Companies are now embracing premiumisation strategies to meet the escalating consumer appetite for luxury products across all product categories.
Indian consumers are presently allocating more of their spending towards premium and high-end items, encompassing a diverse range of products from luxury liquor varieties to automobiles. A report from ICCBizNews sheds light on the premiumisation strategies being adopted by firms to cater to this increasing consumer demand.
Taking alcohol as an example, the publication indicates that in 2022, Indian consumers collectively consumed over 75 lakh 'cases' of Scotch whisky, which includes esteemed brands like Johnnie Walker, Glenfiddich, and Dewar's. This consumption volume nearly doubled the figures recorded in 2020, which stood at 39 lakh cases. Additionally, during the same period, the consumption of Irish whiskey multiplied by five times, Japanese whisky by six times, and American whiskey by three times.
According to the publication, Diageo, the British beverage conglomerate known for trademark brands like Johnnie Walker, Baileys, Smirnoff, and Guinness, has significantly reduced its presence in the mass segment in India. Currently, 80 per cent of its sales come from the premium segment, which is twice the proportion it was five years ago.
Shweta Jain, the Chief Business Development Officer (Premium, Luxury, Reserve, Craft) for India & South Asia at Diageo, stated that they have restructured their portfolio to prioritize and accelerate growth through premiumisation. She highlighted their new innovations, such as Godawan, an artisanal single malt produced in Alwar.
Furthermore, the automotive industry has seen an influx of new premium launches. Maruti Suzuki India introduced its seven-seater Multi-Purpose Vehicle, Invicto, priced at Rs 25 lakh. Hero MotoCorp partnered with Harley Davidson to co-develop the X440, with prices ranging from Rs 2.29 lakh to Rs 2.69 lakh. Bajaj Auto and UK's Triumph Motorcycles Ltd jointly launched the 400cc motorcycle, the Triumph Speed 400, with a starting price of Rs 2.33 lakh. These recent product launches indicate a growing trend among companies that once captured a substantial market share through competitive and affordable pricing, but are now shifting their focus to capture the emerging premium segment.
Shashank Srivastav, Senior Executive Director at Maruti Suzuki, confirmed this trend, stating, "The consumer preference is shifting towards SUVs/MPVs, which are more expensive. There is a clear inclination towards higher variants offering more features, technology, and connectivity." Tarun Garg, COO at Hyundai Motor India, added, "Customers are now willing to pay a premium for advanced and hi-tech features."
The "go-premium" trend is also evident in the TV screen market. The publication reported that in the first five months of 2023, sales of TVs sized 65 inches and bigger increased by 37 per cent. According to GfK India, large television screens now make up 12 per cent of the total TV market in the country, a significant rise from the pre-pandemic level of under 5 per cent. Notably, the 65-inch-plus segment is experiencing the most rapid growth, while the share of smaller television screens is declining.
The hospitality sector, which suffered during the pandemic, is now seeking to make a strong comeback through premiumisation. Oyo, the budget hotel startup, has ventured into a premium brand offering called "Palette." ICRA projects that India's premium hotel occupancy will reach a decade high in FY2024, with the average room cost exceeding Rs 6,000.
According to Patu Keswani, from Lemon Tree Premier Hotels, there is a noticeable shift in consumption patterns. With increasing earning capacity, the Indian middle class is becoming more aspirational and is willing to spend a bit extra, as stated in the publication.
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