Premiumisation In FMCG More Organic Than Price-driven: Nielsen
Home care and processed foods have seen particularly strong growth, with consumers gravitating towards premium brands in these categories, it adds
Nielsen has released its report titled ‘Elevating Value – Navigating Premiumisation Trends in India’, which highlights the growing importance of premium brands across the FMCG, tech and durables industries.
The report indicates that premium brands in FMCG are consistently growing approximately twice as fast as their non-premium counterparts. Similar trends are observed in the Tech & Durables sector, driven by increasing income levels, urbanisation, smartphone penetration, and a more aspirational consumer base.
Notably, smaller manufacturers or emerging brands in this space are registering faster growth in premium and luxury products compared to larger industry players.
“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 premiumisation in the future,” says Roosevelt Dsouza, commercial head – India, NielsenIQ.
Ecommerce is a key enabler, and modern trade is thriving
The report reveals that nearly half of all sales on digital platforms come from premium brands. Modern trade is also thriving, growing at twice the rate of traditional channels, with metro cities contributing significantly, while Tier 1 and 2 cities emerge as the fastest-growing markets, reflecting rising aspirations and greater availability of premium brands.
South sone, organised retail channels, and metro cities are leading the charge in premiumisation, though growth is accelerating across all regions.
Urbanisation Fuels Growth in Premium T&D Segment
Tech and Consumer Durables industries are also mirroring these shifts. Products with premium features are seeing a 50 per cent growth, with consumers increasingly seeking out items that promise convenience and improved lifestyle quality.
According to NIQ Consumer Life Study, 41 per cent of urban Indian consumers are now willing to pay more for tech products that simplify their lives.
Premiumisation In FMCG More Organic Than Price-driven
NIQ’s report also notes that the growth in premium FMCG is more organic than price-driven, with consumption volumes rising at almost twice the pace of price increases. Home care and processed foods have seen particularly strong growth, with consumers gravitating towards premium brands in these categories.
This volume-led growth reflects a shift towards higher-quality products, especially in segments like personal care and home care, where wellness and health-focused products are gaining traction. South sone has the highest proportion of premium brand sales, while West and East are growing the fastest.
According to NIQ Mid-Year Consumer Outlook Report, more than 70 per cent of urban Indian consumers are willing to pay a premium for a product that will last longer before it needs to be replaced. Indian consumers prioritise spending more on at-home experiences to save on outdoor dining and entertainment expenses.
Luxury Segment: The Next Big Bet
The luxury segment within FMCG stands out as the fastest-growing category, with brands priced over two times the category average achieving remarkable success. Despite overall FMCG in India facing challenges to achieve double-digit growth, the premium segment consistently grows at double-digit rates across all markets and categories, driving half of the incremental sales for the Indian FMCG industry. The trend is visible, particularly in the South and West sones.
Modern trade has become a critical launchpad for luxury products, particularly for smaller and medium-sized manufacturers who are outpacing larger players in this space. Meanwhile, in traditional trade, FMCG giants continue to dominate in terms of overall market penetration, though medium-sized players maintain a stronger foothold in the luxury segment.
According to NIQ, modern trade is playing a key role in introducing premium and luxury products to the Indian consumer. Of all new product launches in modern trade, 58 per cent are from the premium+ segment. This is significantly higher compared to traditional trade, where premium launches account for 38 per cent of new products. As a result, medium and small manufacturers in modern trade are experiencing faster growth than larger, more established companies.
Health, Wellness & Premium Ingredients In Focus
Indian consumers are increasingly prioritising health and wellness in their purchasing decisions, particularly in the home and personal care sectors. The demand for superior-quality, natural, and chemical-free products with active ingredients as well as proven benefits is driving premiumisation in these categories. Similarly, healthy options are steering premiumisation in food products.
India's rapidly growing economy, characterised by a large working-age population, rising per capita income, and increased smartphone penetration and urbanisation, emphasises the need for manufacturers to focus on premiumisation as a key growth driver in the FMCG sector.
