From Dal to Dolce: India is loving its luxury life very much!

It's time to move over from plain, vanilla budget basics! Indians are no longer looking for “best purchases and value buys under Rs 1,000”—at least not as much as before.

India's getting fancy, and how! From gold-flaked chocolates to swanky SUVs that look like they’re wheeled straight out of a Bollywood blockbuster, Indian companies are rapidly jazzing up their product lines, even faster than you can say the word "premiumization."

But what does this mean for Indian companies and consumers? What is this jazz about premiumization all about? Is it just urban India that’s riding this wave, or has rural India also joined the bandwagon? We decode for you.

What's premium, really?

Imagine you’re eating Pav Bhaji at a roadside thela. Later during the day, you decide to dine out at a fancy, upmarket cafe, only to find Pav Bhaji Fondue on the menu. Same same, but much more expensive—often 5 to 10 times higher—for a little more hygiene and some better ambience!

Think of premium products as this fondue. They are a notch up your regular, daily-use products soaps or shampoos, and even cars, all packaged luxuriously, offering just about the right touch of quality. The main differentiator, though, would be the price range.

Driving home premium wellness

A recent report by Nielsen suggests that over 70% of urban Indians are okay with paying a premium for their products. And companies are cashing in on this sentiment like never before. This explains why 58% of new products launched so far this year have been in the premium+ segment, as opposed to just 38% of new launches in regular, traditional trade.

Take cars, for instance. Indians are no longer vying for a good old Maruti 800 or Alto, traditionally known for their healthy mileage, but are rather happy investing in more swanky features that come along with high-end cars.

In October 2024, India’s largest car manufacturer, Maruti Suzuki, sold 65,948 units of its compact cars like Swift, WagonR, Dzire, and more. Compared to the year-ago period, which saw sales of 80,662 units, this was an 18% dip.

But take a look at their SUV (sport utility vehicle) sales for the same period. Cars like Brezza, Ertiga, and Grand Vitara sold about 70,644 units, a 19% uptick from the sales made in October 2023, i.e., 59,147 units. Simply put, when it comes to cars, Indians are saying the bigger, the better!

The same is true for India's second biggest automobile manufacturer, Hyundai. Its SUV lineup made up a staggering 68.2% of the firm's total sales made for October 2024. What's more, SUV demand remained largely consistent across urban and rural markets.

Consumers are inching up

FMCG (fast-moving consumer goods) are also riding the premiumization wave, with Indians prioritizing their health and wellness and not bothered about dishing out a few extra bucks for the same! You’ll find no dearth of words like organic, vegan, gluten-free, and sugar-free, peppered generously over every product you’ll see today, be it soaps, juices, or more.

No wonder then, sales from premium segments in 2024 make up around 27% of all FMCG sales and even contribute a massive 42% to the sector’s value growth in India.

The Nielsen report further adds that luxury brands that position themselves at twice the price of their category’s average are even witnessing stellar growth.

In fact, for most FMCG brands like Tata Consumer Products, Hindustan Unilever (HUL), Dabur, and Nestle, it is this premium segment that is growing much faster than their regular ones.

And it's not just about daily-use products; Indians are also taking their celebrations a step over. Spirits manufacturer Radico Khaitan highlighted that for the first half of 2024, their prestige & above segment made for 88.4% of its net sales value. In the same period, the regular popular segment accounted for just 9.1% of their net sales.

From Hindustan Unilever, which saw its premium products grow 30% over the last quarter, to Kingfisher beer's parent company, United Breweries, whose premium product sales volume jumped by 27% during the quarter as opposed to just a 5% rise in overall volumes, everyone is seemingly taking their lifestyle a notch above.

Per the Nielsen report, in 2024, a typical global consumer spends about $13.7k per year. This is set to grow by around 2.4% to $14k as early as next year. Even a report by Goldman Sachs also highlighted a similar trend, noting that India’s affluent class, or those earning over $10,000 (Rs 8,42,694.97), is set to reach 100 million in the next 3 years. And where will this consumer spend? On premium products!

Online shopping shifts from mass to class

Amazon’s Great Indian Shopping Festival, which was live between September 27 and October 29 this year, saw 140 crore customers, more than 85% of whom came from non-metro Indian cities. On the site, there was a 400% spike in sales in premium sales across categories like watches, fragrances, handbags, jewelry, and more. Rival Flipkart noted a similar trend, recording 1.8x growth in premium beauty and personal care products during the first half of this year.

Dialing in premiumness

The Indian smartphone ecosystem has always been dominated by basic phones, or those entry- and mid-range phones that are priced between Rs 10,000 and Rs 6,000. But that has changed in recent times, with premium smartphones (i.e., those priced over Rs 60,000) registering 20%+ growth in 2024.

During the first quarter of this year, sales of mass phones (priced between Rs 10,000 and 20,000) reached 44%, compared to 51% in the year-ago period. But it's all sunny and shiny in the mid-premium (priced between Rs 40,000 and Rs 60,000) and super-premium segments (priced above Rs 60,000). Sales growth has burgeoned by as much as 27% and 86% in these categories, respectively.

As India continues its march toward becoming the world's third-largest economy by 2027, the premium party is just getting started. Industry experts predict that premium segments will grow faster than you can say "sustainable organic handcrafted artisanal batch of coffee."

So the next time you see someone dropping serious rupees on a fancy bottle of black water that also somehow plays music and tracks their hydration (yes, that's a thing), remember: This is just the trailer. Picture abhi baaki hai, mere dost!