NEW DELHI: Far from the days of selling sachets of shampoo for 50 paisa or detergent for one rupee, FMCG firms like HUL, Emami and ITC are increasingly moving towards selling premium products to align with the aspirations of modern day Indian consumers.
Interestingly,the fast moving consumer goods (FMCG) firms are no longer targeting the only urban markets for the premium products. The rural masses are equally potential consumers of such products as their incomes and spending power increase.
HUL, a heavyweight in the FMCG space that has been focussing on making products affordable and make money out of it, is taking the lead in tapping opportunities in the upper segment as the Indian market evolves.
“India is changing and the beauty of India is that the dichotomy and paradox of opportunities (it presents)…Now there is opportunity at the top end…premiumisation is important,” (A) Unilever Chief Operating Officer Harish Manwani had said.
In the personal space, HUL has been pushing sales of its premium products like Dove and Pond’s Gold Radiance to counter P&G’s ‘Olay’ range.
Similarly, homegrown major Emami is also gearing up to cash in on the opportunities at the upper end of the pyramid.
“We are looking at entering the premium category in personal and healthcare segment. Besides, we will also consider some kind of collaborations with UK-based companies,” Emami Ltd Director Aditya Agrawal told PTI.
Analysts said the push for premiumisation has been intensifying over the past two-three years.
“There has been an increasing trend among consumer firms pushing their premium products. In the last two-three years, three-fourth of the advertising budget of most consumer firms are spent towards promoting premium products,” IDFC SSKI Securities Managing Director Nikhil Vora said.
He said move to sell premium products is not restricted only in urban markets.
“As income level in the rural areas also increases, there is propensity to spend more. So most FMCG firms are trying to upgrade the choices of consumers in those markets,” he added.
According to market research firm Nielsen, FMCG market in rural India is expected to grow more than tenfold to USD 100 billion in the next 15 years.
Mukul’s comments:
(A) The Indian Consumer presents a very interesting picture to the industry. On one end is the huge middle class segment which is very particular about getting value for its money. On the other end, rising incomes are pushing the consumer towards a position where he does not mind paying a little extra for premium products. And the good news for the industry is that more and more people are joining the upper middle class and upper class segments and they want to be second to none when it comes to consumption of branded products. This phenomenon explains the five-fold increase in the footwear industry, tremendous growth in luxury watch market, and as described in this article, promising growth in the premium segment of the FMCG industry. Rise in premium markets is also pointing out to a changing profile of Indian consumer towards a younger, tech savvy and brand-conscious consumer who does not flinch in spending more on a premium brand. There are two interesting aspects to this: One, this tendency to demand more premium products is now even extending to necessary products like food, where consumers are showing readiness to spend on quality food items even at a higher price. Second, the myth that premium products are reserved for only urban and metro markets is being busted as rural demand for these products is also rising, giving spreading industrialisation and rising rural incomes as also is the participation of Tier-2 cities in the growth of these premium product markets. As the incomes rise in these cities, the young, well-earning crowd wants to match its metro counterpart in spending and brand usage, which is driving the growth in these markets.
