Premiumisation in health and food faster than other FMCG categories: BCG

Survey finds health and food are amongst top categories where consumers willingly spend more to get a better product

Indians are willing to trade up more in categories such as health and food more than leisure, beverages, apparels, home care and personal care if a recent survey by the Boston Consulting Group is anything to go by.

39% respondents, who participated in the survey, said they would consciously spend more to get a product that was better than the rest in health, which BCG said was a sign of trading up. Food came next with 36% respondents saying they were willing to trade up, the consultancy added.

In categories such as personal care and home care, the level of trading up was 30% and 31% respectively, BCG added. Similarly, apparels saw a trading up proportion of 28%, beverages, 29%, and leisure, 30%.

BCG also said that consumers in health and food were trading up in two ways. One was they were consuming more value added products and second was they were willing to pay a price premium for select brands.

"For instance," says Rohit Ramesh, principal, BCG, "The share gain of categories such as premium chocolates and cookies in the last few years has been fairly rapid. From 2009 to end- 2013, premium chocolates as a category grew from 11% in size to 19%. The premium biscuit or cookie market has shown even sharper gains, moving from 20% in 2009 to 38% at the end of 2013," he said.

BCG did not share numbers for 2014.

Interestingly, the growth at the premium end of categories such as health and food co-incided with the fall at the lower end of these markets. In chocolates and biscuits, for instance, market share data disclosed by BCG showed that lower-end chocolates shrank from 38% in 2009 to 30% at the end of 2013, while lower-end biscuits came down from levels of about 61% to 38% at the same time.

BCG also said that marketers could win in premium foods if they had a discernible difference in product quality, had a focused approach to advertising & marketing and concentrated on modern trade.

Ramesh says, "The key is to tap aspirers and affluent consumers and help them find occasions where they can spend on premium products. Advertising and marketing will therefore have to be tailor-made keeping this objective in mind."

In recent years, the focus of FMCG companies on the premium end of the market has only grown even though consumer sentiment has been tepid on account of inflationary pressures. With an urban recovery around the corner, the focus on premium products is expected to grow in the coming years.