Premium, value or bust, says Rabobank

31-Jan-2013 - Last updated on 31-Jan-2013 at 12:25 GMT

Hybrid Consumer: Basic spending on groceries but room for luxury goods, says Rabobank

Confectioners must position themselves in the premium or value segment or face sales meltdown as consumers alter spending habits, according to Rabobank.

Speaking at the ProSweets’ Conference on Ingredients this Tuesday, Mark Kennis, associate director value added processing at Rabobank, said that consumers were becoming increasingly “hybrid” and were trading down to basic groceries, but keeping up spending on luxury items such as premium chocolate, fine dining and iPads.

As a result, the mid-market is suffering, he said.

“The implication for food processors is that you need to distinguish [premium or value]. If you don’t, you have a certain problem.”

Value or premium?

Asked by ConfectioneryNews.com which segment presented the best prospects for manufacturers, Kennis said that it largely depended on where the company was geared.

“It makes more sense to move up,” but it depends on the product category, he said.

“Chocolate is seen as a premium product,” and could profit from the shift, he added.

“…The message here is that the premium side is growing and the value side is growing.”

Empowered women

According to Kennis, social demographics, such as the financial empowerment of women have driven the change in consumer behaviour.

“We still see fairly traditional roles between men and women in grocery shopping,” he said, adding that women were more likely to scout for low prices, while men would take whatever was on the shelf.

According to Rabobank, 70% of household spending is decided by women.

Kennis said that although women often looked for bargain buys, they still wanted treats such as confectionery, meaning that both the value and premium segments were strong opportunities.

Brand disloyalty

However, Kennis warned that younger generations were much less brand loyal.

“They don’t care as much about the brand as older generations,” he said and will change from product to product.

He added that premium private label from supermarkets was also growing in markets such as the UK and Netherlands and was contributing to brand erosion.

Retailer positioning

Kennis added that retailers were also putting pressure on mid-market confectioners by positioning themselves as either premium or low-cost stores.

He said that online grocery shopping was also gaining traction, particularly in the UK, which gave premium products a strong outlet.