Premiumisation & Beyond Challenges and Possibilities

Even as trends in the alcoholic beverages industry change and a new generation of consumers gears up to experiment with a myriad range of drinks, the one thing that emerges strongly is that there has been a gradual shift towards premium brands in India’s alco-beverages industry.

There are many reasons supporting this transition but primarily it is the younger consumers’ propensity for spending more on quality than just quantity. Premiumisation has therefore come under the lens for the alcoholic beverage producers as well as dealers, retailers and package and label makers operating in India’s alco-beverages industry.

At the ThinkPad Session II of the 10th Spritiz Conclave & Achievers’ Awards, a panel of distinguished and highly experienced industry experts deliberated on what premiumisation actually means and how this trend will get reflected in India’s alco-beverages industry, in the face of certain challenges.

A panel committee took centrestage with the participants exploring the various facets related to premiumisation and how this trend is likely to shape up in the coming days. On board were Ruchika Gupta (Director – Marketing, Beam Suntory India), Amulya Pandit (Consultant, Euromonitor International), Sanjeev Banga (President – International Business, Radico Khaitan), Anant Iyer (COO, Alcobrew Industries), Rahul Singh (Founder & CEO, The Beer Cafe), R Subrahmanyam (Executive Director - EY India) and Nirupama Soundararajan(Co-Founder & Partner at Policy Consensus Centre), all of whomspoke on the many sub-segments of this complex issue.

The session moderator, Ruchika Gupta began with the question ‘What is premiumisation and how does one define it? According to her, it is the science of motivating consumers to pay more, usually on the back of quality and not on account of exclusivity, which is luxury. She clearly demarcated between premiumisation and luxury. “The concept is to provide value more than volume which is quite important in today’s day and age. Premiumisation is equally about aspirations,” she said. To put in common people’s parlance, premiumisation means to have quality products which are worth paying more for.

Adding to this perspective, Rahul Singh defined premiumisation as creating the motivation to pay more because the consumer deserves it.

“Consumer trends have changed across cities in India and this is being reflected through the tilt towards premiumisation,” he said. Taking a more holistic view on the theme, Sanjeev Banga said that premiumisation was not just about pricing but an overall approach that include production process along with marketing and distribution to create immense value and a connect with customers. He opined that it also included sustainability along with cultural and social responsibilities.

Brands which can dovetail into these elements and create a connect with consumers with these elements are genuinely premium brands.

Make it Better

In his noteworthy presentation, Amulya Pandit observed that studies had indicated that the present generation was drinking less but better quality alcohol. “There is a lot of change in consumer behaviour. To compare, while mosquito repellent mats were once popular, they soon came to be replaced with liquid solutions, indicating a huge change, irrespective of the price shift,” he pointed out. According to Amulya, there are two important factors to be taken into consideration. One, the macro environment has changed in India and second, a huge number of millennials are now entering the phase where they are becoming legally eligible for drinking.

“The fact of real GDP growth outpacing inflation, and the fact that disposable income of India in the last two years is increasing by double digits bode well for premiumisation,” Amulya commented.

According to data presented by him, the per capita consumption in India is now one-seventh of the global average and this indicates potential towards premiumisation. In fact, in India, the consumption of alcoholic drinks has crossed the pre-pandemic levels.

Amulya says that nowadays trends are fuelled by premiumisation. “ point to note is that India has a strong base in terms of consumption. In most developed countries, the markets have saturated but that is not the case in India where alcoholic beverages market is 5.87 billion litres, which is growth of 20 percent over the last year,” he explained.

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