Top-end consumption growing much faster in India: Goldman Sachs

Premiumisation of the economy: In the past 3 years,  a large divergence in growth rates of consumer companies and categories in India has been witnessed. One of the key factors driving this is that companies that address consumption from the top end of India’s income pyramid have grown much faster compared to companies in the same category that address broad-based consumption in India, a recent report by Goldman Sachs showed. 

Premium players within the same category growing faster

There have been many reports in the past throwing light on Indians' inclination toward premium products, be it the sales of iPhones, sales of SUVs, etc.

According to the Goldman Sachs report, In most industries, the companies that address relatively more affluent consumers have been growing faster than companies that address broad-based or mass consumption. These trends are visible in FMCG (Nestle India growing faster than Hindustan Unilever), footwear (Metro growing faster than Bata), fashion (Trent growing faster than V-Mart), passenger vehicles (SUVs growing faster than entry-level cars) and 2-wheelers (Eicher growing faster than the industry).

Within companies, premium segments have grown faster

It's not only the premium players who are growing. As per the report, within the same company, a sharp divergence is seen in the premium portfolio and the mass portfolio. 

According to Goldman Sach’s, HUL’s premium portfolio has grown 2x that of the company’s overall “These trends are in concurrence with the data showing the much faster growth of Affluent India, which is likely to continue going forward,” the report said.

In Companies exclusively addressing premium consumers growing rapidly: Companies in categories which largely address top income consumption like jewellery (Titan), travel (Makemytrip, Indian Hotels), premium retail (Phoenix Mills), premium online beauty (Nykaa) and premium healthcare (Apollo Hospitals) have seen strong growth. 

Credit Card spending has increased 2.5x since FY19

Credit cards tend to be largely used by upper-income consumers. There are slightly more than 90 million credit cards in India (having grown from slightly below 50 million in FY19). Many consumers have more than one credit card. “Thus, most credit cards are likely to be owned by our definition of ‘Affluent India’, which compares to ~60mn consumers. The total spend on credit cards has increased 2.5x if we take the trailing 12 months vs FY19,” the report mentioned.