Premium brands dominate advertising as mass-market budgets shrink: Report

The Indian advertising industry is at a turning point, with luxury and premium sectors witnessing rapid growth while mass-market brands struggle to stay relevant. As high-income consumers drive premium spending, advertisers are shifting budgets towards affluent audiences, reducing investments in traditional mass-market campaigns. The Indus Valley Annual Report 2025 highlighted how this polarisation is reshaping media strategies, creating both opportunities and challenges for brands.

The report highlighted that India1, comprising around 140 million people, controls nearly a third of India’s discretionary spending. Urban India’s top 10% spends 13 times the national average on premium categories, including high-end real estate, automobiles, and personal care. This sustained affluence is driving luxury advertising investments, even as middle-class consumption weakens and advertising revenues for mass-market products decline.

The report described India1 as the India which refers to the top 10% of India's population, which drives a significant portion of discretionary spending and influences consumer trends, especially in premium and luxury markets. Though geographically dispersed and less politically influential, its growing affluence shapes market dynamics, social media narratives, and India's global soft power, widening the economic gap with the rest of the country.

Luxury’s growth

One of the biggest factors behind this shift is the rise of homegrown premium brands. The report stated that Indian companies are leveraging expertise in textiles, Ayurveda, and high-end manufacturing to cater to wealthy consumers. Luxury housing sales have doubled over the last five years, now comprising more than 20% of total new real estate transactions. Similarly, premium motorcycle sales surged 32% between FY19 and FY23, signaling strong demand for high-end products. Brands like Forest Essentials and Tanishq have successfully positioned themselves as leaders in India’s premium market, blending traditional craftsmanship with modern branding.

Additionally, the experience economy is thriving. Travel-related remittances jumped from $7 billion in FY20 to $17 billion in FY24, accounting for over half of all outward remittances. Increased spending on premium experiences is evident in MakeMyTrip’s 50% rise in average hotel transaction sizes and BookMyShow’s 40% surge in event ticket sales, highlighting affluent consumers’ preference for high-end leisure and entertainment.

Challenges in advertising and mass-market consumption

The traditional mass-market advertising industry, which once relied on large-scale campaigns, is facing significant hurdles. According to the report, advertisers are increasingly prioritising high-net-worth consumers, leading to a 35% rise in digital ad investments for premium brands in FY24, while mass-market advertising budgets have been cut by 12%.

Startups are shifting their marketing strategies, focusing more on content-driven branding and ingredient transparency rather than traditional mass endorsements. Zomato has led a trend where startups are setting up their own in-house creative agencies instead of relying on external ad firms. Meanwhile, celebrities are increasingly used to break through ad clutter rather than to build trust, with brands like Bold Care and Cred employing such strategies.

This transformation is further exacerbated by the financial struggles of middle-class consumers. The report revealed that only 2% of Indians paid income tax in FY23, a figure expected to drop below 1.5% in FY25 due to expanded exemptions. Consequently, entry-level smartphone shipments declined by 18% year-on-year, budget two-wheeler sales fell by 12%, and entry-level car sales dropped 9%, reflecting the weakening purchasing power of mass-market consumers.

As the gap between luxury and budget segments widens, the advertising industry is being forced to adapt. The report suggested that businesses must rethink their marketing strategies to align with the growing influence of affluent consumers, as premium brands continue to dominate advertising space. The era of mass endorsements and broad-reaching campaigns is being replaced by high-impact, niche-focused advertising that prioritizes deep consumer engagement over sheer reach.