Unlocking Growth in India's Premium Market

Chandrasekhar Venugopal
PRINCIPAL
Siddharth Agarwal
PRINCIPAL
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India's middle class is rising, fueled by the evolution of premium customers. Entrepreneurs have started to decipher the signals and are ready to unlock this growth potential.

These signals have begun to become louder. One interesting sign is the huge love Indians  have shown for premium sneaker brands such as Air Jordans. Post-pandemic, India has observed a K-shaped recovery that isn't just about bouncing back, it's about leapfrogging to premium. And for founders, it's a unique opportunity. 

There is further evidence from consumer companies to suggest that the sachet economy is beginning to taper off. In contrast, premium category sales are skyrocketing. For context, India bought a record-breaking 10 million iPhones in 2023. Similarly, 65-inch+ television sales accounted for 12% of all TV units sold in 2023, up from 5% in 2020. Smart inverter AC sales increased to 77% in 2023 from 27% in 2017.

Premium is a rising segment of Indian consumers that can be attributed to the increase in affluent Indian households, which are expected to grow to about 80 million by 2030. That’s almost a quarter of the total 350 million Indian households in the country. For context, that’s equivalent to the entire population of Germany and larger than the UK. 

To unpack more on what is premiumization, how real is this opportunity, and how should founders approach building on this theme, we sat down with industry veterans Chakradhar Gade, Co-founder & CEO, Country Delight; Kapil Chopra, Founder, EazyDiner and The Postcard Hotel; and Revant Bhate, Co-founder & CEO, Mosaic Wellness, to unpack the drivers behind this trend, and how founders can capitalise on the opportunities ahead. 

What is premiumisation?

Premium and luxury are often (and usually ) used interchangeably. To add to the confusion, terms like mass-premium, bridge to luxury are thrown into the mix. Let’s establish the basics first- Premium offerings lie somewhere between mass and luxury. 

Our founders, who are seeing this play out across different categories, had their own interesting ways to articulate this.

Chakradhar illustrated a spectrum from the functional to the aspirational:

“Everything (from mass to premium to luxury) flows between functionality and aspiration. While mass is purely functional, mass premium offers great value for money with a 95 percentile offering. At the premium end, aspiration and feel-good factors start to play out.”

Revant linked the consumer mindset with affordability to outline the difference:

"Mass - I'll be able to spend money today. 

Premium - I'll be able to buy it next year.

Luxury - I'll be able to buy it in ten years.” 

Kapil highlighted the inherent nature of the Indian economy, where consumers always have a desire to upgrade, to define premium:

“Premium is aspirational. Getting a better phone, better car. Everybody's moving up. And it's a simple journey of a developing economy galloping fast.”

Categorizations indicative and up from discussion

Why is premiumisation important?

Affluent Indians are driving spends across categories beyond food and apparel. It’s everything from smartphones to cars, expensive watches to jewellery. With developed and previously high-spending markets, such as the US, the UK and China, facing economic headwinds, India is one of the most promising markets where the middle class is driving premium spends upwards.

Estimates expect 79 million households an income of Rs 10 lakh or more per year by 2030, up from 36 million in 2019. 

In 2023, brands and companies struggled to sell low-priced goods and invested in premium offerings to cater to these new aspirations. It is a trend visible across metros and smaller centres, spurred in part by the rising purchasing power post-pandemic.

It is clear that this presents founders with a unique opportunity to create value for a developing segment with large ticket sizes and higher loyalty towards brands. The question is, should everyone build premium products, or upgrade their existing offerings?

Is it a trend across categories?

Premiumisation is occurring across product categories.

It is not just products, but also experiential categories such as travel or music concerts. The examples are evident: 

  1. The booming real estate sales, rising interest in SUVs, and the growing popularity of craft liquor in and from India. 
  2. The rise of brands such as Mokobara (luggage), Air Jordans (shoes), Dyson, Marshall (speakers) and many others. 
  3. The rise in iPhone sales in India in 2023 is a clear sign that people are willing to buy a brand that was previously seen as aspirational. 
  4. SUV sales in India accounted for 48% of the overall passenger vehicle sales in 2023, with over 20 lakh units sold

But here is the catch: 

Premiumisation is not a one-size-fits-all proposition. 

For example, in food, the customer has to like the flavour to keep coming back — that’s table stakes — but it also has to make the customer feel valued in the overall experience. In fashion, it is about driving aspiration. In service-driven categories, premium is providing intuitive and seamless service.

For example, in hospitality, every part of the guest experience is anticipatory and memorable. 

In a nutshell: Integrating premium into your product or service will depend on the core segment you serve. 

There are some interesting examples across categories where companies have integrated or launched new premium offerings over the past year:

Ola Prime Plus: Ola launched its premium service in a few cities, guaranteeing professional drivers and zero cancellations, understanding the main pain points of daily commuters.

Usha Onio fan series: The consumer durables firm launched its aesthetically designed fans for consumers who demand more than functional choices. 

HUL’s beauty product premiumisation: The FMCG major reported Rs 900 crore worth of revenue gains from its newly launched beauty ranges such as Novology and Acne Squad, priced higher than its other mass offerings. 

What does it mean for builders?

The premiumisation trend in India mirrors the growth curve in China when consumer spending picked up in 2007.

While status and aspiration are a part of the reason for the shift in Indian buying preferences, premiumisation is also indicative of changing lifestyle choices. 

With economic growth, the appetite for higher quality goods and services also rises.

The startup community has noticed the trends. Our experts on the panel had clear advice on the key to unlocking the premiumisation goldmine for founders: Understand your niche.

Obsess over your customers. Get one small thing, really, really right with them. And then start building around that.- Chakradhar.

For instance, in Chakradhar’s experience, Gen Z are very savvy as customers. They experiment fast and are less forgiving of bad experiences. Millennials, meanwhile, are somewhat the opposite. While building your product, you should be clear on which of these you are serving and design accordingly. He should know. Country Delight delivers on the promise of providing high quality, fresh milk and other produce to lakhs of customers while working favourably with farmers and auto drivers.

Premium isn't just about a price point, it's a promise of quality and exceptional service. Deliver on that promise, and you'll cultivate a loyal customer base.

Building a premium brand

To build a brand that resonates with the premium customer, understand what motivates them. Higher income = higher discretionary spend is a simplistic understanding of the shift to premium. 

Revant

“Know your brand goals and target audience. Remember, 1% drives 60% of the consumption.”

Kapil

“Authenticity is your biggest moat.” 

It is, therefore, important to understand what drives premiumisation:

Better for you: People are increasingly driven to live and maintain healthier habits, and are willing to pay a premium across categories, such as food, cosmetics, eyewear and jewellery.

YOLO: You Only Live Once mindset has set in the middle and upper-income groups post-pandemic. Experiences and self-worth are also becoming increasingly important.  

Signalling and self identity: People are increasingly looking beyond the traditional markers of affluence such as cars and clothes. 

Personalisation: Consumers want to be associated with distinctiveness. Personalization elevates product value by enhancing uniqueness. 

India's premium market is experiencing exponential growth, and presents a unique opportunity for founders. The key to success lies in identifying a well-defined niche and catering to its specific needs and fostering genuine customer loyalty. This market's considerable depth, coupled with India's robust growth trajectory, guarantees true success for those willing to capitalise on its potential. 

We are bullish about this space and are looking for newer, interesting ideas. Are there other factors besides what our panellists discussed that you feel are driving premiumisation? Are there other compelling reasons for the Indian consumer to open their purse strings?

Whether you are building in this space, or have a view about premiumisation, let’s talk. Write to us here: Consumer@matrixpartners.in

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