Premiumization Strategies in Food and Drinks: Fighting product commoditization through added value product positioning

Date: August 22, 2010
Pages: 126
US$ 2,875.00
Publisher: Business Insights
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: P1B62E058A2EN

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Premiumization Strategies in Food and Drinks: Fighting product commoditization through added value product positioning
The premiumization trend has been identified as starting in the 1970s in alcoholic drinks. It moved first into food and drinks that were associated with treating / indulgence and gifts, such as boxed chocolates. Throughout the latter part of the 1980s, the 1990s and into the 21st century, premiumization has continued apace, developing both horizontally, in terms of the number of categories in which it can be observed, and vertically, in terms of the tiers of premiumization that have been created.

It has been an appealing strategy for manufacturers, offering the possibility of avoiding discounting wars and building better profit margins. However recently it has become increasingly hard for manufacturers to carve out distinctive premium positionings as the markets have become more crowded, and many, but not all, premium products have been affected by the economic downturn.

This report identifies recent and current successful premiumization strategies and considers the impact that the economic downturn has had on the premium sectors of the food and drinks industry. It demonstrates how premiumization can be achieved and defended against the threats it also describes. It identifies the essential elements of success in premiumization and also looks more broadly to emerging consumer trends to consider where the new post-recession forms of premium may come from.

Key Features of this report
  • An examination of the factors that have enabled premiumization to grow in developed markets and a consideration of how far these will also hold true for developing markets.
  • An analysis of the impact thus far of the recession on premium brands in developed markets and the post-recession prognosis.
  • An analysis of premiumization in a mature market; the development of tiers or levels of premium, what happens to premium brands when the whole category shifts premium-ward;
  • The main premiumization strategies employed – product based (including health, ingredients etc), distribution, packaging, production-based, with examples from around the globe.
  • A model of consumer motivations. Why do people pay more for premium? Identification of intrinsic product-related motives and status-related motives. An exploration of the evolution of each; contrasting the motives of mature developed markets and the developing economies.
  • An analysis of the main threats to maintaining a premium position and an identification of the tools and approaches that can make a strategy most defensible.
  • Emerging consumer trends and the way in which these could be harnessed and applied in developing new premiumization strategies
  • Case studies exploring the different routes manufacturers have successfully taken to carve out a premium position, based on ingredients or packaging, distribution, exclusivity etc.
Key benefits from reading this report
  • Understand what it is that motivates consumers to pay a higher price and purchase a premium product and tailor your communication and marketing strategy to those motivations.
  • Importantly, learn which are the key emerging consumer trends increasingly being identified as influencing the way consumers now think and shop. Affected by these, the ‘new’ premiumization will look very different from that prior to the recession. Consider the application of this for your own portfolio.
  • Benefit from numerous examples of new premium products and the ways in which they meet the consumer motivations described. In particular understand how motivations and the cues, such as packaging and descriptors, vary geographically and by product category, thus enabling you to tailor your communication appropriately in different markets.
  • Identify the key threats to maintaining a premium positioning and how to develop a strategy that is most defensive to these threats
  • Benefit from case studies which demonstrate how companies of different sizes, in different categories and in different geographies have used a variety of strategies to build sustainable premium brands. Strategies include those based on product specification, specific ingredients, distribution, exclusivity, scarcity, concerned consumerism and packaging.
Key findings of this report
  • Women are the driving force behind premiumization as they increasingly not only do the shopping but earn more of the money with which they shop. This, coupled with rising disposable income leads to an increasing comfort with, and desire to ‘trade up’ beyond products that would have previously been purchased.
  • The first ‘rule’ of successful premiumization is that at least some degree of product superiority exists. However simply offering ‘more of’ or ‘better’ is not a very defensible strategy, being easily copied by private label or leapfrogged by another product. More sophisticated and individualized approaches are increasingly being offered, using a mix of product, distribution, brand positioning, and relationship strategies.
  • The main approach used to establish premium credentials is product specification, and as noted above, these have become increasingly complex. Health claims, particularly ‘clean’ products (containing no…bad ingredients), high end, natural or exclusive ingredients (particularly super fruits) are increasingly evident. In production, both new and sophisticated techniques offering consumer and/or environmental benefits or, conversely, traditional or ‘handmade’ options all feature.
  • Consumers motivations for buying premium brands can be divided into intrinsic product or status related reasons. The intrinsic product can be worth more by being experientially (taste, texture etc) or emotionally (treat, reward) pleasing. In western economies status-related motivations have moved on from being dominated by conspicuous consumption of the most expensive or luxurious. Whilst those motivations are still important, and indeed dominate in developing markets, connoisseurship, and exclusivity based on scarcity have become increasingly important.
  • Post-recession, new consumer trends point to the increasing importance of provenance in premiumization, also of being local and trustworthy. Concerned consumerism means strategies which enable consumers to be display altruism and environmental concern will flourish. Scarcity or exclusivity is a key driver of premiumization which can be realised through distribution or production techniques as demonstrated by the success of members clubs with their customised high-end products and personal delivery.
Key questions answered by this report
  • How has premiumization developed in mature consumer markets to date?
  • What are the differences and similarities between developed markets and the developing countries in terms of premiumization ?
  • What impact is the recession likely to have on premiumization in the next few years?
  • What are the strategies that manufacturers use to support a premium positioning?
  • Are all premiumization strategies based on intrinsic product superiority? What is the role of other aspects of the marketing mix such as distribution, packaging and advertising?
  • What are the main threats facing a manufacturer as he tries to maintain a premium positioning for his brand?
  • What tactics provide the best defence against an erosion of premium positioning?
  • Why do consumers pay more than they have to and buy a premium brand? What motivates them? Have those motivations changed over time?
  • What cues do premium products use to indicate to consumers that they are premium and worthy of their higher price point? How do these vary by category and geography?
  • What broader consumer trends can we identify that can be adopted profitably by manufacturers to create premiumization?

