India's new consumers are increasingly buying higher-priced premium products

Categories such as hair serums, granola, frozen foods, body wash, oats, fabric conditioners are seeing a jump in household penetration as well as volume growth as new consumers readily buy such products, according to data sourced from Kantar, a market research firm.

Overall premium categories reported a compound annual growth rate of 16% in volumes between April 2022 and April 2024, while value growth rose 24% in the same period.

Kantar tracked household consumption of categories such as food spreads and dressings, face scrub, peels, masks, body wash, hair serums and conditioners, muesli, Korean noodles, liquid dish wash, liquid detergent, ready-to-cook mixes, cornflakes and oats, frozen foods, fabric conditioners, targeted skin creams, sensitive toothpaste, healthy bread, healthy oil (olive, canola, rice bran, flaxseed) sweetener, and sugar-free cold drinks, among others.

Across all categories, Kantar reported a jump in both buyer penetration as well as a significant consumer shift towards paying more to buy such products. Kantar defines penetration as the percentage of households that purchased a category or a brand in a given period of time—12 months.

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Hair serums reported a 30% jump in the number of households buying the category between 2022 and 2024; fabric conditioners too reported a 1.7x jump in the number of households buying the product the same period while reporting a household penetration of 37%. Sensitive toothpastes, on the other hand, reported a 47% jump in the number of households buying the category while the category penetration still stands at 21%. Anti-ageing creams too reported a 35% jump in households while reporting volume growth of 27% in the two-year period.

To be sure, more mature categories such as soaps and biscuits enjoy well over 90% household penetration in India.

While several of these categories have been around for years, companies are now reporting greater adoption, prompting them to increasingly launch higher-priced premium products with added benefits.

It also helps that online commerce has improved access to such categories and also allows new-age brands to launch pricey hair masks, serums, protein bars, muesli, lip colours, oils, etc. Kantar data points to greater sale of premium products across quick-commerce and e-commerce.

“India is a polarized market. Premium will keep growing; mass will keep growing. The polarization will definitely continue because the upper end of the market is unaffected," said K. Ramakrishnan, managing director- South Asia, worldpanel division, Kantar. Companies will benefit and profit from premuimization across categories.

Kantar defines a brand as premium if its average price is more than 125% of the median value of the category.

There is a gradual change in consumer behavior - from the traditional, savings-oriented consumer to one that actively seeks several products, services and experiences despite their priciness, Kantar said in Consumer Connections data on household consumption released for 2024.

Analysts said traditional ways of driving growth for packaged goods by reaching more households are now giving way to upselling value-added goods to shoppers.

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"Traditionally, FMCG models were based on increasing penetration and that's how that whole FMCG distribution model really grew. Now what is happening is that there's only so much of a certain category that you can consume, and incomes are also increasing. Therefore, premiumization is the only way to grow," said Anand Ramanathan, partner and consumer products and retail sector leader, Deloitte India.

Joy soap maker RSH Global said while it largely operates in the mass-market segment, it is seeing visible signs of premuimization in the skincare portfolio.

“While we have primarily operated in the mass or affordable segment of the market since the inception of our brand, we have undertaken some strategic premiumization in recent years. For a mass brand, this is a gradual process. In our three core categories—skincare, moisturizers, and face washes—we have started moving towards premiumization with the introduction of value-added products. Our focus will continue to be on the mass and masstige categories, avoiding niche markets in the short to medium term," said Sunil Agarwal, co-founder and chairman of Joy Personal Care (RSH Global).

Masstige is a bridge category of products that are considered premium, but available at affordable or attainable price points.

On Tuesday, staples company Adani Wilmar Ltd. said it has recently rolled out first-pressed mustard oil at a slight premium to  regular mustard oil. “In this category, we have seen connoisseurs who are die-hard buyers of mustard oil. For them, we have got the first press oil," said Angshu Mallick, MD & CEO, Adani Wilmar. Going forward, the company that sells edible oil, rice and wheat flour under the Fortune brand, said it will look at categories such as functional oils and flour with low glycemic index.

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Companies such as Hindustan Unilever have identified premuimization as one of the growth drivers for its India business.  “Our premiumization strategy has yielded tangible benefits over the last few years. This can be evidenced by a circa 300 basis points increase in our premium contribution over the last three years," the company’s management said during the company's post-earnings call on 24 July.  More recently, HUL launched a range of specialty coffee under the Bru Southern Trails brand, foraying into premium roast and ground coffee format. It also launched Vaseline's first overnight serum-in-lotion. It also relaunched Lux body wash last quarter.