Premium products buck demand slowdown, high inflation

2 min read . Updated: 14 Nov 2022, 02:01 PM IST

FMCG giant HUL says its premium laundry care brands grew at twice the pace of the overall portfolio while skin care and colour cosmetic products too reflect the same trend..

Well-to-do households are spending more on products in both discretionary and non-discretionary categories.

NEW DELHI : Demand for premium products is holding strong across fast moving consumer products, alcoholic beverages, and devices, as affluent, upmarket consumers remain immune to the adverse effects of inflation.

Companies, such as Mondelez, Nestle India Ltd, Hindustan Unilever Ltd (HUL), AB InBev and Flipkart, said premium skin care, foods, beverages, laundry care and liquor are reporting robust growth, albeit on a low base. Smartphones in the uber-premium and premium segments are also seeing a big jump in shipments. The trend points to greater ability among households at the top-end of the consumption basket to spend more freely across discretionary and non-discretionary categories.

“Overall, the premium portfolio continues to play a pivotal role in our growth story and is being activated through various channels and occasions. Case in example—the festive season, which witnessed strong off-takes across categories, saw premium offerings leading the way," said Vikram Karwal, senior director, marketing, chocolates, Mondelez India.

FMCG giant HUL also said its premium portfolio performed better. Its premium laundry care brands grew at twice the pace of the overall portfolio. It reported similar trends in its skin care and colour cosmetics categories with the premium range for Lakme and Pond’s delivering double-digit growth during the September quarter.

“Even if you look at it from a lens of market, premium is growing faster than popular, popular is growing faster than mass. This is a very clear trend and it is, in many ways, intuitive because people who have more money are a bit more resistant to inflation than people at the bottom of the pyramid," Sanjiv Mehta, chief executive and managing director, HUL, said during the September-quarter earnings call. Growth in premium categories comes even as companies called out the weak demand scenario in the September quarter. FMCG volumes fell 0.9% in the three months ended 30 September, researcher NielsenIQ said on Thursday. Lower-income households across urban and rural pockets are feeling the pinch of high inflation affecting demand.

Companies said households at the upper end of the market are still driving consumption. For online marketplace Flipkart, this translated into “strong" growth across premium (offerings) on its platform in personal and beauty care, both in terms of the numbers of customers shopping on the platform, as well as spending during the festive season. “In larger markets, premium demand has been more resilient. I would quote some of the recent industry reports where it was evident that 80-90% of India’s discretionary income or savings rests with the affluent and aspirant consuming classes," said Kanchan Mishra, head of Flipkart’s FMCG, home and general merchandise businesses.

A spokesperson for Nestlé India said premiumization is one of the company’s growth engines and the entry of Gerber is an example of premium toddler food. In the smartphone category, Samsung forecast a 45% increase in sales during the festive season sales and 80% growth in the premium segment compared to last year. Demand for premium Samsung TVs more than doubled, while sound bars grew by threefold.

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suneera.t@htlive.com

ABOUT THE AUTHOR

Suneera Tandon

Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.