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- RESEARCH & AWARDS
A new report from Rabobank says changing consumer preferences are leading to a polarization between premium and value tiers in food sales, a shift which will leave mid-tier items in danger of becoming extinct.
The report, titled “The Rise of the Hybrid Consumer,” says consumers in the past decade have been trading down to value items for everyday groceries, while also trading up to premium products for “socially and emotionally relevant products.
“As a result of this new consumption pattern, the mid-market has been under pressure, as products in this segment are perceived to offer neither quality nor value to today’s hybrid consumer.”
Private label is squarely behind the trends, offering better values on everyday items that consumers trade down to, while increasing premium offerings that consumers are aspiring to buy.
The report predicts a 10 percent drop in standard product sales in the food segment by 2017, falling to 50 percent of all sales. Premium product sales would grow 5 percent to 20 percent in 2017, with value products gaining 5 percent in sales to 30 percent of the market in 2017.
“Private label now not only facilitates down-trading but also increasingly allows consumers to trade up to the premium food category,” the report said. “This is particularly apparent at full service and upmarket retailers that now increasingly enable hybrid consumers to trade up through premium private-label products.”
That trend is born out, the report says, by the top-performing food retailers in the U.S. since 2007 – hard discounters such as Aldi and premium retailers such as Whole Foods Market and H.E. Butt.
As for ways to seize on the opportunity, the report suggests better marketing and active brand management on the consumer end, to avoid brand erosion to hard discounters and private label. It encourages premiumization to capitalize on the high end of the market, with manufacturers offering healthier alternatives, more natural and fair trade ingredients, and more convenient packaging and sustainable business practices throughout the supply chain.
It also believes that reverse positions – value products in the premium segment and premium products in the value segment – can provide additional opportunities, especially in private label, where those price points are more easily reached.
Finally, it says the ability of suppliers to lower costs while maintaining high-quality levels would allow price points to fall on better quality items, reaching the hybrid consumers’ goal of quality products on their budget.