FMCG companies see strong growth in premium items: Kantar report

The premium segment in the FMCG sector grew across categories during the year ended April, according to a report by Kantar.

The report mentioned three ways through which brands pushed premium products — “natural”, “small packs”, and “specialisation”. It noted that categories like face creams, bar soaps, and tea have found a way to grow in the natural premium segment.

Kantar cited the example of Glow & Lovely, where new users accounted for 78 percent volume gains in the natural segment. In the case of Tata Tea, new customers accounted for 61 volume gains in the natural segment.

The report also said small packs helped premium segments grow because aspirational buyers were willing to explore and try new brands.

Kantar’s report noted that although growth in the premium segment slowed down during the year ended April over the previous year, there were opportunities for premium brands. It pointed out that there are consumers who are not compromising on purchasing premium brands despite market fluctuations and if reached with the right offering, there is a chance to upgrade the buyers even from the bottom of the pyramid.

Sanjiv Mehta, MD & CEO of Hindustan Unilever, told investors after its earnings that it is making great progress on its strategic choices, which include accelerating market development or creating the future market and driving premiumisation. “We continue to upgrade the consumer to higher order benefits, thereby growing our premium portfolio at twice the growth rate of the rest of the business,” Mehta said.

Kantar’s report said that Rs 5-priced products still drive growth and Rs 10 packets are still the king of price points. But FMCG companies are reducing the weight of these packs to mitigate input cost hikes.

In India, major industry players like Dabur, Hindustan Unilever, Nestlé, Britannia, Coca Cola, Pepsi, and P&G have opted for Shrinkflation, Kantar said. It pointed out that the Rs 10 bar of Vim soap weighs 135 grams now against 155 grams about three months ago. It also said that consumers rationalized by buying more packs on more occasions.

Also, the Rs 20-price point is an emerging price point that the Kantar pointed out.

“In the June quarter, we experienced 20 percent inflation in all our materials put together on a net level and we had mentioned that in the September quarter, we will end up seeing even higher inflation,” said Ritesh Tiwari, CFO of HUL. a post-earnings conference call.

“So the impact on price-point packs continues…. which is why ensuring that we are able to offer bridge packs.”

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