Indian Meat Consumption

Trends in meat consumption
Broiler meat is the fastest growing segment, whereas bovine meat is the slowest segment.

Meat consumption has grown at about 4.8% pa. Poultry (broiler) meat has grown at nearly 20% per annum from a level of 478,000 tpa to 1.4 million tpa. Mutton segment has grown at almost the same rate as the overall meat consumption, whereas pork has grown at a slower pace. The bovine meat segment is virtually stagnant.

Per capita availability has grown from 11.9 grams/ day to 14.65 grams/day during the same period (CAGR = 3.52%)

How does India’s consumption compare with the rest of the world?

There is no straight comparison to derive the potential. However a look at the values, does give an indication of the gap. India’s consumption levels are very low and malnutrition and hunger are prevalent. It can be argued that as long as income levels keep increasing, the demand is likely to keep on growing in the foreseeable future.

The diagram depicted below maps the per capita consumption of meat of India and the rest of the world, for the year 1998. It is in the form of the classical S-curve, with India yet to be at the high growth inflexion point. The diagram would indicate that the inflexion point (at which demand starts accelerating) would be somewhere around 20-25 kg pa.

The position of Japan at low consumption levels could be explained by the fact that Japan is a high fish consuming community, which inhibits its meat consumption.

India’s consumption levels (currently 5.35 pg/ annum) are so low that it can only be explained by low incomes and high relative prices.

The horizontal axis indicates per capita consumption of meat (kg/ annum)

Data source: FAO

The total world consumption of meat is estimated to be of the order of 240 million tpa and India’s share of consumption is only 2.2%. On the other hand, India supports nearly 17% of the world’s population

Rising Inequality - The stealth Bomber

Paul Krugman made an interesting observation about the reduced egalitarianism in the American society. This is how he sees it:
“To get a sense of just how dramatic that shift has been, imagine a line of 1,000 people who represent the entire population of America. They are standing in ascending order of income, with the poorest person on the left and the richest person on the right. And their height is proportional to their income -- the richer they are, the taller they are.
Start with 1973. If you assume that a height of six feet represents the average income in that year, the person on the far left side of the line -- representing those Americans living in extreme poverty -- is only sixteen inches tall. By the time you get to the guy at the extreme right, he towers over the line at more than 113 feet.
Now take 2005. The average height has grown from six feet to eight feet, reflecting the modest growth in average incomes over the past generation. And the poorest people on the left side of the line have grown at about the same rate as those near the middle -- the gap between the middle class and the poor, in other words, hasn't changed. But people to the right must have been taking some kind of extreme steroids: The guy at the end of the line is now 560 feet tall, almost five times taller than his 1973 counterpart.”
He goes on to explode a few myths (as he calls them), namely:
“MYTH #1: INEQUALITY IS MAINLY A PROBLEM OF POVERTY.
It's not only the poor who have fallen behind -- the normal-size people in the middle of the line haven't grown much, either. The real divergence in fortunes is between the great majority of Americans and a very small, extremely wealthy minority at the far right of the line.
MYTH #2: INEQUALITY IS MAINLY A PROBLEM OF EDUCATION
The richest twenty percent are those standing between 800 and 1,000. But even those standing between 800 and 950 -- Americans who earn between $80,000 and $120,000 a year -- have done only slightly better than everyone to their left. Almost all of the gains over the past thirty years have gone to the fifty people at the very end of the line. Being highly educated won't make you into a winner in today's U.S. economy. At best, it makes you somewhat less of a loser.
MYTH #3: INEQUALITY DOESN'T REALLY MATTER.
It's easier for a poor child to make it into the upper-middle class in just about every other advanced country -- including famously class-conscious Britain -- than it is in the United States. Not only can few Americans hope to join the ranks of the rich, no matter how well educated or hardworking they may be -- their opportunities to do so are actually shrinking. As best we can tell, pretax incomes are now as unequally distributed as they were in the 1920s -- wiping out virtually all of the gains made by the middle class during the Great Compression.”

India would do well to take note of this and try and address the issues so that such an event does not occur here. If it does the results will be catastrophic. Inequalities are visible and will be manifested in rising crime rates. If unchecked, it will further lead to anarchy and breakdown. The price is way too high for comfort.

The rising inequality is like a stealth bomber. It creeps up unnoticed and then creates catastrophe.

The Great Indian Demographic Shift

The NCAER defines the Middle class as the one with household income between Rs 200,000 and Rs 1000,000. In 2001-02, the middle class consisted of 10.7 million households (5.4% of the total). The middle class owned, among other things, 7 million motor cycles, 7.3 million CTV, 6.2 million Refrigerators, 1.5 million AC and 3.2 million cars.

The total number households with income over Rs 200,000, was 11.5 million (6.2%). This is the rich class added to the middle class, a combined class of significant interest to marketers of consumption items.

Further, the analysis of NCAER indicates that the population having household income of over Rs 200,000 has increased and will continue to increase as follows

• 4.8 million HH, 2.9% of the population in ’95-96
• 11.55 million HH, 6.13% of the population in’01-02
• 18.12 million HH, 8.9% of the population in ’05-06
• 32.25 million HH, 14.5% of the population in ’09-10

The average HH is equivalent to 4.8 people.

Thus, in 4 years leading up to the current year the population of this class has increased by 57% and now consists of about 87 million people. This number is set to increase by another 78% during the next 4 years to reach 155 million.

This is a huge demographic shift by any standards, almost doubling in 5 years.

Further, the next class defined by NCAER (Rs 90,000 to 200,000 pa HH income), is also showing a similar trend:

• 29 million HH in ’95-96
• 41 million HH in’01-02
• 53 million HH in ’05-06
• 75 million HH in’09-10

It is this segment which moves on to the higher income segment. The figures indicate that the upper segment will keep increasing at these high rates and the great demographic shift will continue for quite some time.

A graphical look at the Indian Economy

Economies take time to move forward or even downwards. The larger the economy, the more time it takes to move it from its trend line. However, if the economically is under developed due to self imposed shackles and the shackles are being removed the potential for forward movement away from the trend line is huge. Most Asian Economies have demonstrated this repeatedly over the lat two decades.

The Indian Economy is fairly large, at $750 billion in market exchange rate and $3.6 trillion on ppp basis. The diagram below shows the growth of the economy over the last 50 odd years:

There are two distinct shift points in the above diagram. One in 1980 when the economy moved from 3.4% annual growth rate to 5.4% annual growth rate and the second in 1993 when it moved from 5.4% pa growth rate to 6.5% pa growth rate. The diagram indicates that 2003 may be heralding another shift. The growth this year (not in the diagram) is reinforcing such thoughts, though we will not really know for sure till we live through another 3-4 years at least. It is possible that we are shifting towards a trend growth rate of 7.5 to 8.5% pa., a trend that may go through 8-10 years.

The diagram below shows the YOY growth rates through the years depicted above. Also shown are 10 year, 15 year and 20 year CAGR for each year.

This diagram complements the earlier diagram. The long averages remain below 4% till about 1987, though the shorter average (10 years) gets past the 4% barrier by 1984. These averages do not look back after 1987and by 1996, 5% was breached. By 2006, all the 3 long-term averages have reached the 6% mark.

The same diagram is repeated below, after removing the YOY growth lines for clarity.

The diagrams above indicate that the next higher growth trajectory is indeed possible to attain within a short time frame of 3-4 years. That’s encouraging.