Times & Trends

THE VALUE/PREMIUM DICHOTOMY:
GROWTH AT BOTH ENDS OF THE SPECTRUM
EXECUTIVE OVERVIEW

IRI's Times & Trends highlights new developments and critical events across all major CPG categories and channels, providing powerful benchmarking data to help guide your strategic decisions. This edition of Times & Trends explores the dichotomy between value and premium brand sales growth. It's far from a surprise shoppers of all demographics have flocked to value brands as a strategy to save money in the current recession, but surprisingly many are also increasing their purchases of premium brands. A free summary is also accessible via the GMA website at www.gmaonline.org.

INTRODUCTION

Change. This one word has defined the CPG industry for more than a year now. Change is omnipresent: consumer rituals, attitudes, and shopping behaviors have changed more drastically and quickly over the past year than any time in recent history.

Of course, the driver of these changes is the country’s economic climate. Recessionary conditions have left consumers seeking new ways to save money.

For example, trading down has become pervasive. Undoubtedly, value brands have played a key role in helping consumers maintain very tight fiscal budgets.

And, the home has once again become the central hub for daily living. To save money, consumers are dining at home, entertaining at home, preventing and treating ailments at home, and conducting beauty treatments at home with increased frequency. This shift has created pockets of opportunity for CPG marketers.

Adverse economic conditions are expected to linger throughout 2009 and into 2010. But, the CPG industry is well-equipped to survive, or even thrive, despite the downturn.

This report explores the power of value and premium CPG products to drive growth at both ends of the spectrum in recessionary economic conditions.

KEY FINDINGS

»Consumers are adeptly charting a course through an intense economic storm, with value tier CPG products playing a critical role in meeting the need for low-cost solutions to daily living and key premium tier products answering the call for affordable indulgence.

»Despite a recessionary economy, 16% of shoppers are splurging on premium products on a regular basis- but they are willing to travel to get the best deal; as everyday low price providers, supercenters are experiencing exceptional growth at the premium end of the CPG product spectrum.

Top Categories Where Brand Preference Most Frequently Trumps Price - Per cent Consumers That Typically Purchase Their Preferred Brand
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Price increases at the value end of the CPG product spectrum were, on average, one percentage point lower versus premium tier products over the past year, contributing to strong unit sales growth at the value end of the spectrum.

»Manufacturers have done a remarkable job at establishing strong brand equity across a range of key CPG categories, including chocolate candy and shampoo; across these categories, a majority of consumers indicate that brand is a more important consideration than price when making a product selection.

Across several key CPG categories, such as coffee and beverage alcohol, premium tier products are driving growth despite recessionary economic conditions as consumers take solace in home-based dining and entertainment and seek to indulge without “breaking the bank”.