Premium Food Sales Growing Despite Economic Gloom

Despite the gloomy economic news, and reports of plummeting consumer confidence, people still seem ready to spend on premium quality food.

Kantar Worldpanel, the market data company, tells us that overall grocery sales grew by 5% in the 12 weeks to 26th December 2010, but that sales of premium own label across the 4 big supermarkets grew by 11%, over twice as fast. The Kantar data also shows us that the so called upmarket grocers are doing best, with Sainsbury, Waitrose and Marks and Spencer gaining share whilst low priced ASDA and Morrisons lost share and Tesco only managed to stand still.

Reporting on their performance Sainsbury, who spent nearly £1 billion revamping their premium Taste the Difference Range, said sales of higher priced and ethically sourced products were growing fast, citing free range turkey sales up 30% and smoked salmon up 16%.

Marks and Spencer also mentioned booming sales of turkeys and smoked salmon, whilst Tesco confirmed the trend towards premium food, with sales of “Finest” ham on the bone up 50%, “Finest” party foods up 90% and “Finest” wines up 100%.

Less spectacular, but nevertheless welcome, beef sales in the 12 weeks to end December grew by 4% in both volume and value after months of virtually static sales.

Undoubtedly there will be a Christmas effect in these numbers. Shoppers traditionally splash out during the festive season. But these are comparable figures with Christmas last year, and presumably people were feeling festive then, so the big growth in premium sales does seem to be a trend rather than a one off.

Whether the trend will continue is another question, as the effects of government cuts put further pressure on disposable incomes.

The difference between now and a couple of years ago when the credit crunch first happened and shoppers flocked to discount supermarkets and grocery value ranges is that then, the worry of economic hardship was greater than the reality. The reality now is that money will become tighter, and we may yet see down trading in food. On the other hand it could be that people have tried the value route and it does not meet their needs, at least all of the time.

The Institute of Grocery Distribution is of the view that shoppers will not trade down if it means compromising on quality or values. Rather, people will be more careful about how they shop and prepare food. 36% of us are already trying to reduce food and packaging waste, say the IGD, and 22% are going back to a simpler diet, cooking uncomplicated meals and cutting out unnecessary add ons. This perhaps means higher sales of top quality staple foods.

One high priced staple that shows no sign of growing is lamb. In the 12 weeks to end December 2010, lamb consumption dropped by 17% in volume and 6% in value. It is no good arguing that Christmas is not a big lamb eating time. The point is that these figures are compared with the same period in 2009, The only conclusion to be drawn is that the lamb eating experience does not justify its high price, and that lamb is becoming less and less relevant to the meat eating public.

£1.8m to be spent on advertising organic food - will it make any difference?

The Organic Trade Board, a body representing over 90 companies, is spending nearly £2m to promote the benefits of organic food. Half of the money was put up by the companies involved and the other half came from the EU.In the OTB's words, they want to "democratise" organics, and to this end adverts will appear in magazines like OK and Heat.

Will it stop the drop in organic sales?

The organic optimist would say yes. All that is needed is a bit of consumer education. Hugh Bowles, chairman of the OTB says “The term organic is widely misunderstood, and through this campaign we want to help consumers to discover exactly what it means and why it is worth it.”

The organic sceptic might respond that it is wrong to blame the sales drop on confused consumers. They might point to the acres of newsprint and hours of television given over to supporting purchase of organic food but which has not helped maintain sales. They could argue that, despite much research, no consistent evidence has been found to prove that organic foods are better for you, and that those worried about animal welfare or environmental standards could buy local foods from a trusted farmer or even from one of the supermarkets with a good reputation for caring about such things. And so, why would consumers pay a hefty premium for organic, especially in a difficult financial climate.

But, there are consumers who like the idea of organic, and, regardless of logic, advertising is as much about appealing to the heart as to the head.

So has the new advertising got the “wow” factor that might persuade people to re-evaluate and think about spending a bit more to buy organic food?

Probably not.

The problem is this... The OTB has not come up with a strong, compelling and easy to understand reason to buy organic. Instead, they are trying to be all things to all people. One advertisement shows a father and son saying they like organic because “we care about animals”, a second shows a painter/decorator saying he loves organic because “it feels right for my family”. The special website developed to back up the adverts show several more reasons – “Better for nature”, “More natural”, and “Great tasting”.

This might not matter if the amount of money being spent was huge, but £1.8million spread over three years, whilst it sounds colossal, is small in terms of the amount of impact it will have on consumers.

As with all these generic campaigns which advertise a broad sector rather than a specific brand, we will never know whether the advertising worked. Should organic sales rise then the adverts will be claimed a success. But the fact is that growth is much more likely to be a result of big retailers promoting organics to bring the price closer to conventional products, or innovation in the way organics are sold, like Waitrose’s expansion of the Duchy Originals range.

Should sales not grow then the claim will probably be that things could have been much worse had the advertising not happened.

What cannot be faulted is the organic movement’s commitment to its cause. It is no mean feat to bring 90 stakeholders together and persuade them to part with hard cash for a speculative venture.