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Premium leanings

India's urban consumers are keeping an eye and their pockets open for premium products and services that answer their aspirational needs and which appeal at functional or emotional levels, a trend that will strengthen in 2012. Rachit Vats and Anita Sharan write. Why consumers are buying premium | Consumers redefining value

business Updated: Jan 09, 2012 01:11 IST

Dr Nita Pedekar, a middle-class married Mumbai consumer, goes about her weekly shopping at a modern hypermarket looking for good bargains. She also keeps an eye on products that meet her aspirations for more, better, at slightly higher prices.

Many more urban consumers are willing to loosen their purse strings today to try out functionally or emotionally appealing products and and services that either provide them with better benefits at a personal level or indulge them at a larger family level. Even if these come at a premium.

Brands are also clueing in sharply to the consumer openness to buy better products and services at a premium. In spite of the economic seesaw and inflation, as long as urban consumers are able to perceive 'benefits' clearly, they are willing to pay a premium. So whether it is personal care products and services, consumer durables, premium holidays and restaurants, fashion and formal apparel, the premium end is finding takers.

Well known fashion designers Rocky S, Narendra Kumar, Nishka Lulla and Malini Ramani are now designing apparel for kids. Beauty service brands such as VLCC and Kaya have launched packaged beauty products at premium prices. While Kaya's products sell out of its service centres, VLCC is on retail shelves.

From toothpaste, to hair oil, to detergents to TVs and refrigerators, there have been premium launches aimed at whetting the urban consumer's appetite for aspirational products.

Are premium products flying off the shelves? Suvodeep Das, marketing head, Kaya Skin Clinic, said: "While the overall skincare services category is growing at 22%, the premium anti-ageing category is growing at 30%. In beauty and skincare, luxury products are expected to grow at around 33%, mid-range products at around 25% and mass products at 12-14% over the next five years."

"Earlier, if the customer wanted to make a purchase in the consumer durables category, he would stick to the budget. But with improving retail business and ease of financing, consumers are ready to stretch beyond the budget and make more focused purchases that bring them specific benefits," said Yasho Verma, COO, LG Electronics India.

"The demand for premium products is growing, even if the consumption base is much smaller. Marketers are addressing both the functional and the emotional needs of the consumers," said Purnendu Kumar, VP retail, Technopak Advisors. The top categories, where premium purchases are high, include consumer durables and mobile phones, FMCG, apparel and automotive products.

Many premium products are even able to mark up items to attract consumers who equate quality with price. Almost every brand now makes sure to roll out a product with a premium counterpart. So, if you have an Ariel regular, there's also the premium Ariel OxyBlue or Ariel 24Hr Fresh+OxyBlue. Usually, the price premium is 15-20%.

"We have not seen any downgrading," said Govind Shrikhande, MD, Shoppers Stop.

"Currently, when large ticket items like a house or a car buying is put on hold, consumers make a trade-off. In foods and FMCGs, home care and personal care, there is no down-trading as of now. Brands with clear benefits will stay insulated," said Devendra Chawla, president, food & FMCG, Future Group.

At Hindustan Unilever, the efforts to build premium segments in each of its categories including food, personal care and homecare, is evident. "We believe that the secular trend that we will see in India is one of up-trading and premiumisation, as consumer aspirations and incomes keep rising. We are investing in building segments of the future through a market development approach," said a HUL spokesperson.

"Some of the emerging segments include facewashes, premium skin lightening, hand and body skin care and hair conditioners. We are also investing to grow new segments in core categories such as laundry and tea. Comfort, Dove, Sunsilk and Brooke Bond Taj Mahal are the growth drivers in their respective categories," the spokesperson added.

"With the Dettol No Touch Handwash System launch, we saw a 10% incremental business for Dettol. Similarly, Vanish's liquid format brought 15% incremental sales for the Vanish brand," said Chander Mohan Sethi, chairman and MD, Reckitt Benckiser India.

This year will see the premium consumption trend strengthening. Sayyaki Ghosh, director - consumer products division, L'Oreal India, summed it up: "The premium shift is happening with India getting richer, resulting in higher spending on consumer products. Consumers are getting more discerning and are willing to pay a premium for better products."

Why consumers are buying premium | Consumers redefining value