India’s Consumption Upswing: A New Era of Growth
According to a recent report by Bank of America, two major consumption themes are expected to define the next leg of India’s consumer story: premiumisation and a wallet shift towards discretionary spending. Despite volatility and patchy demand, several premium consumer categories have outperformed in recent years, with the likes of jewellery, premium alcoholic beverages, and luxury hotels leading the charge.
Premiumisation: A Secular Trend
Premiumisation is a secular trend driven by rising incomes, evolving aspirations, and the democratisation of the internet. As upper-income households are expected to make up half of all Indian households by 2030, compared to one-fourth in 2018, companies that channel their strategies toward these segments will be better positioned for long-term growth. Even the biggest staples companies are sharpening their focus on the top one-third of Indian households.
Jewellery: A Standout in Premium Consumption
Jewellery remains a standout in the premium consumption basket, with leading jewellers delivering a median revenue CAGR of 24% over the past six years, based on aggregate data for 60 companies. A BofA consumer survey conducted earlier this year found that a majority of respondents planned to use tax-cut or subsidy savings to purchase jewellery — ranking it among their top two spending priorities.
Premium Alcobevs: Holding Up Well Despite Challenges
Premium alcoholic beverages have also held up well despite operating and regulatory headwinds. Consumption patterns are evolving: new-age drinkers may be drinking less frequently, but they are seeking variety and better brands. Innovation and renovation by leading alcobev companies are reinforcing the trend. BofA maintains a Buy rating on United Spirits, noting its strong positioning despite the broader challenges.
Luxury Hotels: Benefiting from India’s Growing Appetite for Experiences
India’s growing appetite for experiences is translating into higher spending on travel, tourism, concerts, and live events. According to the BofA survey, travel and tourism features among the top three categories where consumers intend to spend more. This trend directly benefits the luxury hospitality segment, which is set to see robust demand growth of around 11% CAGR between FY24 and FY28. BofA sees The Leela (rated Buy) as a key beneficiary of this tightening demand-supply gap.
Staples: A Gradual Recovery
Within staples, BofA expects a sequential recovery in several categories due to a low base and macro bottoming out, though the pace will likely be gradual. The brokerage remains selective in the sector, preferring names such as Godrej Consumer Products and Marico, which are diversifying portfolios into higher-growth demand spaces.
Investing in India’s Consumption Upswing
As India’s consumption upswing continues, investors can look to benefit from the growth of premium consumer categories. By investing in companies that are well-positioned to capitalize on these trends, investors can potentially generate strong returns over the long term. For more information on investing in India, including stock market tips and investment strategies, visit our website.