The Rise Of The Super Premium Segment
- The premium segment contributes to about one-fifth of the total FMCG market
- While metros have the highest share in the premium segment, Town Class 1 and rural areas are key growth drivers
- Modern trade and chemists contribute considerably more to the super premium segment than others
The economic slowdown has sapped consumer demand in India. Stress has manifested across sectors, and the $37 billion fast-moving consumer goods (FMCG) sector is no exception. Notably, growth in the FMCG sector has dropped to a single-digit rate after maintaining double-digit growth 12 quarters ago (for Q1 ‘14 over Year Ago, value growth for FMCG is 9.1% and for the moving annual total (MAT) of March 2013, it’s 11%).
Despite the slowing growth, however, savvy marketers are finding opportunity amid a group of consumers looking for the best the market has to offer— premium products.
Understanding The Premium Segment
The premium category has two segments: premium and the super premium. While premium products command prices that are 20 to 70 percent higher than the category average, super-premium initiatives are two or more times the cost of the category average. While premium products operate within the range where they could be substituted with similarly priced products, super premium products are typically offered to a niche segment of consumers.
Why Does The Premium Space Matter?
Premium products are gaining shelf space in the FMCG sector, assisting marketers fight rising input prices and slowing overall demand. While the premium segment contributes to about one-fifth of the total FMCG market, the super-premium segment accounts for 8 percent of the total (value share), and is growing 1.5 times as fast as the premium sector.
What’s Driving Sales?
Grocers contribute the most to the FMCG segment as a whole. This is true even for the premium segment. When you look at the super-premium space, however, modern trade and chemists contribute significantly more than they do in the mass and premium sectors.
Improving income levels and choice in the FMCG space is driving the growth of the premium space. For example, Nielsen studies indicate that rural consumers are no longer just buying mass products. While metros have the highest share of the premium segment, Tier 1 towns and rural areas are key growth drivers. Rising incomes and consumer aspirations are driving rural consumers to upgrade to premium products. And smaller packs are driving this growth.