Entry-level consumers restrict discretionary spends, retailers step up premiumisation as mass consumption lags

MUMBAI: Even as premiumisation is playing out in a big way and companies are latching on to the trend to spruce up growth, mass consumption continues to struggle. From apparel to jewellery and food, firms are finding it hard to get entry-level, middle class shoppers to spend more–in jewellery, of course, high prices of gold have been an added dampener but the broader point is that despite festivities and tax cuts, December quarter did not turn out to be very big in terms of mass discretionary spending, industry executives said in Q3 earnings call. Some CEOs said that GST cuts did lift demand but the momentum failed to hold, more so in categories such as apparel.

“We had expected a stronger demand pickup during GST reduction. While there was a visible spike immediately after the reduction, that momentum did not sustain beyond the initial period. The broader uplift we were anticipating did not really play out over the rest of the quarter,” said Kavindra Mishra, MD & CEO at Shoppers Stop, adding that the value segment saw a fairly ‘tough’ quarter with muted demand conditions across the market.

Tanishq is seeing pressure in the sub-Rs 1 lakh segment in both gold and studded jewellery. The brand which company executives said has a substantial contribution of buyers in the sub Rs 1-lakh and Rs 50,000 segment is mounting marketing efforts to get the consumer cohort back to the stores. “....a lot of efforts from our side…to keep jewellery accessible has really been top of our mind,” said Arun Narayan, CEO, jewellery division at Titan Company. Karthik Yathindra, CEO at Page Industries which is the exclusive licensee of brands Jockey and Speedo in India said that demand is slower in the entry-level price points. Business in general trade has also been tougher compared to e-commerce and exclusive brand outlets. “There is some level of shift happening within the general trade business in terms of stockholding considering how retailers are dealing with softer demand at the consumer level,” said Yathindra.

The urban low and middle income households have been under pressure with many experts saying that real demand boost will come from growth in wages and incomes. Rural India, for instance, has been leading FMCG consumption for several quarters now; market leader Hindustan Unilever recently said although demand trends have improved in Q3, rural remained ahead. “As mass market lags, retailers are following where the money is, stepping up premiumisation.

Bata, in fact, has now started promoting higher price points on display windows and store premises, especially in large metros. “‘Premiumisation, for us, is not about pushing customers upward. It is about adding value across the board, giving them wider choice, and a consistent experience regardless of the price they pay,” said Badri Beriwal, chief strategy & business development officer at Bata India in response to queries.

Talking about growth at the overall informal eating out level, Saurabh Kalra, MD at Westlife Foodworld which runs McDonald’s India outlets in the West and South said that there hasn’t been a tremendous growth in Q3. “In fact, it’s remained pretty flattish from what it was in the previous quarter,” said Kalra. While for the company, there have been some green shoots in consumption, it will still refrain from calling it a sustained revival until the momentum continues for a few more months, the firm said.