Premiumisation: Turning top-up to trade-up

The trend in so many product categories has become less about quantity and more about quality. This has been triggered not only by suppliers’ desire to drive up profit margins, but also by a demand from shoppers for more premium products. Indeed, just over a quarter of c-store shoppers say they would trade up if the price was right.

Certain regions have seen higher levels of premiumisation, greatly based on means to spend. For example, in London we have seen an expansion of the premium convenience store fascia Simply Fresh, unsurprising given Londoners have the highest gross disposable household income per head in the UK.

Increasingly young people are staying at home longer, and with fewer outgoings have more disposable income. A new language for premium has developed for younger shoppers, sparked by Generation Zs’ and Millennials’ growing desire to give back to social causes and to “do good”. Nearly half of 18- to 34-year-olds would pay more for a product that positively contributes towards an important social cause, which is substantially higher than older generations. Furthermore, they are more likely to want organic and ethical food and drink.

However, disposable income for retirees is growing at a faster rate than for non-retirees, and this emerging “grey pound” should not be ignored in locations with an elderly population. Appreciate that their idea of premium differs; those aged over-65 place greater importance on British sourcing. Convenience stores are local, independent businesses with sourcing flexibility, making them ripe to start tapping into this appeal from older shoppers for authenticity and provenance.

While one person’s view of premium can vary greatly from another’s, a similar story can be said for categories. Bakery, chilled foods and confectionery are the top three categories shoppers would trade up into, but what can others do to get on that list?

One in five shoppers trade up as a treat, but gifting and special occasions also play a large role. Suppliers must establish what trade-up occasions their product can best play into. For example, alcohol shoppers are almost three times more likely to be on a treat mission than the average convenience store shopper. Alcohol suppliers can work with retailers to market their product as treat-worthy, ensuring POS material gets this message across, similar to the displays we regularly see for in-store bakery. This will go hand in hand with their ‘drink responsibly’ message, encouraging less regular, more premium purchases.

So when it comes to premium put your shoppers at the front of your mind: do they have the means for more expensive products; how do they define premium; and what occasions are they purchasing premium products for?