Spotting opportunities for premiumisation

Healthy options command a 9% price premium

As prices rose faster than wages throughout 20171, consumers were feeling the squeeze, sending consumption habits into flux. As a result, we’ve seen consumers switch to cheaper stores or products, and even cut out some purchases entirely. But it’s important to remember there are still opportunities to encourage shoppers to trade up, by targeting the moments that matter to them.

More needs, more opportunities to trade up

Health is a word on everyone’s lips, with one in three food items chosen to satisfy a health-related need and the market now worth £23 billion a year.  Unsurprisingly, we’re willing to spend more for food that’s good for us, with healthy sectors now commanding a 9% premium, up from 7% last year.

Brands such as Halo Top have given shoppers a reason to trade up, with their premium, low calorie, low sugar and high protein ice cream. The offering has simultaneously managed to tap into the health trend while also delivering indulgent flavours. And meeting more needs means more opportunities to drive spend. Consumers can be traded up to a more premium price when the product caters to more than one need, and will pay on average 24% more when it satisfies four needs.

Social events command higher spend

It’s not just manufacturers that are tapping into consumers’ desire for more. Retailers are also benefitting from our love of luxury, seeing 9% growth in premium private label compared with last year, while economy private label grows at just 3%. We are also willing to part with our well-earned cash when it comes to socialising; spending more on emotionally-engaged occasions over functional ones. Whether it’s celebrating with friends, enjoying a romantic night in or just spending some quality time together with the family, we are willing to spend a 13% premium on a social occasion. These special events provide an opportunity for retailers and manufacturers alike to drive premiumisation.

At a time when consumers are carefully managing stretched household budgets, providing solutions to real needs is the only way to persuade consumers to pay a premium. And while shoppers continue to look for more out of the products they’re picking up off the shelf, that’s exactly what manufacturers and retailers alike need to offer in order to take advantage of these pockets of spending.

In Home & Carried Out | 52 w/e June 2018 and 52 w/e August 2018

1. ONS