Rapid Growth of premium brands in India’s FMCG and Tech, ET BrandEquity

(IANS) India is the only market consistently delivering double-digit growth in the Asia-Pacific region in the FMCG, tech and consumer durables segments, according to a report by consumer research firm NielsenIQ (NIQ) released on Wednesday.NielsenIQ (NIQ) has released a report titled “Elevating value – navigating premiumisation trends in India,” highlighting the significance of premium brands in Fast-Moving Consumer Goods (FMCG) and the Tech & Durables industries. The report indicates that premium FMCG brands are growing at twice the rate of non-premium brands. A similar trend is seen in the tech and durables sector, driven by rising incomes, urbanisation, smartphone penetration, and a more aspirational consumer base.The report also finds that smaller manufacturers or emerging brands are growing faster in the premium and luxury products segment compared to larger industry players. Roosevelt Dsouza, commercial head for India at NielsenIQ, stated, “We are observing an increasing convergence of aspirational consumer preferences with higher disposable incomes, as well as the presence and access to premium products. This shift is driven by digital platforms, contributing to nearly half of the sales. Market mix, channel diversity, and new entrants will further drive the adoption of premiumization in the future.”Digital platforms contribute significantly to premium brand sales. Nearly half of all digital platform sales are from premium brands. Additionally, modern trade channels are growing twice as fast as traditional channels, with metro cities contributing significantly. Tier 1 and 2 cities are emerging as the fastest-growing markets, reflecting rising aspirations and greater availability of premium brands. South Zone, organised retail channels and metro cities are leading in premiumisation, though growth is accelerating across all regions.

Tech and Consumer Durables industries are also experiencing these shifts. Products with premium features are seeing a 50% growth, with consumers increasingly seeking items that promise convenience and quality of life improvement. According to the NIQ Consumer Life Study, 41% of urban Indian consumers are now willing to pay more for tech products that simplify their lives.

The report notes that premium FMCG growth is more organic than price-driven. Consumption volumes are rising at nearly twice the pace of price increases, reflecting a shift toward higher-quality products. Home care and processed foods have seen significant growth, with consumers favoring premium brands in these categories. Wellness and health-focused products are also gaining traction, especially in personal care and home care. South Zone has the highest proportion of premium brand sales, while West and East are growing the fastest.

According to the NIQ Mid-Year Consumer Outlook Report, over 70% of urban Indian consumers are willing to pay a premium for products that last longer. Indian consumers are prioritizing spending more on at-home experiences to save on outdoor dining and entertainment expenses.

Luxury FMCG brands are the fastest-growing category, with brands priced over twice the category average seeing remarkable success. Despite the broader challenges faced by the overall Indian FMCG industry in achieving double-digit growth, the premium segment consistently achieves double-digit growth across all markets and categories, accounting for half of the incremental sales. This trend is particularly visible in the South and West zones.

Modern trade has become crucial for launching luxury products, particularly for smaller and medium-sized manufacturers who are outpacing larger players in this space. In traditional trade, larger FMCG companies continue to dominate in terms of market penetration, though medium-sized players maintain a stronger foothold in the luxury segment. NIQ indicates that modern trade is vital in introducing premium and luxury products to Indian consumers. Of all new product launches in modern trade, 58% are from the premium+ segment, compared to 38% in traditional trade. Thus, medium and small manufacturers in modern trade are experiencing faster growth than larger, more established companies.

Indian consumers are increasingly prioritizing health and wellness in their purchasing decisions, especially in the home and personal care sectors. The demand for superior-quality, natural, and chemical-free products with active ingredients and proven benefits is driving premiumization in these categories. Healthier options are also steering premiumization in food products.

India’s economy is growing rapidly, marked by a large working-age population, rising per capita income, increased smartphone penetration, and urbanization. Manufacturers need to focus on premiumization as a key growth driver in the FMCG sector.

• Published On Oct 25, 2024 at 03:30 PM IST

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