Food companies benefit from Premiumisation

India: Indian Fast moving consumer goods (FMCG) market is seeing some new changes as Indian consumers are evolving every day in their product choices and FMCG companies are offering products with different variants at premium prices to tap that demand in the country. Indian premium segment is about worth INR 60,000 crore, which is about a fifth of the total FMCG market. Premium product which are 50-60% costlier than normal products seem to be doing good in the market.

Companies are now focusing on differentiation to sell their products and boost their earnings by making the products a niche segment. For instance, a green tea bag which is sold by Mumbai-based Girnar is priced at INR6/piece. But when sugar and some spices are infused, the price tag jumps to INR15 apiece. Or take biscuits, the country's largest consumer products category, while Parle products dominate the INR25,000 billion market with its popular Parle G glucose variant, as consumers are now upgrading to pricier cookies and the Premiumisation is helping companies. Another FMCG player Britannia gets nearly 85 per cent of its sales from premium products and the company's most expensive variant, Good Day Chunkies is 90 per cent costlier than its basic version.

According to TechSci Research, Indian companies have started adding extra benefits in their existing products such as added nutrition in a particular product or addition of a new flavor in the existing product line. This trend is forecast to increase in coming years as consumers are getting more demanding and they are willing to pay premium prices for quality and value added products. Furthermore, consumers also perceive that high priced products are more likely to be of better quality, which is also helping the FMCG companies to sell their products at premium prices.