Despite inflationary and other pressures, demand for premium products in grocery fresh perimeter departments continues to surge.

Consultancy Daymon reports strong pull in categories like premium meat, said Andrew Moberly, the company’s senior director for strategic advisory.

Prime beef, for instance, has seen an 11% volume increase as of April 2022 vs the prior year, Moberly said.

“Consumers are limiting their intake of red meat, and as a result are more selective when purchasing it at the store—opting for more premium or high-quality varieties. Additionally, with many consumers continuing to eat at home, they’re looking for an upgraded experience comparable to eating out.”

That behavior, Moberly said, will drive shoppers to continue purchasing these premium meat options as they look for restaurant-quality offerings to enjoy at home.

Inflation, of course, does continue to impact purchasing decisions, with 75% of consumers ranking inflation as the most serious economic problem, according to Daymon. With inflation top of mind for shoppers, Moberly said, consumers are turning to private brands to provide savings while not sacrificing on quality.

“Nearly 70% of consumers say private brands are a better value for their money, marking this purchasing environment as a time to increase private brand trial and loyalty. However, we expect demand for premium perimeter products within private brand to continue, especially with inflation perceptions varying across generations.”

Gen X and millennials in particular, he added, are least concerned with food inflation compared to all other generations, with 37% of those 25-31 year old having high hopes for their finances a year from now, compared to 22% of the general population.

The ISB perspective

According to the August IDDBA Trends Recap, both the fresh perimeter and aisle bakery delivered growth in July, though that was predominantly driven by price inflation rather than unit sales, said David Wagstaff, vice president of North America for Manchester, UK-based premium brioche category leader St Pierre Bakery.

However, there are certain subsectors that bucked the trend including bagels, croissants and specialty desserts.

“These are areas where premium products stand to do well and subsectors in which St Pierre operates,” Wagstaff said. “Coffee shop products are enjoying significant growth and July has a major holiday which always boosts more premium sectors of bakery since so much of buying in ISB is occasion-led.”

The trend for premiumization, Wagstaff said, is here to stay. Previously, shoppers were elevating their meals at home because they couldn’t travel or dine out in the pandemic. Now that the cost of living is on the uptick, consumers are still looking to treat themselves well at home.

“Eating better quality food and entertaining guests at home is still more cost effective than going out,” he said. “Anything that’s saving shoppers time and provides an easy solution for entertaining at home is doing well throughout the store – not just in the bakery.”

There’s a real opportunity, he added, for retailers to inspire shoppers and provide affordable luxuries, working with brands like St Pierre to ensure basket spend at a time when shoppers are economically-speaking, more discerning.

It’s all about delivering “perceived” value, Wagstaff said. Most shoppers don’t assess value just from the price tag – especially in food purchases. They look at the quality, the authenticity, and the versatility of products across different meal occasions.

When it comes to inflation, Wagstaff said, what happens when consumers start to feel the pinch is not that they spend less money necessarily, but that they become more discerning with where and how they spend that money.

That means that brands and suppliers offering quality goods have an opportunity. The financial difference for consumers between buying ‘good’ or ‘best’ is marginal, therefore, shoppers are more likely to opt for the better quality, or premium offering.

“It’s different if you’re talking about cars or high-value purchases, but everyday grocery brands are subject to a different purchase journey – and savvy brands – and retailers – will be ready to highlight quality goods to shoppers,” he said. “This also creates an opportunity for St Pierre specifically; because we win out in independent taste tests on taste, texture and flavor, we understand that driving trial is key. While inflation might create a more risk averse consumer, perceived quality is so important.”

Inflation is being felt across the board, in every sector, Wagstaff said. That creates two camps of shoppers: those who spend a little extra knowing they’re getting a better quality and become brand loyal; and those who don’t spend the extra, but don’t have an experience that keeps them coming back.

An omnichannel perspective

The keys to marketing and merchandising premium products rests in having a strong omnichannel strategy that centers on product attributes and cooking usage, Moberly said.

As 56% of food shoppers say they are willing to pay more for products that fit their lifestyle, retailers must elevate premium product attributes through effective in-store signage, along with callouts on product display pages within the digital shelf.

“Consumers are shopping across in-store and online channels looking for full meal solutions, making it imperative for retailers to elevate not only their marketing strategies but their merchandising strategies as well,” Moberly said. “For instore, this includes cross-merchandising items such as meat with marinades, seasonings and fresh sides, promoting complete private brand meal solutions.”

For online shoppers, retailers must strategically incorporate complimentary items at the digital shelf, providing an opportunity to cross-promote premium purchases with fresh private brand additions, he said.

Finally, the more retailers use their in-store and online platforms inclusive of social media channels to promote recipes, usage tips, and full meal imagery, the further they can induce premium purchases.

Within grocery fresh, prepared foods are coming into focus with year-over-year unit growth of 11% as of June, with heat-and-eat options becoming a strong segment, according to Daymon.

Prepared foods fulfill the growing consumer need for convenience, with nearly 9 in 10 consumers now purchasing freshly prepared foods and almost one-third saying they are purchasing them more regularly, Moberly said.

To support this shift, Daymon is tracking an increase in prepared food quality as consumers are looking for convenient meal options that also have added health and wellness attributes.

“We’re excited to see how retailers enhance prepared food options for prolonged shopper engagement and growth—from including premium restaurant-quality ingredients, from-scratch sauces, and authentic recipes with clean label formulations,” Moberly said. “As shoppers look to customize their prepared food selections to prevent meal boredom, we anticipate cross-merchandised pre-marinated premium meat and vegetarian options with prepared meal sides to continue becoming elevated solutions in the coming months.”

“A little theater”

Wagstaff said that St Pierre has long held the belief that instore bakery is about providing the experience and inspiration for shoppers that cannot be delivered in the same way by the commercial bread aisle.

Now that foot traffic has returned post-pandemic, it’s imperative, he said, that retailers deliver on the customer expectation – both of the shopping experience and the product range available.

“Merchandising solutions that highlight quality and authenticity will help retailers to drive sales, especially in the current climate. Our Eiffel Tower racks not only act as a trip trigger, driving footfall into the instore bakery and offering a little extra theater, but they also communicate our unique proposition – authentic French products that can elevate everyday meals.”

In communicating that, St Pierre is automatically addressing the “Why pay more?” question, he added. In short, shoppers will pay more for quality.

In the near future, St Pierre is set to expand its premium lineup with the launch of a new bake-at-home line, with authentic French baguettes and crusty rolls.

The take-and-bake sector, Wagstaff said, has experienced a “race to the bottom,” becoming highly commoditized. As a result, it’s a perfect time to highlight quality.

“There’s room for an authentic, quality product, and our brand is perfectly placed to fill the gap in the market.”

St Pierre’s strategy is two-pronged: the company can take its brand-loyal consumers and introduce them to another new category. And it can also take the quality for which it’s known and improve an area of bakery that’s a bit on the stale side.