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Market Size Matters

Forget the BRIC-view of 'emergence'. Think America versus China versus Europe versus India. It's all about becoming the single largest consumer market.

By Amanpreet Singh

The world's single largest market for colour TVs --- know which it is? Not India, with some 7.3 million units sold in 2003. Not Europe, with a market size figure of 14 million. Not even America, with 16 million. The biggest market for CTVs is China, which will end this year having bought approximately 30 million CTV sets. Phew!

The CTV, as you know, is the quintessential 'middle-class' product, and its market size has its own tale to tell. But what about that quintessential symbol of being 'well-off' - the car?

China, as it turns out, has overtaken India as a car market too (this was the solitary market on which India was ahead till the late 1990s, thanks to the concentration of wealth atop the pyramid). India closes the year with roughly 750,000 new cars on the roads, while China logs some 1.2 million. The West, of course, scores much higher on this score, having been well-off for considerably longer and in much larger numbers. Europe's annual car market is some 14.5 million units strong, while big daddy America's is a good 17 million (a few million below its peak).

The difference is that while India and China are growing (the latter far more consistently) as car markets, America and Europe (the latter less so) are largely stagnant. But what about something soft --- say, cola consumption? Surely, this wouldn't be about the size of the 'middle-class', the number of 'well-off' or anything else of the sort...

Well, whaddayaknow. The cola figures are even more revealing. Annual consumption in India is a meagre eight servings per capita, compared to the US, which is at a staggering 747 servings (two drinks a day, that is, for every American). America, of course, could be taken to be an exception - a country where the phenomenon of cola replacing drinking water draws shrugs more than anything else. What's China's consumption like? A good 23 servings per capita per annum. And Europe's? Germany is at 361, the UK at 400 and Norway at 495. Perhaps the big stunner would be the figures for Pakistan and Sri Lanka --- at 19 and 24 servings, respectively, several times India's.

Does market size matter? Silly question; of course it does. It affords larger economies of scale, attracts more investment and puts together a wider set of resources to make something of that investment. The larger a free-trade zone, or 'market', the better it is for everybody in it. Call it simplistic, but it has probably been a major plus in America Inc's favour to have been the single largest market for almost everything this past century, the century of stars-n-stripes.

Europe seems to understand that, somewhere, even if its multi-starrer European Union project is running into difficulties (an exclusive constitution could do the very idea in, potentially turning euro-bulls into bears). China is comfortable with its numbers, and though nobody outside the country has any idea if it has any grand market strategy (the denial of numbers published even in The Economist obscures the picture), at times it seems self-evident that it has got its internal dynamics all worked out to defy Western-world caricaturization.

And India? Take a look at SAARC numbers. South Asia as a whole is a CTV market of some 12 million units and a car market of just over a million. Nothing dramatic, really (except perhaps in cola consumption). Some might even see non-Indian markets as a sort of 'drag' (in cars, particularly).

Yet, that shouldn't detract from two facts. One, the bigger the market, the better--- logic that applies as much to 'bottom of the pyramid' calculations as any other. Two, market size computation under a proposed free-trade zone should not be a direct sum of constituents. The whole could actually be greater than the sum of parts.

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