Nestlé India announced on Tuesday that premiumization represents a ₹7,500 crore growth opportunity, providing significant scope to expand its coffee, chocolates, and pet care segments across both urban and rural markets**. This trend aligns with broader shifts in consumer preferences, as many companies tap into evolving aspirations.
As part of this strategy, Nestlé is set to launch its first premium Nespresso coffee store in Delhi in the coming months. Additionally, its pet care segment reported double-digit growth in the December quarter.
“The overall premiumization opportunity in our categories is approximately ₹7,500 crore. Since 2015, this segment has grown at a CAGR of 16%, consistently outpacing category growth. This is a trend observed across most companies, and we see the same in our business,”said Suresh Narayanan, Chairman & MD of Nestlé India, during an analyst and investor meeting in Gurugram.
He emphasized that is no longer restricted to urban affluent consumers, stating, “Even rural consumers now have a growing appetite for premium products.”
Expanding into Aspirational Categories
Companies are increasingly targeting aspirational consumers by introducing global brands and premium product categories such as body washes, sunscreens, serums, muesli, and energy drinks.
For example, Hindustan Unilever Ltd (HUL) has already outlined its strategy to expand premium categories including face care, hair care, home care liquids, and mini meals—demonstrating the widespread industry shift.
While mass-market products like ₹10 instant noodles and shampoo sachets remain crucial for affordability-focused consumers, Nestlé is diversifying into categories such as cereals, flavored yogurts, cat food, and premium coffee.
For the 15-month period ending March 31, 2024, Nestlé India reported sales of ₹24,275 crore and a profit of ₹3,932.8 crore.
Narayanan highlighted premium coffee as a key growth driver, adding, “Confectionery, though a smaller part of our portfolio, is performing well and will contribute to future growth and profitability. Pet care, while still a small segment, holds strong potential given our global expertise.”
Urban vs. Rural Market Trends
While urban demand for packaged goods has slowed, rural markets remain strong. Narayanan pointed to challenges such as urban unemployment, slow real wage growth, and post-COVID economic moderation, along with food inflation affecting household budgets.
“Consumers are spending more on premium products but consuming them in smaller quantities,”he noted. However, he expressed optimism that recent budget announcements on personal tax reductions could boost consumption and savings.
Pricing and Inflation Impact
Within its portfolio, coffee prices remain high, leading to price hikes on both coffee and noodles.
“Coffee has seen hyperinflation, with prices rising 75% year-on-year. If this trend continues, we may need further price adjustments, though we are working to offset costs through efficiencies,”Narayanan explained.
Meanwhile, milk prices have remained stable, but cocoa prices are on the rise—posing additional challenges for the company’s premium product strategy.