Sophisticated splurging

Shoppers of all demographics have flocked to value brands, but according to IRI many premium brands are also picking up steam. On a unit sales basis, value brands enjoyed more growth in 2009 than 2008, while premium brand sales shrank just over 1 percent and mid-tier brands shrank nearly 3 percent. What’s happening here?

“Several shopper trends have converged to create this dichotomy,” says President of IRI Consulting and Innovation Thom Blischok. “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. Premium brand purchases have grown the most at dollar stores, supercenters and Walmart, while shrinking at grocery, drug, mass merchandise and club stores. In addition, retailers now offer high-end private brands that offer a premium experience at a lower cost versus premium national brands.

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, driven by innovations, such as Glaceau’s vitaminwater. Similarly, yogurt sales were essentially flat during the last year, while premium yogurt sales grew 34 percent.

Shoppers have swapped dining out for maintaining at least a few indulgences. And, they haven’t lost their sweet tooth. Of the top 10 items where brand preference beats out price as the most important decision influencer, chocolate candy is No. 1, and cookies and ice cream/sherbet also make the list.

“These findings remind us that 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,” adds Blischok. “It underscores the need for CPG manufacturers and retailers to build and maintain a highly-detailed understanding of shopper attitudes and behaviors.”

It doesn’t surprise me. In tough times, food and beverage is one of the only categories where we can spend very little of our hard-earned money to bring great enjoyment into our lives.

http://us.infores.com/page/news/times_and_trends.