Blog: A premium analysis
Olly Wehring | 6 July 2007
At what point do consumers reach a ceiling which they are no longer willing to pay for a product? This is of course a question facing anybody selling anything, but in the food and drinks world it is all the more pertinent since the strategies of many of the top producers and retailers became so focussed on the idea of 'premiumisation'.
I was at a food and beverage conference last month in central London which discussed potential growth strategies for the industries going forward. Inevitably, alongside ideas such as environmentalism, organics and health, premiumisation was much discussed.
One speaker in particular championed this concept, suggesting that the opportunities for premiumisation were almost limitless. Now don't get me wrong, I am well aware that the likes of Diageo, Pernod Ricard, Tesco et al have successfully travelled down this road in recent years. But something about his unqualified optimism didn't sit well.
After a moments thought, I realised it was my own shopping habits that were causing my doubts. Increased inflation here in the UK and rising interest rates have without doubt blunted my own personal spending power and caused me to just think twice before I drop the premium sausages into the basket rather than the standard brand, or reach for the malt whisky rather than a standard blend.
The question must be asked then, how does this theory of unlimited premiumisation sit if we enter a sustained period of economic recession? In the UK and US, this question has been largely academic in recent years.
And at the moment in the US it looks set to continue to be academic as the economy there continues to thwart the doom mongers. But here in the UK there are signs that we are on he verge of a far less attractive financial outlook.
Indeed, the idea for this blog was sparked by a blog written by the BBC's economics editor Evan Davis. He pointed out that real household disposable incomes (i.e. incomes after tax and inflation) in the UK have fallen for the second consecutive quarter. Putting this in numbers, households were 0.3% poorer in the first quarter of the year than they were three months before.
He does point out that consumer spending was robust, growing 0.5% in real terms and the economy grew strongly, by 0.7% in the quarter. But his analysis ought to at least make us stop and think.
"It seems that the economy is still being to some extent sustained by consumers who are struggling to adjust to the fact that their spending power is not rising as fast as it was. They are still spending more even though their income has not been rising," he wrote.
"One wouldn't want to be too alarmist about this, but it slightly smacks of the cartoon character chased off a cliff - with the legs still running before the character finds the ground is no longer there and a fall is imminent."
Philadelphia’s soda tax came into force on Sunday, and is reportedly causing a stir in the city's check-out aisles....
Earlier this month, I was most-kindly invited by Accolade Wines to visit the Royal Albert Hall in London. The reason? They wanted to see a tennis great in action, and then give them a guided tour thro...
Do you like whisk(e)y? And, I mean, really like whisk(e)y? Are you at a loose end in the first half of 2017? If so, then I've found just the job for you....
Most of the time, changes at the top of a company present themselves in press releases, stock exchange filings or responses from a spokesperson....
- Chile's winemakers caught out by Brexit "disease"
- What's coming up in beer in 2017? - Comment
- Interview - Pernod Ricard's luxury director
- The just-drinks Analyst - 2017 forecasts
- What's coming up in wine in 2017? - Comment
- Suntory sends staff to fat camp - report
- Diageo Australia names new commercial head
- Pernod Ricard's Absolut Lime - NPD
- Former Stoli Group CEO joins Perfect Vodka owner
- US craft beer growth slows again - IRI figures
- Global vodka insights - market forecasts, product innovation and consumer trends
- The Next Seven Big Beverage Markets
- Global Cognac insights - market forecasts, product innovation and consumer trends
- Global gin insights - market forecasts, product innovation and consumer trends
- Darker Than Before: Global Prospects for Brown Spirits