About the author
Executive summary
Major trends in premiumization
Defining premiumization
Premiumization and consumer needs
Emerging consumer trends and their application in premiumization
Building a successful premiumization strategy


Defining premiumization
What constitutes premium?
Tiered premiumization
Scope and structure of this report
Definition of ‘premium’
Report overview


A brief history
Drivers behind the development of premiumization
Economic and social factors
Rise in disposable income
Development of the middle class
Increase in smaller households
Later marriage and later, or smaller, families
The increasing proportion of women in the labor force
Drivers by stage of premiumization
Early stage
The role of manufacturers and retailers
Consumer drivers in the expansion of premiumization
The development of masstige
Case Study of a Mature market: The UK crisps category
What distinguishes tiers in the current crisp market?
Masstige or premium?
Implications for premiumization in a mature market
The impact of recession
Consumers have sought to save money in their shopping basket
Non grocery purchasing has been affected more than grocery
Sales of premium products have been under pressure
Many premium products have benefited from the economic downturn
The shift to eating in
The shift to cooking and home baking
A retained ‘small luxury’
Concerns about food and ethical standards remain
Wider consumer values have been affected
Post recession implications for premiumization
Economic recovery
Sales of premium products will remain subdued
Premiumization will recover to its pre-recession days
A change in the nature of ‘premium’:


Product specification
Product ‘quality’
‘More of’ or ‘a better quality of’
Increasingly complex product specification
Health related ingredients
‘High in…’ claims as a premium health positioning
‘Added…’ claims as a premium health positioning
‘Low in…’ claims as a premium health positioning
‘No…’ claims as a premium health positioning
High end and natural ingredients
Limited and exclusive ingredients
Production and manufacturing
High-end production techniques that retain or add to the high quality ingredients
Minimal production techniques
Scale of production
Ethical production techniques or approaches
Premiumization through provenance
Distribution strategies
Packaging strategies
Packaging material
Pack design
Pack description
Other terms
Premiumization via packaging
Brand positioning


A model of consumer motivations
Motivation relating to the intrinsic product
Status acquired from product (brand) consumption
By tier of premiumization
The evolution of consumer motivations
Status motivations
Intrinsic product motivations


Consumers are seeking reassurance and trustworthiness
The continued importance of local
The opportunity of handmade and customized
Concerned consumerism
Environmental, the premium way
Case Study: ILOHAS water
A different relationship with the brand
Members' clubs
Part ownership of production – a honey case study


Sphere of operation
Tier of premiumization
Markets of operation
The threats to a premium product
Maximizing the chances of success
Provide a clear reason for purchase
Offer clear product and status benefits
Create a new category or consumer motivation
Case Study: Red Bull
Be obviously premium
A premium brand positioning
Be packaged premium
Be small or offer small company values
Be premium in the use of media
Build the premiumization strategy on relevant and emerging consumer trends
Added or super ingredients
Local, simple, just high quality
Relational and experiential
Exclusivity and scarcity
Superior quality
Concerned consumerism


