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US premium brands gain market share at expense of private label

Premium brands are gaining market share across food categories as housebound consumers in the US look to treat themselves at home, according to recent IRI retail data.

The first weeks of lockdown prompted an initial rush to stock up on basic food items, such as pasta, bread and other shelf-stable pantry goods, followed by a rise in demand for indulgent goods, such as chocolate and alcohol, as consumers allowed themselves small treats while living under lockdown.

However, recently published IRI data suggests that many housebound consumers are continuing to trade up for everyday food products.

The market research company defines ‘super premium’ products as those with a price tag at more than 50% above the subcategory average, while ‘premium’ products are priced at 25% to 50% above the subcategory average.

It analysed US retail sales data for the three-month period leading up to 4 October 2020 and found that premium-priced pasta sauce products gained more than 5.2 points of share in the subcategory compared to the same period a year ago. Other categories that enjoyed premiumisation were spirits and liquor (4.6), frankfurter sausages (3.6), frozen meat (3.5), Mexican food (3.1), sports drinks (3.0), and processed cheese (2.1).

“Despite ongoing economic uncertainty, anticipated recessionary spending behaviors, including an increase in spending on private label and value brands, as well as a shift to value channels, hasn’t occurred to date,” write IRI analysts in the report, The Premium Opportunity. “Now spending more at home, consumers are shifting more growth to super-premium brands both in and outside grocery and the shift to more premium brands is occurring even among low-income households.”

This trading up is occurring at the expense of value tier and private label, it adds, and lower earners report making small indulgence purchases at a similar rate as other households.

IRI recommends manufacturers draw attention to the relevant attributes that mark a product as premium, such as health and wellness, immunity, indulgence, and convenience. With an increase in people shopping for groceries online rather than in traditional bricks-and-mortar outlets, food and drink marketers should also pick the most engaging search words to capture online shoppers’ attention.

Some US pasta sauce brands enjoying this shift towards premiumisation include Rao’s Homemade and Michaels of Brooklyn, which is seen as a natural, locally positioned brand, as well as Primal Kitchen, which positions itself as certified keto and plant-based.

Within the frozen dinner category, products positioned as indulgent, convenient and better-for-you, such as Amy’s and Saffron Road, saw accelerated growth during COVID-19. Super-premium frozen dinners increased their subcategory share from 22.7% to 24.3% while premium products grew from 5.4% to 5.6%.

Meanwhile, ‘chocolate brands, such as Lindt, Ghirardelli and Ferrero Rocher gained share, leveraging their image of ‘affordable luxury’. Even household cleaning products got a premium boost as consumers switched to brands seen as more efficient in fighting bacteria and viruses, according to IRI.

Creating a premium experience at home

Many manufacturers are already wise to this opportunity and have been capturing demand with premium product launches over the past six months. Häagen-Dazs, for instance, launched its ‘Heaven Light’ ice cream with fewer calories and no artificial flavours while coffee chain Starbucks launched a Nitro Cold Brew Coffee in a can infused with nitrogen microbubbles.

Tailored messaging can help capture specific consumer segments while promoting the ‘experience’ of premium products could resonate well among Millennial consumers, IRI says.

In the UK, food manufacturers have been partnering with restaurant chains to offer co-branded products that allow consumers to recreate the experience of eating out while they are housebound. PepsiCo-owned Walkers crisps, for example, launched crisps flavoured with Nando’s Peri-Peri chicken and Yo! Sushi’s katsu curry.

Other brands are collaborating to offer food and drink pairings. US-based ParmCrisps and Bridge Lane Wine worked together to launch a home-delivery snack box with cheese and wine pairings that promises to enhance the at-home snacking experience.

According to Marcia Mogelonsky, director of insight, food and drink at Mintel, the coronavirus pandemic has made comfort foods more relevant as people’s horizons narrow.

“Although COVID-19 only took a few months to change the world, the virus’s onset and its impact on lives and routines reinforced consumers’ desire for comfort and familiarity,” she writes in an online blog.

“Snacks and confectionery are well-positioned to provide those attributes, as people have relied on them for support even before the pandemic. Consumers choose snacks because they want to eat foods that make them feel good and that doesn’t have to be restricted to the ‘bad times.’”