Is the age of the Goliath brand over? Author Ben Zifkin’s book The Rise of…
Demand at both Ends: Growth Potential for Both Value and Premium Brands
By Alfredo Costa
We know that growth for online grocery sales continues to massively outpace growth across the total market (up 35.4%). However, another emerging area of growth has come from Discounters (ALDI, Chemist Warehouse, Costco); this sector has also shown relatively strong sales performance over the past year (up 4.5%). The key to success for retailers appears to be a focus on high quality products at low prices. ALDI, for example, had its most successful Christmas to date, persuading many ‘high affluence’ shoppers – to ‘switch’ part of their Christmas spend from other stores.
Nielsen’s syndicated Grocery E-Commerce Report shows that the grocery sector continues to wade through a prolonged period of low growth (2018 closed out the year at 2.6% headline dollar growth). But there are still opportunities to turn this around by tapping into growing consumer demand for items on both ends of the price spectrum – value and premium.
At a national grocery level, private label growth is over four times that of total branded products, driven by Woolworths, Coles and ALDI’s core range. Across a number of categories, private label falls into the top five manufacturers. The value for money continuum—from premium through to budget private label – is being stretched, and this has strategic implications for brands as shoppers become more and more comfortable with private label.
At the other end of the price spectrum, premiumisation is another avenue for manufacturers to achieve growth. Nielsen’s Changing Consumer Prosperity study reveals that there are instances where shoppers are willing to spend more in particular categories or on items that carry particular attributes. The majority of Australian consumers are either highly or somewhat willing to pay more for products that are environmentally friendly or sustainable (62%), contain organic or all-natural ingredients (59%), or carry social responsibility claims (55%).
Within the grocery sector, the categories consumers are most willing to buy premium items include meat/seafood; coffee/tea, alcohol/spirits, dairy products and haircare. This trend highlights that there is consumer demand for premium grocery items that allows them to save on out-of-home expenses e.g. dining out, takeaway coffees, on-premise drinking and professional hair treatments.
Examples of where grocery categories in Australia have shown growth as a result of premiumisation and/or innovation include: premium ice cream where shoppers are buying smaller tubs at higher prices; premium and international brands in butter; high-end pet food and treats; and ‘permissible snacking’ which tap into consumer demand for low-calorie, low-carb, low-sugar, gluten and/or dairy free treats.
In a grocery market with limited growth, suppliers must continue to innovate to drive growth, and retailers will need to deliver on the value equation of quality at low prices.
Read the full article here.