Premium Evolution
The growing sophistication of consumer taste buds continues to fuel store brand opportunities in the gourmet products category.
As the country begins to edge its way out of its proverbial black hole economically, the premium products category continues to trend upward — with consumers seeking artisan, gourmet-style products. And with the rise in popularity of specialty grocery stores such as Trader Joe's, retailers are following premium private label trends closely and looking to invest more heavily in this segment.
Trends and opportunities
Fern Bennett Phillips, CEO of Portsmouth, N.H.-based Little Big Farm Foods LLC, believes that the premium segment sets the trends for most categories.
"This is where most of the new product activity is occurring, for both specialty food brands and private label," she says. "Innovation continues to drive most categories. While the idea is not merely to develop products to 'throw against the wall to see what sticks,' the premium segment can afford to be creative in developing sophisticated flavors, stemming from the increasing importance of diverse food traditions and global tastes."
Phillips says trendy ingredients and "superfruits" continue to flourish, but cherries and acai are yielding to yumberry from China, as well as hibiscus.
"The spicy/sweet segment continues to thrive as well, with new types of peppers such as 'ghost peppers,"' she says.
Phillips adds that sales of good-for-you or healthier foods continue to grow, but consumers still seek out small, indulgent treats.
"Instead of an entire cake, the consumer is buying cupcakes," Phillips says, emphasizing that both portion control and affordability come into play when they make these food choices.
Finally, in terms of trends, chocolate is here to stay, Phillips says — and the more premium, the better.
"Also, the antioxidant properties in chocolate are superb; there is growing evidence that, particularly for women, chocolate is a healthy additive to diets."
Barry Rosenbaum, president of Hicksville, N.Y.-based Nassau Candy, agrees.
"Impulse purchases of premium chocolate and confectionery products are here to stay," he says.
But Rosenbaum sees current trends focusing on national brand equivalents with greater value for the consumer.
Bill Stewart, vice president of sales and marketing for Glendora, Calif.-based Tom Clark Confections Inc., says that in his category, he also sees a trend toward higher-indulgence products that combine unique ingredients in innovative combinations.
"For example, Trader Joe's has clearly proven that a store brand can be a leader in innovation, and they have done an outstanding job in creating unique premium products that provide a great eating experience," he says.
Phillips cautions, however, that store brands need to monitor trends carefully to distinguish the "trendy fads" from the true trends.
"Trends are often surrounded by premium callouts, not always necessary for even premium store brands," she says. "For instance, 'Maine sea salt and caramel chocolate' may be successful, but the true trend is the salty sweet combination. So, make it taste delicious, offer sampling opportunities, price it right, and it will sell.
"We all recognize that 'wild' and 'local' are trends across many categories," Phillips continues. "In baking mixes, for example, 'wild blueberries' are more compelling to the consumer than 'blueberries.' Taken up a notch, 'wild Maine blueberries' may be more so for a new brand. Retailers need to determine whether consumers will pay the upcharge for this specific a premium ingredient. If not, 'wild' may suffice."
Turn strategy into profit
By offering a free store brand product with the purchase of a national brand item, retailers could increase trial, Phillips says. And if the product performs, they also could enhance loyalty, not only to the specific product, but also to the overall store brand.
"And demo sampling is always a winning trial generator — again, if the product is right," she adds. "One company I know of 'concept-tests' price points with product packaging via online research to verify a successful match. Of course, this does not guarantee a winning product, but does add confidence to the offering."
Phillips believes a simple, legible package fares stronger.
"Callouts are important, but a beautiful product shot and a compelling product name should compel the consumer to pick up the product to investigate further," she says.
For store brands, provided the products deliver on their "promise" of premium quality and an indulgent eating experience, Stewart says retailers also have an opportunity to improve product merchandising to capture impulse sales. Potential merchandising locations include checkout stands, floor display shippers and more.
Strategy shortfalls
Phillips says she has seen some mistakes along the way in terms of store brand strategy or execution in the premium product segment.
"I always caution about over-SKU'ing in categories," she adds. "Yes, there needs to be a variety, but SKUs need to be monitored carefully and weeded through at least every 12 to 18 months."
Plus, a lower price alone will not compel the consumer to buy/try, Phillips stresses.
One of the greatest challenges retailers face is execution at store level for seasonal products; that is, getting the products from the warehouse to the stores and onto the shelf in time to hit the start of key consumption periods, Stewart says.
"One solution is to build in more lead time, or make the merchandising process easier via pre-filled floor display shippers, etc," he says.
Rosenbaum says some retailers rely on low-quality products and/ or low-quality packaging to hit price point(s), but forget about keeping their shoppers happy.
"Shortfalls in product quality or packaging do not a repeat customer make," he stresses.
To that end, Stewart believes some premium product categories have not been addressed effectively in terms of quality and packaging. For example, he points to the "on-the-go" indulgent snack occasion.
"Single-serve PET jars that fit into car cup holders for 'dashboard snacking,' for instance, need more [innovation] attention," he says.
Rosenbaum agrees that retailers can better compete in this segment by creating upscale packaging to increase the value of the product.
Premium's future
The trend toward exotic flavor combinations for more sophisticated palates should run its course over the next five years, Phillips says.
"Certain flavors will be firmly established, but the trendy superfruits such as the acai berry should fall out, surpassed by more traditional superfruits such as cherries and blueberries," she says. "Further, as the economy improves, the indulgent trend and spending on small, decadent treats may decrease, but I think consumers will always appreciate the small decadence of a sinfully rich cupcake. And portion control will also fuel this loyalty."
Stewart believes consumers will continue to be driven by a desire for indulgent premium products. But, at the same time, they also will be price-conscious value-seekers.
"This creates significant opportunities for store brands. To accelerate the opportunity, store brands will need to be innovators rather than merely copycats of successful marketers," adding he says, that collaborating with store brand manufacturers on new product concept development, prototype testing with store customers, etc., will improve the innovation process, as well as the success rate of new store brand products.
For his part, Rosenbaum sees continued comp growth in the foreseeable future.
"Growth will be supported by unique packaging and quality products with a strong value proposition," he says. "I also see a continued per-capita consumption increase of premium chocolate and confectionery products," he adds, noting that the U.S. market will strive to match per-capita consumption of Europe's private label segment.
'Impulse purchases of premium chocolate and confectionary products are here to stay.'
'Callouts are important, but a beautiful product shot and a compelling product name should compel the consumer to pick up the product to investigate further.'
One of the greatest challenges retailers face is execution at store level for seasonal products; that is, getting the products from the warehouse to the stores and onto the shelf in time to hit the start of key consumption periods.