle class, with 70 percent reporting that they think they will be better off in the next two years. Behind them, some 64 percent of the rural middle class are optimistic about the future.
Their material wealth also reflects this abundant confidence. About half of the rural middle class have basic durables—a television, a DVD player, a pressure cooker, a refrigerator, and a scooter. An even higher proportion—66 percent—of the urban middle class have these necessities of modern life.
When it comes to more advanced durables, however, the numbers are much lower and they indicate significant room for growth. Only 28 percent of the urban middle class and 13 percent of the rural middle class own a modern oven, a dishwasher, a microwave, a camera, a plasma TV, or a car. By contrast, 42 percent of educated professionals possess these types of products.
There is also room for greater connectivity, as will be shown in chapter 10. Just 15 percent of the urban middle class use the Internet. Among the rural middle class, it is even lower, at just 4 percent. Moreover, nearly a fifth of the urban middle class and nearly half of the rural middle class do not have a bank account.
The data indicate that the middle class in India, as in China, is far from a homogeneous group—and different from the middle class in the United States and Europe, as well. But, in their voracious appetite for a Western lifestyle, albeit with Indian or Chinese characteristics, middle-class consumers from both these countries are unrivaled.
Upwardly Mobile: The Lifestyles of the Middle Classes
Much is made of the migration from the rural districts to urban centers. But an even bigger migration is taking place from the lower reaches of the social pyramid to the next level of the pyramid. As you will see in part II, this migration is having a transformative impact on the demand for food and beverages, housing and household appliances, luxury goods, digital products, and education. But it is also having an impact on consumers’ recreational lives. After generations of living at a subsistence level, millions of people are engaging in definably middle-class pursuits.
Take, for example, the new passion for driving on the newly built expressways that fan out from Beijing and other main cities. It used to be that only people who could afford chauffeurs owned cars. Now, however, there is a fast-emerging car culture, and proud owners are eager to sit at the wheel and take to the open road.
Driving clubs are popular, with many organizing self-drive tours. For instance, the Beijing Target Auto Club runs a seven-day excursion from Beijing to Hubei province in central China, and arranges visits to the Three Gorges Dam, one of the controversial wonders of modern engineering, as well as to a mountain forest famous for its fabled race of hairy ape-men.4
In India, too, the car trip has become a popular weekend activity. Rising incomes, together with much-improved roads between the regional capitals, have paved the way for the new passion for driving. As Govind, who spends his life with cars, told us, “It used to take me three days to drive from Mumbai to Jaipur, and the roads were terrible. Now the National Highway 8, which links Mumbai and Delhi, is a pleasure to drive on—and it takes me only eighteen hours to complete the 1,200-kilometer journey.” And better roads are attracting a bigger variety of cars, he said. “A few years ago, all I would ever see were Ambassadors and Fiats. But now, I often spot Camrys, Accords, Skodas, and even the occasional Mercedes Benz and Audi.”
Another sign of middle-class affluence, and one linked to the popularity of the self-drive tour, is the dramatic growth of the travel and tourism business. According to our analysis, Chinese travelers made sixteen million overseas trips in 2010, two million more than the number of foreign trips made by Japanese travelers.5 Over the next decade, we project that the number of overseas trips made by Chinese travelers will swell to fifty-three million. These travelers will account for 9 percent of foreign tourists in North America by 2020, compared with 3 percent today, and they will represent 19 percent of foreign tourists arriving in the European Union. Spending by Chinese tourists is surging by 19 percent a year and will reach nearly $120 billion annually by 2020.
Middle-class and affluent consumers, most of whom have never traveled overnight, are spearheading this travel craze. Today, around two hundred million urban Chinese consumers have taken an overnight leisure trip. But with an average of twenty-five million people taking their first-ever such trip every year, this number is likely to more than double by 2020.
If Western tourists typically go to see the sights, Chinese travelers go to shop. We have calculated that 40 percent of the money they spend abroad is spent on shopping—around twice the share that Japanese and U.S. tourists devote to the same activity. Affluent Chinese, in particular, buy luxury items abroad. For Chinese travelers of all income levels, hotels tend to be places to sleep, not experiences in themselves. When choosing a hotel, they look for cleanliness and the hotel environment—these are as important as price. Customer service, location, and brand matter much less to them. Hotel quality is more important for affluent Chinese, but even these travelers dislike spending lavishly on just a name.
Indian travelers are similar to Chinese travelers—with a focus on value. Yet even the ongoing global economic crisis has not reduced the readiness to travel far and wide. Destinations such as Switzerland, Dubai, New Zealand, and Singapore generate significant revenues from Indian tourists. As an example, the Singapore Tourism Board reported that Indians spent more than any other nationality on shopping in Singapore. Interestingly enough, the tourism boards of these countries have realized the power of the Indian film industry and provide incentives to Indian movie makers to film in their countries in order to generate tourist demand. Switzerland has seen thousands of Indian tourists make their way to Zurich, Geneva, and Interlaken to see the sights that they saw on the silver screen. Jungfrau, one of the top tourist destinations in Switzerland, with a cog railway and panoramic views of the Alps, now has an Indian restaurant—aptly called Bollywood.
If there are many other things that the new middle-class consumers are doing now that they have more money in their pocket, no coverage of this theme would be complete without some mention of the growing popularity of blogging—something covered more fully in chapter 10. The Internet is a craze, with people spending hours surfing the Web, and for newly affluent, property-owning consumers, it is a new channel for speaking out against corruption, incompetence, and the misuse of power.
This new political outspokenness is the other side of the demand coin. Better educated than before, and more confident, too, consumers feel entitled to articulate their views on everything from products to public policy. As property owners, they are angered