Indian shoppers turn to premium goods

10 August 2011

NEW DELHI: A trend towards "premiumisation" means many Indian consumer goods manufacturers and retailers are now adapting their portfolios and strategies.

Hindustan Unilever, the FMCG specialist, has observed rapid shifts in shopper behaviour as a result of rising wealth levels, according to R Sridhar, the firm's chief financial officer.

"We see that change is in the terms of households that are moving from bottom of the pyramid to mid-class, middle moving to affluent," he told DNA India.

"You can see that clearly in personal products, there is [a] drive towards premiumisation."

Saugata Gupta, chief executive officer of Marico, another consumer goods company, suggested the same process is fuelling integration between the desires of buyers in rural and urban markets.

Given this, he predicted the packaged food, health and beauty categories would witness both dramatic increases in sales and new conceptions of what constitutes a good purchase.

"In the last ten years, the big change that has happened in the consumer space is that India is no longer about price, but the equation has moved to value," said Gupta.

"So if you have to deliver value, it has to be quality and features along with price and not just low price."

Mayank Shah, group product manager at Parle Products, said his company had benefitted from this shift: "Until four years ago, only 15% of our turnover from biscuits came from premium products. Today that number stands at 50%."

Future Group, one of India's biggest retailers, launched a new store network, Foodhall, in May, focusing on high-end offerings in sectors such as grocery and beverages.

Cadbury, the confectionery giant, has rolled out a high-end line, Silk, specifically for India, and V Chandramouli, its director, snacking and strategy, argued communications must create a "wow factor".

"It is important to make significant investments in modern trade through activations and in-store displays to convey the premiumness," Chandramouli said.

Data sourced from DNA India; additional content by Warc staff