The shortages — and subsequent price hikes —that have shadowed many corners of the food industry in the second half of 2021 don’t seem to have significantly affected demand for one category of goods you might expect to be especially hard-hit: premium products.
Americans who shopped premium in the grocery perimeter before the supply chain disruptions kicked in are not inclined, at least not yet, to change their buying patterns, according to industry insiders.
In the past decade, consumers’ increasing willingness to try international foods and other foods new to them has helped drive product innovation, and that has seen an increase in premium products, said Raj Shroff, founder and principal of Columbus, Ohio-based PINE Strategy & Design.
What started in restaurants has trickled down to the grocery fresh perimeter and supermarkets in general, and it’s a dynamic that falls into the snowballing category, with new demand leading to new innovation leading to new demand, and on it goes.
“People now expect new and different all the time,” Shroff said.
Even with the economic turmoil produced by COVID, premium has continued to thrive, Shroff said. The higher income households who were more likely to buy premium in the first place have not been hit nearly as hard in recent years, and they continue to be more likely to indulge when buying food.
In fact, America’s recovery (albeit slow) from the pandemic has unleashed demand for many premium products, Shroff said. Just take a look at the lines at Starbuck’s, he said. And those consumers willing to pay $5 or more for a coffee are also willing to spend more for a premium cut of meat, a plant-based product, a specialty fruit and countless other fresh food items sold in the grocery perimeter.
With the pandemic, many Americans hunkered down and leaned heavily into the comfort foods they’ve known their whole lives, said Bill Bishop, chief architect and co-founder of Barrington, Ill.-based Brick Meets Click.
For many, that may have meant a longer-than-usual detour back to center-store.
“I think of Campbell’s rolling out soup recipes,” Bishop said. “Who didn’t grow up with red and white soup cans?”
But this might be a case of the exception proving the rule. Premium fresh products sold in the grocery perimeter were on the uptick before the pandemic, and now that COVID is (hopefully) starting to recede for good, that momentum, perhaps interrupted in some cases, shows no signs of letting up.
“I think people are getting more definite about what they want, and they’re willing to pay more for it,” Bishop said. “And it’s hard to see how this is not going to continue — it’s particularly true of the younger set.”
People continue to get more ambitious in the kitchen, spurring demand for new (and often premium) fresh foods at the grocery store, he said.
Shroff agrees. The pandemic, he said, has taught consumers that you can splurge on foods in the perimeter and throughout the store and still spend a lot less than you would eating out.
“The affordability of grocery vs. restaurants is a real thing,” he said. “You were forced to eat at home, and people realized they could make great meals and have more time with their family. There’s a new comfort with eating and making food at home.”
For those who don’t want to cook, Bishop said, more and more grocery stores are willing to meet the need with premium prepared foods.
“Twenty years ago you were lucky to get maybe some kind of imitation Chinese food. Now there’s fresh sushi in every supermarket.”
Shroff agreed that there’s room for growth in deli-prepared.
“You look at things like Kroger’s new ghost kitchens,” he said. “These are competing head-to-head with restaurants. With the chef there, there’s the perception that it was made right away.”
Such offerings scan as “premium” for many consumers, though they’re often quite affordable, especially compared with a restaurant tab.
“You can get a great meal for two people for $16 that’s on the premium side, but still affordable,” Shroff said.
And at least for now, deli-prepared premium is a way for retailers to keep coming in to their brick-and-mortar store, he added. Though there is room for ecommerce to break into this space.
“It can work online, but I don’t think grocery websites have really pushed it. Maybe with ghost kitchens and employees from restaurants moving into grocery, it could change.”
Instore bakery is another department where the tilt towards premium is becoming more and more noticeable, Bishop said.
“I was looking at some crumb apples pies recently that were very attractive,” he said. “I thought one was mispriced. You can spend $15 really easily on a pie.”
The same is true with meat and seafood, he said. Some retailers, for instance, are now advertising premium salmon filets at $6.50 to 7 for the half pound, something Bishop said he hadn’t seen before. And some retailers are starting to promote themselves as purveyors of fine meats, with store-branded product shipping nationwide. Expect to see more of those retailer branding efforts, Bishop predicted.
And in produce, prepacked products that look like something out of a Harry & David catalog are gaining ground among retailers, Bishop said.
“I got one recently with plums that taste like candy. Quality and price and willingness to pay is definitely up over a number of years ago. It reflects the fact that the US had a pretty darn good run from 2012 to 2020.
On the subject of economics, what impact, if any, will the recent inflationary prices have on demand for premium products?
As of mid-fall of this year, the answer is not that much, Bishop said, though that could change if the inflation numbers continue to go up in 2022.
“It seems to be a phenomenon that’s affecting some groups a lot more than others,” he said. “My guess is that group that traded up (to more premium products) is the not the group that’s feeling the pressures of inflation. They’re not going paycheck to paycheck.”
Examples of the premium-ization of grocery perimeters and stores in general are everywhere, Bishop said.
Discussing a Heinen’s store in the Chicago area where he lives, he said “all of the product in there is premium — meat, seafood, even the salad bar.” Another old chain with stores in the area, Mariano’s, a Kroger banner, is seeing “a tilt toward premium in a really nice way.”
“People are saying, ‘This may cost a dollar more, but I’m still going to do it.’”
