Even in the recent large deals (HUL-GSK and Kraft Heinz-Zydus Cadilla), we saw a large roster of bidders, which says that there is a lot more appetite there in the market.

“Now, China is slowing down and has an ageing population. Add to that the political uncertainties due to the U.S.-China trade war. These conditions work in favour of India... The large deal sizes and activity levels in the consumer space are results of the same,” said Nishesh Dalal, co-head - transaction services at consulting firm KPMG.

The acquisitions in the consumer space show the overall confidence in the economy, said Sunil Kataria, CEO-India and SAARC, Godrej Consumer Products (GCPL). “It is also a message to large established brands to be more innovative and in-tune with the market,” he added.

Factors like income growth, political stability, demographic advantage, and the government’s initiatives together make India a sweet spot for foreign investments.

As a joint report by the World Economic Forum and Bain & Company released earlier this month suggests, unlike many ageing nations in the West and East, India will remain a nation of the young with a median age of 31 in 2030 and consumption growth will also be fuelled by the burgeoning millennial and generation Z consumers (those born in or after 2006).

Abneesh Roy, senior vice-president (research) at brokerage firm Edelweiss Capital says that as India approaches the $2,000 per capita income mark, a hockey-stick curve or a large spike is expected to be seen in consumption growth. “Usually, the FMCG sector starts accelerating at this point and continues to grow for a fairly long time depending on the stability in distribution,” says Roy.

Going forward, we are looking at double-digit growth in consumption in the FMCG sector, given the positive outlook we are seeing right now, said Mayank Shah, category head at Parle Products. “Large part of rural India is still dependent on agriculture and our country is dependent on monsoons for agricultural produce. Bad monsoons can play a spoilsport. However, good monsoons will give a good possibility of a hockey stick growth in the economy,” Shah said.

Over the past 18 months period, we have seen companies targeted towards different parts of consumer spending and channels – discretionary spends (like dine-out restaurants or personal care) or staples and non-discretionary (like supermarkets), and e-commerce – get more funding from PE firms and global companies.

In December 2017, French luxury goods conglomerate LVMH’s investment arm L Catterton Asia bought a majority stake in Impresario Entertainment & Hospitality, which runs brands like Smoke House Deli and Social. The same month Gaja Capital invested in Massive Restaurants that operates fine dining restaurants Masala Library, Made in Punjab, Farzi Café, Pa Pa Ya and MasalaBar.

In April 2018, online beauty retailer Nykaa raised fresh funds through a mix of primary and secondary transactions. In September, Indian hotel chain OYO informed that it will raise $1 billion from its existing investors, including Softbank. In December 2018, online food delivery startup Swiggy raised $1 billion in a funding round, led by its existing investor Naspers. The same month, Sapphire Foods, the largest franchisee of Yum! Brands Inc, which owns Pizza Hut and KFC brands in India, raised funds in a round led by Edelweiss Private Equity.

Earlier this month, cloud kitchen startup InnerChef India raised fresh funds in a pre-Series B round, led by existing investor Mistletoe Inc. Cab aggregator Ola raised fresh funds from its existing investor Steadview Capital. According to news reports, Zomato is already in talks to raise $1 billion this year

“At a $2,000 per capita income level, your basic needs are met and the income that you have available for discretionary spends or disposable income rises,” said Dalal. “The $2,000 per capita figure in India must be viewed against the large population with a wide disparity between the low and middle-income population in the country.

But, there is some reason to cheer. The WEF-Bain report titled ‘Future of Consumption in Fast-Growth Consumer Markets’ suggests that the upper-middle and high-income segments are expected to grow from being one-in-four, to one-in-two households by 2030.

“Upper-middle-income households will drive 47% ($2.8 trillion) of total consumption, and high-income households will drive another 14% ($0.8 trillion), compared to 30% and 7% respectively today,” the report said.

Generally, investors are cautious in the election year and we might not see many big ticket deals in the next 12 months, industry experts said.

In the medium to longer term, there is a consensus that India is going to be among the fastest growing economies in the world and perhaps clinch a spot among the top three world economies in the next two decades, said Dalal.

$2k per capita GDP

$2k per capita GDP to drive growth in consumption