Creating for the masses or premiumisation for the niches – which trend will shape India’s consumer landscape in the long run? Many would choose the first option. Given an inflationary environment and slowing growth worldwide, what’s better than leveraging affordability and scale in a classic price-conscious market? Yes, the margins are low, but industry giants like Reliance, the Tata group, Hindustan Lever and Dabur India have built their brands on volume-driven growth.

Lately, however, the Indian consumer market has witnessed a great divide in spending patterns. Of course, the charm of mass-market products is far from fading. Affordability remains crucial for broad household consumption (food, groceries and other home essentials), and a UBS Securities report estimates that growth in this sector will remain subdued at 4-5% YoY in FY26. Conversely, in a report titled The Rise of Affluent India, Goldman Sachs has underscored how consumption by the top end of the country’s income pyramid is ushering in a new trend.

According to its estimates, the top 10% of urban India (around 3.5% of the total population) spend eight to 10 times more on premium categories than the national average. It is further suggested that roughly 30 Mn or 20% of Indian households engage in high-end consumption. But delving deep, we find a unique convergence of aspirational minds across the country, which means tier II and III cities are also playing a significant role in this transformation, unlocking new opportunities for direct-to-consumer (D2C) brands and venture capital players investing in them for early advantage.

Undoubtedly, this is no fad. Per a NielsenIQ report, premium FMCG categories are growing twice as fast as their mass-market counterparts, accounting for 27% of FMCG sales and contributing 42% of the sector’s value growth. A similar surge in premiumisation is also seen in the tech and consumer durables space.

Experts attribute this trend to rising incomes, global awareness and a willingness to invest in products that resonate with one’s aspirations. In essence, people today pay more for quality, sustainability and value-driven options, reflected in high demand for organic foods, customised fitness solutions, out-of-home dining, clean-label beauty and personal care (BPC) products and experiential travel/hospitality.

Consider this. Domestic airlines are seeing unprecedented demand for business-class seats, prompting even budget carriers to introduce premium cabins on domestic routes. Outbound travel is surging, with India’s international spending projected to reach $55.4 Bn by 2034. Travellers are no longer deal-hunters but seeking boutique hotels, curated experiences and offbeat destinations. Or think of compact SUVs with hybrid engines and advanced safety features.

Data reveals that SUV sales grew by 140% during 2019-January 2024 against a 20% rise in passenger vehicle sales. Understandably, people purchased them more because they offered superior value, combining fuel efficiency, cutting-edge technology and enhanced safety in a practical package.

Herein lies the crux. Building formidable brands in a world of conscious consumers not merely chasing the exclusivity of high price tags – is no easy feat. As for consumer VCs like Rukam Capital, the ultimate ‘strategy black box’ leading to early stage funding and a healthy return on investment remains complicated due to the market shifts and a lack of benchmarking.

When one is betting on new trends and brand new consumer startups, elaborate sourcing and commercial due diligence is hardly as adequate as they are for funding late stage (and more established) entities.

Diving Deep Into Micro-Trends........

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