How Price Tags are Becoming Less Relevant in CPG
India's consumer landscape is undergoing a profound transformation, marked by the rise of premiumisation—a trend redefining the market dynamics. From smartphones to personal care, consumers are increasingly gravitating toward high-value, aspirational products, reshaping industries and creating new opportunities for brands.
The Premium Surge: A Paradigm Shift
2023 marked a turning point for India’s consumer market. While low-priced goods struggled, luxury and premium products witnessed a significant uptick. In 2024, the consumption of plant-based milk (such as soy, rice, almond, and oats) has gone up to 74% in India compared to last year, driven by health benefits. Thus, signalling a nationwide appetite for premium goods. This shift underscores a fundamental change in consumer behaviour, where quality and status have taken precedence over cost.
E-commerce platforms, once synonymous with bargains, are now thriving hubs for premiumisation. Saurabh Srivastava, Vice President at Amazon India, highlighted that online retail is experiencing "very strong premiumisation across categories." Consumers are no longer merely seeking value deals; they are actively pursuing premium products to elevate their lifestyles.
Industry Giants Embrace Premiumisation
Major players in the FMCG sector have quickly adapted to this wave. HUL reported that 70% of its new launches over the past two years were in the premium segment. Similarly, ITC focused 65% of its personal care product innovations on higher-priced offerings. This trend extends beyond personal care to consumer electronics, fashion, and even food, reflecting a broader evolution in purchasing preferences.
A recent report states that the premium segment now accounts for 27% of total FMCG sales and contributes an impressive 42% to the sector’s value growth. Consumers are willing to pay a premium for quality and exclusive experiences, even accepting brands that charge double the average category prices.
Indian Brands Leading the Charge
Several homegrown Indian brands have capitalised on the growing demand for premium products. Bikano, for example, has introduced a range of premium snacks catering to the evolving tastes of the Indian middle class. Amul, traditionally known for its value-driven dairy products, has also launched a premium line targeting urban consumers with a penchant for gourmet experiences. These brands, along with others like SUGAR Cosmetics, are tapping into a more aspirational consumer base that seeks products that offer a blend of quality and status.
Drivers of Premiumisation
Several factors are propelling the premiumisation trend:
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D2C and the Rise of Niche Premium Brands
In the direct-to-consumer (D2C) space, the impact of premiumisation is particularly pronounced. Categories such as beauty, personal care, and apparel are experiencing significant growth, with niche D2C brands gaining traction. These brands offer curated, superior selections that resonate with status-conscious consumers, often bypassing traditional retail giants like Amazon and Flipkart.
Premiumisation Beyond the Urban Elite
What began as a trend among affluent consumers is now permeating Tier 1 and Tier 2 cities. As aspirations rise and digital platforms expand their reach, premiumisation is no longer limited to metro cities. Modern trade channels, growing at twice the rate of traditional ones, are thriving, with smaller manufacturers leveraging this trend to outperform established players.
The Road Ahead: Redefining Consumer Markets
Premiumisation is more than a fleeting trend—it represents a fundamental shift in India's consumer behaviour. This transformation underscores a broader aspiration for quality, health, and wellness. Products with premium features, such as natural ingredients or proven benefits, are increasingly sought after, especially in personal care and processed foods.
As the economy grows and consumer aspirations evolve, premiumisation will remain a critical growth driver. For brands, this means focusing on innovation, leveraging digital platforms, and crafting strategies that align with the values and aspirations of modern Indian consumers.
Moreover, staying ahead of these trends requires understanding the market and employing real intelligence—leveraging data-driven insights and advanced technology to meet the demands of today’s discerning consumer. Real intelligence empowers brands to predict consumer behaviours, optimise supply chains, and deliver the premium experiences that today’s Indian shoppers demand.
India is not just consuming; it is evolving. In this era of premiumisation, the pursuit of quality over cost is reshaping the FMCG sector and empowering consumers to make informed, aspirational choices. The fusion of real intelligence with the growing premium demand will define the future of retail in India, offering both challenges and exciting opportunities for forward-thinking brands.