Figure 1: Quality segments of the global wine market
Figure 2: Tiers of premiumization in food and drinks
Figure 3: Development of premiumization
Figure 4: GDP at purchasing power parity (PPP) in $ per capita, selected major economies, 2004-2014
Figure 5: Trends in global middle class growth
Figure 6: Heinz Farmers' Market
Figure 7: Development of premiumization in the UK crisps market
Figure 8: Walkers Sensations and Tyrrells Potato Chips
Figure 9: Hairy Biker Potato Crisps range (also available in lemon and olive tagine)
Figure 10: Areas of expenditure most affected by the recession (ranked 1 to 10 by consumers in each of 8 countries)
Figure 11: Consumers ‘ladder up’ through technical and functional to emotional benefits
Figure 12: Evolution of the meaning of ‘quality’ in relation to premium food and drink products
Figure 13: Guggisberg - Grass-Fed Premium Swiss Cheese
Figure 14: Choclatique - Q-91 Chocolate Wafers - Bali-Hi; Bora Bora; Forbidden City; Original; Saigon Cinnamon flavors
Figure 15: Anti Ageing Water Range – Nutra Resvetarol
Figure 16: Japanese Delight - Premium Kombu Seaweed
Figure 17: SoZo CoffeeBerry - ) - Exclusive Dietary Supplement Functional Beverage
Figure 18: Noni Zoda - Fortified Noni Super Premium Beverage with DMG - Organic Cane Sweetened; Sugar Free
Figure 19: Kona Premium Estate Coffee
Figure 20: Redleaf – Canada’s Ultra Premium Bottled Water
Figure 21: Heartland Creamery - French Style Fresh Chevre Cheese with Lavender
Figure 22: Ethical food and drink sales in the UK (?m), 1999- 2008
Figure 23: Hotel Chocolat - Chocolate Collection - The Undiscovered Cocoa of St Lucia
Figure 24: Freshly Wholesome Gourmet - Complete Meal - Indian Tandoori Wild Alaskan Salmon variant
Figure 25: Essential Trading Co-op Ltd: Organic, Luxury Mueslis, Granolas and Cereals
Figure 26: Hwa Tai Luxury - Cracker - Original; Vegetable
Figure 27: Soprole Activ - Yogurt Bebible con Micro Cal - Sabor Frambuesa; Sabor Multifruta
Figure 28: Forte Healthy Energy Shot
Figure 29: Fillico Beverly Hills Luxury Spring Water
Figure 30: A generalized model of the major metrics defining market tier
Figure 31: Consumer motivations in buying a premium product
Figure 32: Relative importance of product and status as purchase motivations, by tier of premiumization
Figure 33: Evolution of status related motivations
Figure 34: Evolution of intrinsic product related motivations
Figure 35: Tesco’s ‘Enjoy the Taste Of....’ campaign reflects the increase in importance of ‘local’
Figure 36: – customized, delivered, organic muesli
Figure 37: ILOHAS mineral water from Coca Cola Japan in ‘eco’ PET bottle
Figure 38: Your Pure Honey Manuka honey certificate of ownership, hives and jars
Figure 39: Innocent guest smoothie Lemon, Honey and Ginger, helping to support bee populations
Figure 40: Nestl? Waters Brand Portfolio
Figure 41: A generalized model of the main threats to the maintenance or growth of a premium product
Figure 42: Red Bull Energy Drink
Figure 43: Red Bull Website Home Page


Table 1: Middle class population size (m) & share of global total (%), 2009-2030
Table 2: Average household size 1990 - 2015
Table 3: Proportion of labor force which is female (%), 1990-2015
Table 4: GDP growth for Major Economies (% change), 2008, 2009 and 2011
Table 5: GDP growth for Major Economies (% change), 2008, 2009 and 2011
Table 6: Premium product launches in categories of interest and product claims May 2006 – May 2010
Table 7: Percentage of new product launches with high / low /no ingredient health claims
Table 8: Proportion of premium new product launches with various ‘clean’ claims (%), 2007- 2010
Table 9: Consumer priorities and motivations
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