The price of sophistication: premiumisation & indulgence 

The growing trend towards premium products can be seen as a combination of aspirational and impulsive, encompassing a desire for products that can be perceived as “better” or more sophisticated. The trend appeals across a range of demographics, notably among the wealthy who would naturally look to products commensurate to their income/status and millennials who exhibit a drive for perceived higher quality. Largely, the growth of premium prominence may be attributed to increased global wealth and the globalisation that has seen Western consumer traits spread across regions.  

In the June report from GlobalData, TrendSights Analysis: Premiumization & Indulgence 2018, associate analyst Charles Sissens explores the key drivers behind the premiumisation and indulgence trend. With premiumisation of products gaining value and consumers actively seeking higher-priced products, there is a widening opportunity for manufacturers to provide offerings that present a certain level of sophistication. Drawing from research detailed in the report, we take a look at the premiumisation and indulgence trend. 

TrendSights Analysis: Premiumization & Indulgence 2018 identifies the key drivers behind the premiumisation and indulgence trend as globalisation, a need for escapism, rising incomes, hyper-premium products, and self-branding. Taken together, we can see that the trend primarily satisfies consumer desires for aspiration fulfilment, treating oneself, and purchasing products of a higher quality than the rest. Brands should consider any product attempting to satisfy this trend as inherently aspirational and luxurious in order to satisfy these desires. Consumers will be drawn to products that justify their premium pricing by providing luxury in both taste and association.

However, brands should also be aware of the inhibitors that may affect the trend and any products that attempt to align with it. Largely, these inhibitors fall in line with economic anxieties that can weaken the appeal of premium products. In order to formulate high-quality products, brands take on a cost that must be passed onto the consumer; risking that the consumer base may not be able to sustain that higher price point. This sustainability is also at risk from brand loyalty and the conflict between need and want, with particular sectors being centred on functionality with little need for indulgence.

As with many emerging trends though, there is a prominent opportunity for success in the millennial market. GlobalData found in 2016 that 65% of millennials would be encouraged to buy premium products if they contained high-quality ingredients, while in 2017 it was found that 46% of millennials said they always purchase premium food products. There is a clear desire for luxury products among this age category, particularly for those that can offer new experiences or those that cater to a certain lifestyle. It is worth bearing in mind for brands that this is likely to be the dominant consumer group for any premium products they develop. 

The GlobalData 2016 Q3 global consumer survey found that 60% of consumers globally find trying new experiences more exciting than trying new products, while the 2017 Q4 global consumer survey found that 52% of consumers purchase premium/luxury products in non-alcoholic beverages occasionally to treat themselves. The link between premium products and the indulgence of a new, or more rewarding, experience is one for brands to pay particular attention to. Specifically, there is an opportunity for products to build premium credentials through an approach that is more experience-driven. 

By accounting for the premiumisation trend’s reliance on perception, brands can look to strengthen their position by giving their product a narrative of sophistication. With less than a third of surveyed consumers stating that they rarely or never purchase premium non-alcoholic beverages, there is a clear existing consumer base for brands to capitalise on with higher-quality credentials.  Brands with non-alcoholic products should look to capitalise on this trend by looking to some of the efforts emerging from alcohol’s “craft” movement, adopting traditional or intricate production methods and making sure to emphasise provenance and storytelling. It will be important to remember that products cannot simply be more sophisticated, they must clearly communicate the source of this sophistication to differentiate from more standard soft drink competitors. 

One challenge that brands may face, particularly in the soft drink sector, is the increasing retreat from sugar. Consumers are becoming increasingly health-conscious and looking to reduce their sugar intake, the GlobalData 2016 Q4 global consumer survey found that 43% of consumers are actively trying to reduce their consumption of products containing sugar and a further 44% consume them only in moderation. It should be borne in mind that products should thus walk a line between indulgent flavour and respecting sugar avoidance. 

The alcoholic beverage sector has already made strong headway within the premiumisation trend with the boom of “craft” beer and, increasingly, spirits. These drinks are still largely seen as treats however, although there is a larger segment of consumers looking to try new products than with non-alcoholic drinks, and consumed less frequently as such. Brands must therefore look to emphasise the superior quality and status of their products, keeping in mind the increased selectivity of consumption habits. 

The GlobalData 2016 Q3 global consumer survey found that the top three responses that alcohol drinkers associated with craft food and drink claims were high-quality ingredients (42%), made by hand (42%), and authentic (39%). Brands need to consider this perception and seek to maximise their products’ appeal within these areas. On the outside, using traditional labels and metal caps can make products appear more luxurious, while emphasising the provenance of ingredients can help tell a story about the product. By adopting “craft” credentials, brands can help produce a product that appears more premium, and even gives an illusion of scarcity. 

With the GlobalData 2017 Q4 global consumer survey finding that 41% of respondents purchase premium/luxury products in alcoholic beverages “occasionally – to treat myself”, it is important for brands to position products appropriately as an indulgence. Craft principles can assist with this, such as making use of ingredients that allow for flavour experimentation and using artisan brewing methods like mineral filtration. Brands must be conscious that products in this category are looking to justify a premium spend from consumers, and must therefore look to stress the high-quality aspects of said products.