ITC Ltd has taken a decisive step to capture the shifting preferences of Indian consumers by embarking on a path of premiumization within its product portfolio. ITC, along with other key players in the industry, is shifting its focus towards catering to the aspirations of shoppers in a market that has traditionally leaned towards value-based purchases.
Riding the Wave of Changing Consumer Preferences
Historically, India has been a value-centric market, with consumers favouring low-priced unit packs. However, the increasing prosperity of the population has given rise to a shift in consumer behaviour. Shoppers are now inclined towards differentiated and premium products, including fragrant body washes, value-added hair oils, and organic food such as wheat flour.
Response to Evolving Market Dynamics
ITC, a conglomerate with interests ranging from cigarettes to hotels, has strategically responded to these changing dynamics. B. Sumant, Executive Director at ITC, emphasized the company’s focus on moving up the value chain, catering to the demand for premium and differentiated offerings. The company has significantly increased the share of premium products in its personal-care and packaged foods portfolios.
Notable Statistics
1) 37% of ITC’s personal-care portfolio is now categorized as premium, up from 26% two years ago.
2) 35% of the packaged foods and beverages portfolio is now premium.
3) In FY23, packaged food products reported gross revenues of ₹15,768 crore, reflecting substantial growth from ₹13,199.59 crore in FY22.
Diversification and Innovation
ITC has adopted a proactive approach to diversification, launching nearly 300 new products in the past three years. These include Sunfeast Dark Fantasy desserts, Engage L’amante perfumes, and Classmate Interaktiv notebooks. The company’s mega brands also expand into new categories, addressing adjacencies to meet evolving consumer needs.
Premium Products and Pricing Strategy
ITC’s premium products span various categories, from charcoal-infused men’s soap under the Fiama brand to Engage L’amante perfumes priced upwards of ₹600. The company has also entered the dairy beverage market with Sunfeast fruit smoothies priced at ₹70, surpassing the typical product pricing range.
Focus on Health and Wellness
ITC significantly emphasises health and wellness offerings to cater to current consumer trends. The Aashirvaad brand, known for staples, has introduced gluten-free flour, multi-millet mixes, and ragi flour.
Technology and Data-Driven Innovation
Acknowledging the importance of technology and data in today’s business landscape, ITC is leveraging these tools to accelerate innovation and speed-to-market. This approach aligns with the company’s dedication to keeping pace with the rapidly evolving consumer goods industry.
Industry Trends and Analyst Perspectives
The premiumization strategy adopted by ITC is not unique to the company, with rival Hindustan Unilever also witnessing a steady increase in its share of premium products. Analysts, such as Nitin Gupta from Emkay Global, view ITC’s premiumization approach as a means to enhance brand salience and build segment margins faster.
Summary
ITC’s strategic shift towards premiumization reflects a nuanced understanding of evolving consumer preferences in the Indian market. By focusing on aspirational shoppers and leveraging technology, the company aims to meet current demands and stay ahead in an industry marked by dynamic shifts in consumer behaviour. As India experiences a K-shaped recovery post-COVID, ITC’s commitment to offering premium products positions it well to capitalize on the growing demand at the top end of the market.
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