What’s behind the flurry of ultra-premium ready meal launches?

In recent weeks, retailers and brands have released a slew of ‘ultra-premium’ ranges that promise to go above and beyond their existing top-tier offerings – with prices to match.

First, Morrisons CEO Rami Baitiéh took to LinkedIn in September to announce its Best Signature Collection. The new range of “mouthwatering dishes inspired by iconic recipes” spans mains and sides for two for £6 and £3 respectively, and steaks for up to £46 per kg.

 Then Tesco unveiled its Finest Chef’s Collection of 12 “restaurant quality” main courses for two, priced at up to £20 each.

Gousto also revamped its premium recipe box range this month. The Fine Dine In, Gastropub and Ultimate Fakeaway options carry a £1.50-£6.50 per portion surcharge.

And this week came the most ambitiously priced of the lot, from the king of premium home dining, Charlie Bigham’s. Its new five-strong Brasserie range, serving two, costs up to £29.95 in Waitrose.

Yet there is little sign of consumers having more money to spend. Asda’s latest Income Tracker showed weekly discretionary spending power for middle-income households – classified as those with gross annual pay of £41k – was down 3.2% year on year in August.

So why the ultra-premium offerings now?

For one thing, not everyone is feeling the pinch. While Asda’s Income Tracker showed disposable income fell for 60% of UK households, higher earners – who make above £65k a year gross – had 5% more discretionary spending power.

What’s more, premium own label is on the up. Sales rose 10.3% year on year in the four weeks to 7 September [Worldpanel], the sixth month of a double-digit rise.

The trend is confirmed by Tesco, which revealed Finest sales had risen 18% year on year to £2.5bn in June. That would be enough to knock Cadbury off the top of The Grocer’s annual Britain’s Biggest Brands list.

Staying home for special occasions

At the same time, there has been a decline in eating out. Visits to casual and fast-service restaurants fell 6% in the quarter to mid July [Worldpanel].

A Tesco Censuswide survey of 2,000 Brits found 57% of those who go to restaurants were doing so less often this year than last. Cost and quality were named as key reasons.

The shift has opened up an opportunity for ultra-premium ranges such as Tesco Finest Chef’s Collection, which was launched alongside the survey.

Charlie Bigham says his brand’s Brasserie range is “responding to something that all of us as consumers are feeling – that eating out has got quite expensive”. “You’re not surprised if you pick up a restaurant bill and it’s £50-£60 a head. Quite a few people are thinking: ‘I can’t afford that.”

Still, a £30 price tag for a ready meal could easily provoke the same reaction. Bigham admits convincing shoppers is “a challenge”. However, he says value for money is “a simple equation. It’s quality plus price equals value. And consumers make the judgement.”

What makes the Brasserie range different (aside from price) is “we’ve incorporated more expensive ingredients”, he says. “We’ve said: ‘Let’s spend a bit more on the food and really try to elevate the occasion’. For the vast majority of people, that makes it much more of a weekend occasion, whereas our existing range is eaten throughout the week as well.”

Bigham cites an example of the flipside: “a well-known takeaway pizza brand” that’s charging £16 for a pizza for two while underdelivering on quality. “When I look at a delicious coq au vin or duck confit with layers of flavour, and then the pizza, I think: ‘We’re offering unbelievable value for money.’”

M&S calls it ‘the trusted value equation’: value equals price plus quality. That appears to have resonated with shoppers.

M&S says it has upgraded 1,000 food lines in the year to 29 March, including Indian meals, its Gastro range and pizza.

This week, the retailer expanded its Gastropub range, backed by celebrity chef Tom Kerridge, with two mains – Lamb Hotpot Pie and Roasted Duck Legs – and three sides. The price remains £15 for a main, side and dessert for two.

Permissable treats

M&S is not cheap – a guest spot in the Grocer 33 in August showed it to be 18% more expensive than the average across the traditional big four. Yet M&S has grown grocery sales consistently ahead of the market, despite a major cyberattack in April. Sales rose 7.7% year on year in the 12 weeks to 5 October [Worldpanel], making it the second fastest-growing bricks & mortar supermarket behind Lidl.

It’s a positive sign for the likes of Bigham, who wants to challenge consumer double standards in the “parallel worlds” of the supermarket and out of home. In the latter, “it’s quite OK to have a cup of coffee and a bun on your way to work and hand over six to seven quid or more”. But in a supermarket, “suddenly we’re into a different price world, where there’s this notion everything needs to cost under £2”.

In a similar vein, Morrisons own-brand director Lizzy Massey argues a Best Signature Collection Dry Aged Sirloin Steak is “competitively priced” at £16 for 350g (£46 per kg). She points out it is “roughly 50% cheaper than a similarly weighted steak from a restaurant”.

Supermarket margins

Even so, those ultra-premium options still offer a higher margin for supermarkets. That’s a major benefit for Paul Stainton, UK partner at private label consultancy IPLC. “Margins have been eroded over recent months and years due to high inflation, and retailers are taking a hit on products they’ve included in price match schemes, in which own label features heavily,” he says. “One way to tackle this is to add more lines to the premium end of own label.”

Stainton believes ultra-premium is well placed to take advantage of a land where “there’s such no thing as a ‘cheap takeaway’ any more”. But he also sees limits, and a £30 ready meal is “certainly pushing the boundaries”.

Part of his scepticism stems from the launch of the Tesco Finest Restaurant Collection during Covid, at similar prices of £20-£25. “The range disappeared after a year or so,” he recalls. Overall, Stainton questions the need for additional own-label tiering, given “the already-established premium tiers are doing a great job for most retailers”.

But retailers and brands are determined to test the theory. Bigham thinks consumers will understand as long as the higher price is matched by quality. “When you sell things at these higher price points, quite rightly consumers get more and more demanding. So, we’ve got to be absolutely sure we nail it .”

Massey is also steadfast. “The challenges customers are facing with the cost of living aren’t going away, so we see continued opportunity to help bring occasions into the home.”