Strong demand for premium products persists despite inflation pressures

Amid shifting retail dynamics driven by India's quick commerce boom, premium products are moving off shelves faster across all channels

The demand for premium products remains strong even as consumers cut back on lower-priced items due to inflation, according to a report by The Economic Times. Consumer companies have also indicated that while urban growth slowed during the September quarter, rural demand showed gradual recovery.

 

Hindustan Unilever chief Rohit Jawa told The Economic Times that premium segments continue to grow around 30 per cent faster than the other segments. This comes even as a slowdown has been observed in the growth trends compared to last year. According to data by Kantar, urban markets grew 4.3 per cent while rural areas saw volume growth at 3.9 per cent within the FMCG segment. This marks a decline from last year’s growth rates of 8.1 per cent in cities and 6.3 per cent in villages.

 

Due to the quick commerce boom in India over the past one year, traditional kirana stores are facing pressure, with about 200,000 stores shut during this period, according to All India Consumer Products Distributors Federation (AICPDF). Despite this shift in retail dynamics, it is being observed that premium products are moving faster from retail shelves, regardless of channels.

 

Consumption among the upper middle class and high-end segments in urban areas has also seen consistent buoyancy. However, among the middle and lower middle classes, urban food inflation and overall muted sentiment have impacted consumption, the report added. United Breweries, which holds half of India’s beer market, reported overall volume growth of 5 per cent, with the premium segment expanding by 27 per cent.

 

These figures shed key light on India’s consumption patterns across classes while consumers relook at their spending strategies amid inflation woes. According to a Kantar report published in June, a typical Indian household spent Rs 49,418 in Q1CY24 (the first quarter of the calendar year). 

 

A close look at urban and rural households shows that urban households in general spent 1.6 times more than their rural counterparts, while south Indian households are the highest spenders.