With premium coffees and pricey hair serums, FMCG firms woo the well-heeled

For long, companies focussed on mass-market products such as powder detergents, shampoos and soaps aimed at millions of middle-income households. The focus is changing, as the focus shifts to premium products and new categories unavailable in India yet.

Last week, Nestle India said it is set to launch its premium Nespresso coffees and machines in India, citing a “surge" in in-home coffee consumption. The company said India is one of its fastest-growing coffee markets.

Today, premium products account for 12-13% of the company’s sales—Nestle expects this number to touch 15-16% in the medium term and 20% in the long term, said Suresh Narayanan, chairman and managing director, Nestlé India said. Nestle has identified premiumization as one of the growth engines that will accelerate its India business, the company had said earlier.

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New categories

Emerging categories such as premium coffee, health science, nutrition and pet care will drive Nestle's premium play in India. The company is now present across all these categories in India, apart from selling mass-market brands such as Maggi and KitKat.

“The market outlook is that quite clearly, premiumization is here to stay. The bottom end of the pyramid is also doing relatively well... I think brands have to fight for mindspace because of the bandwidth of choice between organized players, regions regional competition, and D2C (direct to consumer) has become wider," Narayanan told reporters earlier this week.

More companies are now chasing such consumers, and it is easy to understand why.

A recent report by venture fund Elevation Capital said India’s top five million households, comprising 2% of the population, spend approximately $40 billion every year in discretionary purchases. Over the next decade, this pool will expand to $100 billion as their incomes grow, it said. The report specifically pointed out pet care and premium healthcare as categories that are likely to benefit from this surge in consumption.

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Sun-care and hair serums

Meanwhile, Hindustan Unilever Ltd (HUL) is rapidly entering new premium categories such as sun-care and hair serums. India’s largest consumer goods maker is also looking at premium spaces within foods. The company will "premiumize more" across the board, as it chases greater growth in India.

Premium products accounted for 33% of HUL's product mix in FY22, up from 22% in FY12.

“That's where we are investing further. Most of our market development bets are also in the premium space. It's roughly growing at two times above average (portfolio)," Rohit Jawa, CEO and managing director, HUL, said in an interview with Mint last week.

Jawa said a new India is emerging, prompting companies like HUL to serve them better.

"Most of our funding is going towards new segments and more premium areas because that's where the growth is. That already shows you how we are pivoting towards a different portfolio and channels," he said.

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Ayurvedic products

Citing the example of its ayurvedic brand Indulekha, Jawa said the brand could enter new categories while tapping into demand for premium ayurvedic products.

“We're looking at other categories that the brand can go into. It's a very strong brand, with clinical and therapeutic credibility. We intend to basically make that the main focus of our ayurveda thrust, because it has an opportunity to build a premium ayurvedic, therapeutic segment," he said.

In March, Mint had reported that HUL is set to “significantly" grow its premium beauty business and accelerate premiumization across its existing personal care brands such as Tresemme and Lakme.

Premium global beauty brands are also chasing growth in India. In its third quarter earnings call in February, beauty retailer Nykaa had said its premium business comprising of over 250 beauty brands is growing at about a 50% CAGR over the past three years. Roughly about a third of its gross merchandise value or GMV comes from what it defines as premium and prestige beauty brands. In the December quarter, the retailer introduced several pricey brands such as Urban Decay, Dr. Barbara Strum and Cera Ve.