Small towns now driving premium FMCG sales in India
What's the story
Rural India is no longer just a value market, but a major contributor to the growth of premium fast-moving consumer goods (FMCG) products. A recent report by Worldpanel India has revealed that villages and small towns now account for 42% of sales in this segment. This is a significant increase from the 30% share they held four years ago. The trend highlights how consumers across all regions are willing to pay more for better quality, healthier, or aspirational products.
Market shift
Premium products account for 15% of overall FMCG sales
The report further reveals that premium products such as tea, toothpaste, shampoos, biscuits, and skincare now account for 15% of FMCG sales. Although growth slowed a bit last year, the long-term trend is clear: more households are upgrading from "basic" to "better" versions of everyday items. In metros, affluent households are spending less on essentials like groceries and milk and investing in housing upgrades, travel, luxury cars/smartphones instead.
Budget stretching
Affordable packs help penetrate small-town India
In contrast to their metro counterparts, rural families are stretching their budgets to try premium FMCG products. They often do this through smaller, affordable packs such as shampoo sachets, mini toothpaste tubes, and bite-sized snack packs. These strategies help premium brands penetrate deeper into small-town India. The report also highlights that homegrown brands are doing well by focusing on natural and traditional positioning.
Lifestyle upgrade
Premiumization visible in other sectors as well
The premiumization trend isn't just limited to FMCG products. Sales of luxury houses priced over ₹3 crore surged 80% last year, while premium smartphone volumes grew 8% this year. Luxury car sales also crossed 50,000 units in 2024. All these trends indicate that Indians across different income levels are looking to "upgrade" their lifestyles.