At a time Americans are picking up more value brands to save money, some also are increasing their purchases of premium brands -- while few are enraptured with mid-tier products, according to a study by IRI.
As "The Value/Premium Dichotomy" reveals, in dollar sales, value brands are growing rapidly, as expected. But mid-tier brands lag in dollar sales as premium brands are picking up steam.
"Several shopper trends have converged to create this dichotomy," said Thom Blischok, president of IRI Consulting and Innovation. "The most obvious trend is the move to trade down. Shoppers have moved away from their traditional brands to value brands, including both retailers’ private brands as well as economy brands from national brand manufacturers."
But shoppers are also focused on premium brands, through what IRI has dubbed "sophisticated splurging." Shoppers are holding onto the premium brands they crave but are purchasing them at value stores.
Of the top 10 items where brand preference beats out price as the most important decision influencer, c-store favorite chocolate candy is number one. Cookies and ice cream also make the list.
At the same time, retailers have dramatically increased the sophistication of their private brand lines, offering high-end, premium private label products at lower cost versus premium national brands, the report noted.
Shoppers’ concerns about health and wellness are also driving the spike in premium brand sales. For example, while bottled water unit sales decreased 3 percent during the last year, premium bottled water unit sales jumped 11 percent. Similarly, yogurt sales were essentially flat during the last year, while premium yogurt sales grew 34 percent.
What does this mean for c-store operators, who built the industry on a small group of national brands, but who have been trying to differentiate themselves for decades? My guess: Customers are looking for specific brands and experiences even in the emergency fill-in or impulse categories. Plus, a lower-priced option may not always be the most popular, even during this recession.
Lesson two, as Blischok pointed out: "Shoppers often act in unpredictable ways, and that the results of one action, such as dining out less, often has repercussions in other CPG segments."
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