The UK Premium Sector
The exact nature of the UK premium sector is hard to define, since consumers, suppliers and retailers all have their own interpretation of what defines ‘premium’. However, IGD has defined the premium sector to include products and brands which appeal to consumers on aspirational, ethical and quality grounds:
- The organic market
- Fairtrade products
- Local and regionally sourced products
- Specialist and fine foods
- Retailers’ premium private labels
- Premium branded products
Based on this definition, IGD estimates the value of the UK premium sector to be worth at least £9.8bn, and could be as much as £11.6bn once an estimated value for premium branded products has been included. This represents approximately 9.6% of the UK grocery sector.
Premium Shoppers
Premium products are most often viewed by consumers as those which are ‘out of the ordinary’, with the quality of ingredients being the key indicator of the premium standing of a product. Increasingly, values such as organic and free range have now become closely associated with the notion of premium in the minds of consumers.
The notion of higher quality (that products will deliver something better than the mainstream) is the key motivation behind the decision to purchase premium products. In general it is the confidence that they inspire that provides the motivation to purchase for most people.
Premium Products
Given the difficulties in defining the premium sector, the same challenges exist in defining what makes a product premium. Although the majority of premium products command a price premium, they are not premium solely because of the higher price. Indeed, the high price is derived from the other key characteristics of the product, including:
- The use of high quality ingredients
- Consistent high quality
- Appealing flavour and appearance
- High quality packaging
- Heritage and emotional attachment
Premium Retailers
The UK premium retail sector is dominated by four key retailers, namely Waitrose, Booths, Marks and Spencer and Sainsbury’s.
Over the last five years, Waitrose has been one of the fastest growing UK retailers and is gradually expanding from a regionally based chain to one with full national coverage. The Waitrose range is aimed at achieving ‘food excellence’ through the provision of high quality products that cater to a wide palette of tastes and meet exacting standards.
Booths is a long established regional operator which retains many traditional characteristics of the high class provision merchant. Its 26 stores are located primarily in the North West and is currently implementing an extensive strategic programme to consolidate and boost its credentials as a regional fine foods retailer.
Marks and Spencer sells food through over 400 stores in the UK, making it the only national wholly quality focused retailer in the market. With an exclusive private label offer, its stores have a premium quality positioning with key strengths in areas such as ready meals, hot and cold snacking and desserts.
Sainsbury’s is recognised as the biggest of the quality-led retailers in the UK, although its greater exposure to the mass market has positioned it slightly below the smaller premium retailers in the quality hierarchy. Under Justin King, the company is investing significantly in the customer offer as it seeks to restore its reputation for delivering excellent quality and innovative products.
More mainstream retailers have also sought to capitalise on the growth in the premium sector through developing premium private label ranges. This was led by Tesco’s Finest range which was introduced in 1998, although similar ranges have now been developed by Asda (Extra Special), Sainsbury’s (Taste the Difference) and Morrisons (The Best).
