Don't confuse sales data with consumer trends

It is the quarterly earnings season, and with it come narratives from equity analysts, business media and chief executive officers on the health and status of consumer demand.

- RAMA BIJAPURKAR

It would be both heartening and enlightening if these narratives came from understanding what is happening to household employment, income, sentiment and spending choices instead of conjecture based on sales performance of large listed companies in analysts' favourite sectors (fast-moving consumer goods, or FMCG, for some, cars or smartphones for others).

Evaluating corporate results through the lens of factors affecting consumer demand makes more sense than the reverse, and does not add to the existing confusion of different data sets pointing in different directions.

Conceptually, too, strategic choices made by companies of where they will play, competitive activity, and internal execution issues hugely affect the quantum and profile of their sales, which cannot be seen as a pure reflection of the consumer demand environment.

In the past few quarters, "premiumisation" was identified as a consumer demand trend.

This quarter, rural demand recovery and the urban market pain has been added as a new trend.

'Premiumisation' deconstructed

"Premiumisation" happens in many ways and tells many different stories about consumer demand.

Sometimes, it results from companies making strategic choices to focus effort on higher-income consumers who buy higher performance at higher prices, driven by the underlying household trend of the rich getting richer for well-known reasons.

When company efforts don't work as expected, it does not mean that rich consumers are under pressure or that their share of incremental national income is declining.