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Agarbattis latch on to the premiumization theme

'Premiumization' has been a theme that has been doing the rounds for the last few years, being adopted by everyone from paints to electric wire companies. Premiumization allows firms to capture value from aspirational consumers who want more from the product, allows firms to grow margins as the premium segments grow in size and reach higher utilization levels, and gives firms a nice theme to sell to investors. In today's piece, we look at how agarbatti firms have latched on to the trend of premiumization and the what lies ahead for the theme and the space.


The premiumization in agarbattis- Floral waste, flavours and more


The incense stick market in India today stands north of 7000cr. In a deeply religious country like India, and the secular use of the agarbatti across both Hindu and Muslim faiths has helped the market for these grow steadily over the years. In recent times, however, the customer has started becoming aspirational, looking beyond the traditional black single scent agarbattis. Customers are also increasingly looking for greener alternatives for their incense sticks.


In order to cater to these multiple demands, and in turn capture greater value from the market, firms have now begun providing various premium products.


The first natural area of growth was introducing more flavours: pineapple, sandalwood, jasmine are just a few of the many flavours that firms have introduced to cater to the customer that wants variety.


The second niche that the firms have picked is the environment-conscious consumer, giving them incense sticks made from floral waste after they have been used in temples. Startups and large firms alike are working on the eco-friendly incense stick trend.


The third is a market niche where agarbattis are now being made accounting for allergies and asthma triggers. Building products for niches such as this allows firms to expand the overall pie as well as command greater margins through increased pricing power.


Some firms are also entering the domestic insecticide segment via mosquito repelent sticks, in an attempt to gain share in an adjacent growing market. However with the customer looking to go low smoke in the insecticide segment, this seems a relatively weak threat over the medium term.


What lies ahead?


In an increasingly aspirational market like India, premium products will always see good demand. The market is cognizant of the fact, and generally rewards firms who have been able to introduce and execute the premiumization theme well. We expect this to be a prevalent and growing theme in the consumer discretionary as well as staples space. With the affluent in India showing steadiness in purchase despite slowdowns, as was seen in the trends in staples around the recent slowdown, the theme provides the dual benefits of growth and risk mitigation. We will continue to track names in the space as they introduce and grow premium in their mix, and keep our readers informed of the same!


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