Meat category insights
When Kay Cornelius, general manager of Westminster, Colo.-based Panorama Organic Grass-Fed Meats ponders the definition of “premium,” she thinks of consumers who are making conscious choices to pick foods that align with their values.
Demand for those kinds of products definitely spiked during COVID, she said, and even now that the pandemic is starting to recede, it’s showing real staying power.
“Premium meats came out of the restaurant and into the meat case, and food has become a ‘good’ that people can actually get their hands around,” Cornelius said. “For only 1 or 2 dollars more, can buy organic and grass fed, and it’s not a reach compared to stopping driving a gas- powered car or putting solar panels on roof. It’s not that hard to make a statement about climate by buying organic or grass fed.”
The company’s latest addition to its own definition of premium is a roster of value-added products that make it easier than ever for consumers to bring those shared values to their own kitchens. The line includes fully-cooked meatballs, dinner sausages and hot dogs.
“We’re trying to make premium accessible,” Cornelius said.
All of the new products have been a success, but the meatballs thus far seem to be the “home run” of the group.
“There were no organic grass-fed meatballs out there,” she said. “ We made it a size hearty enough for dinner, or you drop it into a sandwich or put it on a pizza. It gives consumers flexibility.”
Another way in which Panorama is meeting that need is by offering smaller cuts of meat to appeal to smaller households. The company now offers 6-ounce filets in addition to 8-ounce filets, for instance, and packs them one to a pack in addition to two to a pack. That also has the benefit of lowering the price point, maybe premium even more accessible.
Coleman Natural Foods recently launched a premium ground pork sausage roll at retail as an option for consumers looking for a “better-for-you” all-natural option in a category that typically only has one or two commodity options, said Sarah Findle, director of marketing and communications.
“Grinds are incredibly popular as consumers look for versatile protein for breakfast, lunch and dinner,” she said.
In addition, Coleman’s premium case-ready fresh pork selection was recently enhanced with vacuum skin packaging that provides benefits to both the consumer and the retailer, Findle said. Less labor, longer shelf life and a cleaner display puts a competitive price point in front of the consumer looking for easy-peel, mess-free packaging.
The pandemic made home cooks look at new meal options, and pork definitely benefited, Findle said.
“Because of supply shortages and emptying shelves, they discovered new cuts of meat they may not have previously considered. We’re excited that pork is moving beyond bacon and becoming a more permanent protein in homes across the US.”
With the smaller portion sizes of 1, 2, or 3 pork chops that Coleman offers for its vacuum skin packages, consumers with smaller household sizes can right-size premium portions and avoid food waste at home.
“From empty nesters to young professionals or young families just starting out, we can help get dinner on the table in an accessible, affordable and convenient format,” she said. “And according to the Power of Meat 2021, there is no doubt that consumers are becoming more educated about the rising practices behind the meat they eat: four out of the five top claims shoppers want from their meat department are directly related to the way animals are raised.”
In some markets, retailers don’t have a choice. With the upcoming deadline for Proposition 12 in California, Question 3 in Massachusetts and the action of 10 other states over the past 10 years to provide more humane raising conditions for animals raised for food, these demands are making their way into law.
“Healthier animals, mean better quality, premium meat – something Coleman Natural has known since the early days of selling the first USDA recognized natural beef at retail,” Findle said. “We’ve always raised our animals with no antibiotics ever, no added hormones and with enough space to reduce stress and allow for natural movement. It’s the way nature intended, and we’ve always believed that creates a premium product.”
And cost isn’t a barrier for most. Three out of four consumers, Findle said, are willing to pay more for meat if it means guarding safety concerns and feeling confident they’re feeding their family better.
Claims-based: a new premium frontier
Northglenn, Colo.-based Niman Ranch is currently spotlighting claims-based center-of-the-plate proteins, particularly for holiday gatherings and family meals, said Alicia LaPorte, communications director.
“For show-stopper meals, consumers are reaching for simple to prepare and delicious products like our award-winning spiral hams and tender and well-marbled pork loin roasts,” she said. “A new product we’ve seen strong performance in is our new Applewood smoked pulled pork, which has strong alignment with consumer trends for premium meats: transparent, clean, sustainable, simple and versatile.”
While most pre-shredded pork products on the market have a pre-mixed-in BBQ sauce, Niman’s new product includes just four ingredients: pork, water, sea salt and rosemary extract. The company has developed a selection of recipes featuring the product to showcase its versatility, including Banh Mi Bao, Air Fryer Pulled Pork Egg Rolls, Pulled Pork Sandwiches with Spicy Slaw and Pulled Pork Empanadas with Cilantro Mojo Sauce.
The new product, which comes in a convenient compostable container for consumers looking to limit their plastic waste, was selected by Parents Magazine as a 2021 Best Packaged Food For Families.
Demand for ethical, transparent, claims-based meat is higher than ever before, LaPorte said. This increased interest has been the trend for years, but this past year Niman saw enormous growth in the segment. The most recent Power of Meat report, for example, found that 83% of consumers were looking for “better for” products – better for the planet, personal health and animals.
“Consumers are better educated about food than ever before and are reaching for brands that align with their values,” LaPorte said. “Consumers continue to increasingly buy brands with claims like raised without antibiotics and third-party humane certification. With Proposition 12 and Question 3, mainstream consumers are learning more about the extreme confinement of pigs in crates by the mainstream hog industry. Niman Ranch has proudly always been 100% compliant with these rules and goes far beyond.”