Premiumization: a new era of "ethical aspiration"

Premiumization is a crucial tool for modern food and drink producers to increase profit margins and unlock new opportunities in developed markets. According to the Pew Research Centre1, there are 1.32 billion people in the world who can be defined as “middle class”, which includes 531 million ‘high income consumers’.

This is in spite of the impact of COVID-19 on peoples’ finances. In fact, early evidence suggests COVID-19 has increased inequality even more, meaning that brands need to be careful not to get “stuck in the middle”, where they are neither affordable nor aspirational enough for food and drink shoppers.

1Source: The Pew Research Centre

The definition of "premium" is evolving with the (healthier) times

How people define what constitutes “premium” food and drink is heavily influenced by wider societal trends. Hence, trading up in the individualistic 1980s meant buying luxury items like Champagne or foie gras whose price meant they were out of reach for most others. The 2007-08 global recession ushered in a new era of “discrete premiumization” where aspirational buyers sought food and drink products with more subtle markers of luxury such as artisanal production methods. This was also the era where the concept of “savvy shopping” developed in Western markets as consumers sought out premium goods at affordable prices. The definition of premium food and drink in the 2020s will also mirror the big societal concerns which, post COVID-19, will focus firmly on health. Both health of the individual and health of the planet.

Don't forget premiumization is also about indulgence

While health and sustainability are key to the evolution of premiumization, food and drink producers should not forget about indulgence. Mintel’s Purchase Intelligence2 asked Australians to rate as “premium” all of the food and drink products launched between July 2020 and June 2021. Chocolate and ice cream accounted for every one of the top ten most “premium” launches.

This is a consistent finding across markets. It reflects how luxury has become about elevating the everyday with special food and drink moments rather than spending large sums on exclusive items for one-off occasions. Mintel’s research shows 58%3 of German chocolate users/buyers purchase premium chocolate as an “affordable luxury”, while 77%4 of UK purchasers think premium soft drinks are “a good way to treat yourself”. The psychological “comfort blanket” of indulgent food and drink items is especially important in these anxiety-laden COVID times.

However, as the trend for healthy and more planet-friendly diets strengthens, premium food and drink will become less about “frivolous indulgence” and more about “permissible indulgence”. This means in the next few years, consumers will need to justify treating themselves by choosing a brand which tastes good but also does them some good. This means treats must have some nutritional value and be good for the planet.

Welcome to the decade of ethical aspiration

COVID-19 has intensified the importance consumers place both on their own health and that of the planet. But even before COVID-19 struck, consumers were aspiring to healthier products. This reflects Mintel’s Trend Total Wellbeing, which details how ‘consumers are treating their bodies like an ecosystem and seeking solutions that complement their personal health and evolving needs’. In China5, 66% of those who purchased premium-priced food and drink products in 2019 did so to “switch to healthier products” and 84% were prepared to pay more for premium food and drink products with health claims.

Food and drink producers can charge a premium in exchange for delivering functional health attributes that enhance peoples’ mental or physical health. But consumers will also pay more for more natural, “real” ingredients which, according to Mintel’s Trend Total Wellbeing, people perceive will ‘complement, rather than interrupt, the natural ebb and flow of their own body’. The most important factor Indian consumers expect of a premium brand is that it uses high quality ingredients (61%)6. While, in Canada, 22%7 of adults think natural or organic foods are worth paying more for, rising to 29% for 18-34 year-olds.

Food and drink producers should also expect sustainability to become a much bigger driver of purchase post-COVID-19 as pandemic paranoia gets replaced by eco-anxiety. Already, in India8, 53% of adults expect consumer packaged brands to support environmental issues, 51% expect brands to reduce waste during production and 37% to support initiatives to address societal issues. Supporting sustainability enhances peoples’ mood e.g. 77%9 of Spanish adults agree buying ethical food and drink makes them feel good. Those who can afford it will pay more for this altruistic buzz.

Consumers purchasing premium chocolate as an "affordable luxury"
 

58%

German chocolate users/buyers

Consumers purchasing premium soft drinks as a "good way to treat yourself"
 

77%

UK purchasers

Health and sustainability will become increasingly symbiotic

As the decade progresses, food and drink brands will be able to target consumers with more sophisticated - and therefore expensive - products. Personalized nutrition is growing quickly and holds strong global appeal e.g. 62%10 of South Africans agree it's worth paying more for food/drink customized to their specific nutritional needs (eg how much protein my body needs).

As Mintel Trend Total Wellbeing argues, ‘the pro-natural movement... is finding a new focus on bacteria, as scientific developments signal the positive benefits of our body’s natural bacteria, with calls to work with, rather than against, the body’. In the UK, 22%11 of adults would like more information on improving their gut health and half (49%)12 of Chinese adults have used probiotic supplements in the past 12 months. Scientific advances around good bacteria can help to unlock a generation of new premium functional food and drink products.

Brands will also be able to charge a premium for ingredients which are both more sustainable and healthy. This explains why organic claims in food and drink are rising, with 11% of all food and drink launches using this claim between January and July 2021. It also explains why consumers will pay more for plant-based food and drink that protects the health of both the individual and the planet.  In fact, over half (53%) of Brazilians think healthy products are more sustainable, evidencing how these two key trends - health and sustainability - are seen by consumers as symbiotic.

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