Will pressure on disposable income hit premium food prospects?

The media seems full of gloomy news affecting consumers willingness to spend on luxury goods, what with high interest rates, falling house prices, and petrol at over £1 a gallon. Many food prices are also on the rise, for reasons well known to farmers. So the question is whether the trend towards buying premium food will falter as consumers face pressure on disposable income, and become more cost conscious.

Justin King of Sainsbury does not think so. In his view, consumers needing to cut back on bigger ticket items treat themselves by spending more on inexpensive luxuries such as food. He is backing this view with advertisements stressing Sainsbury quality food, and Waitrose and Marks and Spencer are also majoring on quality. Possibly more surprisingly, Morrisons attributed good third quarter results to a boom in their premium "The Best" range and they are advertising this range in the run up to Christmas. Tesco too are advertising top of the range products including one poultry advert for goose, pheasant and duck.

Yes, there will always be a proportion of consumers who have to work to a budget, but according to Tesco, only 16% of people are in this position. Even if difficult times mean that this number doubles, it still leaves 68% prepared to spend more on products they really feel are worth it.

The Institute of Grocery Distribution estimates that the Premium sector will be worth £14.6 billion in 2007, about 9% of the total market, and is growing at 7% versus the total market at 4%. It defines premium as local foods, supermarkets own brand expensive ranges, fair trade, organic, and brands sold with top quality indulgent ingredients. It suggests that the two sectors with most growth potential are locally sourced foods and organics, the former because they reassure about where the food comes from, down to a particular farm or field, and the latter because of media attention.

Free Range Butter - udder madness?

Here's the latest Anchor butter advertisement. The small print at the top says "Merry Christmas from The Free Range Butter Company".

Now why would Anchor advertise itself as free range, something we instinctively associate with animals which can be intensively farmed, not milk based products. The guess would be that Anchor have done market research and discovered that consumers, many of whom are increasingly concerned about animal welfare don't like the idea of milk from cows which are kept indoors all year round and never get to roam grassy pastures. Of course this does not happen in New Zealand, Anchor's home, but it does in the UK. So, Anchor now has a point of difference from British butters that they can use to build their brand.

And the moral of the story? All milk is not the same, and thinking about the link between production systems and consumer trends can point up opportunities to grow a business.

Food and Health - the consumer votes with their purse

News has just come in from TNS, the firm which monitors consumer sales. Far from shunning bacon as recommended by the World Cancer Research Fund, sales of bacon in the week the report was published were up by 4%. British consumers are showing their usual good sense, and choosing a balanced diet.

What Makes a Food Premium?

There is much talk of consumers buying more premium food.

Producing a premium, added value product can deliver bigger profit simply because the higher amount that consumers pay means more money to be distributed through the food chain. Research published by the Institute of Grocery Distribution (http://www.igd.com/) in spring this year provides useful data for farmers wrestling with the problem of how to add value to their produce. So what makes a food premium? Here are some figures.

% consumers saying what makes a premium product:

High quality ingredients used - 41%

Well known brand - 33%

Free range - 23%

Organic - 21%

Locally produced - 19%

Fair trade - 17%

Added health benefits - 17%

Packaging looks good - 13%

Environmentally friendly - 12%

Retailers best own brand - 10%

Quality assurance standards - 10%

High animal welfare - 8%

The figures highlight that many consumers feel that ethical standards also mean premium, whether high animal welfare, environmentally friendly, free range or fair trade. It is also clear that locally produced and organic also equate to premium, and it is likely that ethical considerations influence this also. Other research indicates that consumers buy local because it is better for the environment (less food miles), and they can check for themselves that the farmer is committed to high welfare standards. Organic research also indicates that people buy for ethical reasons.

However two factors stand out as reasons that consumers see a food as premium. First, the product has to be made from high quality ingredients. This means that however ethical the product is it will not be seen as premium unless it is top quality. And second, the product has to be strongly branded, and stand for something consumers can trust. Which means a consistently good eating experience, wrapped up in good looking packaging, with a crisp name and a persuasive reason for the consumer to buy again and again.

Food and Health - confusion reigns

Last week the advice for avoiding cancer was to be thin, according to a study published by the World Cancer Research fund, and the American Institute for cancer research.This week the Centres for Disease Protection and Control Atlanta, in a paper published in the respected Journal of the American Medical Association, tell us that there is no correlation between carrying a few extra pounds (stress few, obese is not good), and cancer risk. Last week's study said the target Body Mass Index to aim for is 25, this week's says up to 30 is ok. Indeed the evidence here is that a bit of a bulge means a longer life. Hmmm.



As far as red meat eating and avoiding bacon butties like the plague is concerned, the Sun (about 3 million readers) comes out today in favour of a middle ground approach. It quotes Karol Sikora, professor of cancer Medicine at Imperial College School of Medicine and advisor to the World Health Organisation stressing that the risks of moderate meat eating are "very, very low". Even the head of the World Cancer Research Fund, Martin Wiseman, is back-pedalling on the bacon issue, saying "its not a question of all or nothing", and if you eat two bacon sandwiches a day now, then aim for one.



Looks like common sense and Granny's maxim of everything in moderation will win the day.

Organic food is better for you......or is it?

To the casual reader last week the headlines were clear - an EU funded study had concluded that orgainic food is healthier because it contains more nutrients. But read behind the headlines and the picture is less definite.

The claimed improvements were limited to a small number of vegetables - antioxidants in tomatoes, potatoes, cabbage, onions and lettuce, and minerals in cabbage and spinach. Milk showed higher antioxidant levels, but more in summer when the cows are eating fresh grass than in winter.

The Times and BBC among others were careful to point out that the results showed significant variations, and the leader of the study, organic enthusiast Prof Carlo Leifert, was forced to admit that some conventionally grown crops have larger quantities of vitamins than organic.

Findings were released to the press, but the detail has not been published, nor have findings been peer reviewed by independent scientists. This will not happen for another 12 months.

Fortunately consumers should get a more balanced picture of organic nutrition levels when the FSA, who have undertaken to review data, publish their findings.

So what are consumers likely to take from last week's publicity? Those already into organic food will be pleased. The well informed will have read the detail and are likely to await further findings. And the headlines may have improved some people's feelings about organic, although whether it tempts them to purchase is another matter, given the cost of organic food versus conventionally produced.

Morrisons latest to support British farming

Morrisons supermarkets have followed up their recent commitment to stock only British pork with a promise to sell only British fresh lamb from now until at least the end of next year. Their advertisement for pork says that they want to support pork while feed prices remain high, and highlights that British pig farmers have the highest animal welfare standards in the world. The advert for lamb also talks about high animal welfare standards.

Waitrose have also been active in their support for farmers "the hardiest breed of all" with an advert on TV. Sainsbury is advertising "British Conference pears. Found on British trees".

The publicity should make consumers think about buying British .