Supermarkets as a whole are becoming more premium. With a focus on the fresh perimeter, modern store design and instore dining, today’s grocery store is substantially more high-end than that of yesterday.
It only makes sense, then, that consumers are increasingly shopping for premium products. While there will always be a place for bargain goods, value lunchmeat and plain, white bread, retailers can get a more premium price out of more premium products.
“Consumers are craving high quality products now more than ever,” says Deanna Depke, marketing manager for St. Louis-based Volpi, a producer of artisan cured meats and snacks.
Part of that is the rise of foodie culture. Part of it can be attributed to shoppers simply putting more stock in higher quality ingredients, production and sourcing.
“Consumers relish the opportunity to consume the highest-quality products, including baked goods,” says CJ McClellan, global marketing manager for Lenexa, Kansas-based Corbion. “In general, premiumization typically signals better quality or a higher degree of value that motivates consumers to indulge in a product they want or need.”
Smaller companies lead the way
Premiumization is chugging along, but larger companies haven’t always been as successful as smaller players across all price points. According to New York-basedNielsen, the 25 largest food and beverage companies drove just 3% of the total category growth from 2011 to 2015. Companies below the top 100, meanwhile, drove an impressive 49% of the growth.
Nielsen points out that those numbers indicate an underlying issue with all new product development but says there is much more at stake with premium products because of the higher revenue potential.
A big reason for this trend could be the reputation smaller, regional companies have for producing unique, quality goods.
“The foodie revolution has shifted consumer preference,” Depke says. “It has geared demand towards authentic, high quality brands rather than national corporations churning out aisles full of product.”
Location, location, location
The “where” of a product can be just as important as the “how” when it comes to premium perception.
Arlington, Virginia-based Food Marketing Institute reports that consumers are shopping with a new mindset, seeking connections and transforming simple commodities to emotional shopping experiences.
Consumers want to feel connected to those faces and farms behind fresh and perimeter offerings. It helps give the shopping experience a new dimension.
FMI says hyper-localization revolves around connections to the land, the producers and the food itself. It requires retailers to source products closer to stores, deliver food that comes from local farmers and comes with stories, transparency and added value.
Volpi has found success in tying in those local production stories with their meats.
The company has partnered with several family farms around its home base of St. Louis to bring back sustainable farming techniques as well as heritage breed hogs. That has resulted in Volpi’s Heritage Prosciutto launching locally in December 2018. It is building toward a national rollout later this year.
“This product is breed and farm specific, allowing full transparency all the way through to consumers,” says Depke. “Volpi Heritage Prosciutto is crafted from free-roaming, pure-bred heritage hogs raised without antibiotics in the Midwest, aged over 18 months. The result is an earthier, more intense flavor that has gained quite a few fans in only a few short months.”
Seafood, dairy see opportunity
The categories that Nielsen identifies as having premium potential are diverse, including electronics and clothing. But seafood and dairy are among the best-performing areas when it comes to upgrading.
Seafood is cited most often in developed markets and is among the top five categories for which shoppers will consider trading up in multiple regions.
Thirty percent of global respondents said they’d consider paying more for dairy products. Nielsen data from between 2014 and 2016 backed up those claims, noting that premium milk sales grew 52%, driven by milk alternatives such as almond milk. In fact, almond milk sales jumped 250% from 2010 to 2015 while the total milk market shrank.
Artisan breads, high-end snacking
Within the instore bakery, the snacking category is the one most associated with premiumization, according to McClellan.
“Premiumization helps give consumers a reason to indulge because food is now more accessible,” he says. “Baked goods and snacking applications that are made with whole grains and real ingredients can be used in marketing to justify premium pricing.”
Corbion has also seen a push for premiumization within artisan breads. Instore bakeries can differentiate themselves with more innovative, unique and nostalgic baked goods made with premium, local ingredients.
McLellan says that consumers perceive premium breads, such as artisan breads, to be healthier. Others, meanwhile, simply like the taste more than standard white or wheat bread and will select a finished application made with premium, artisan-style bread over traditional bread.