Here in the UK, the term “green shoots of recovery” has become something of a cliché of late, particularly in the current politically-charged atmosphere.
Most drinks industry executives we talk to here speak of a cautious optimism that the worst is behind us, but the economic figures remain stubbornly difficult to draw conclusions from.
Recent UK gross domestic product figures showing growth of 0.2% allowed the government to talk of a fragile recovery whilst the opposition talked about a feeble one.
Retail figures from the Office for National Statistics (ONS) were equally murky. UK retail sales grew by 2.2% year-on-year in March, but predominantly food sales decreased by 0.8% while predominantly non-food sales increased by 6.7%. Between February and March, total sales volumes increased by 0.4%. Here, predominantly food sales increased by 0.1%.
So, figures reported on just-food yesterday that suggested a return to premium buying were a welcome hook of optimism upon which you could finally hang your hat.
Data from Kantar Worldpanel claimed that UK grocery sales grew by 3% over the 12 weeks to 18 April. However, the research group also pointed out that Asda – one of the largest supermarket chains in the country – is feeling the pressure of a “sustained return” by consumers towards more premium products.
Edward Garner, communications director for Kantar Worldpanel, said the UK retail sector was “seeing a sustained return to premium buying behaviour, which does not support Asda’s ‘value’ proposition.”
The figures sit quite neatly with our latest interview – published yesterday – with Andy Fennell, chief marketing officer of Diageo. Given the talk of a recovery, it’s an extremely timely piece, on the subject of premiumisation. In particular, Fennell talks about whether consumers trading up is a cyclical or structural pattern.
Whatever execs say, they had very little insight into how this recession would hit the modern drinks market. Before the downturn really took hold, many had talked of a “recession-proof” industry. But, this was largely unfounded bluster as very few – if any – had worked through anything like this recession – this was uncharted territory.
So, Fennell’s comments on trading up and down in the drinks industry makes for very interesting reading, coming as it does, at last, with some hindsight into how consumers have behaved in these turbulent times.
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