n They don't have to be tastier. Profitable premium products pull for other, subtler reasons. Steve Hemsley analyses their potential Whether it's Tesco's traditional Scottish smoked salmon, Safeway's roasted red pepper and goats cheese tartlets, or Sainsbury's Vittoria tomatoes on the vine, the growth in premium foods has the supermarkets licking their lips. With the economy in relatively good shape and mortgage payments low, a growing number of shoppers are being tempted by delicious-sounding alternatives to standard food ranges. These are being bought not only for their perceived improvement in taste but also for how they make consumers feel about themselves. According to Taylor Nelson Sofres Superpanel, premium brands can now account for about 20% of a category and sell at about 40% more than standard lines. Examples of markets where premium products have a strong market share include yellow fats (Flora Pro-activ and Benecol), ice cream (Häagen-Dazs), personal care wash (Dove and Olay), instant coffee (Nescafé Alta Rica) and, for the more pampered pet, cat food (Hill Science). TNS claims that about 80% of volume sales come from the chilled convenience and short-life sectors and that the market for premium products could soon touch £1bn a year. In fact, of a current 9% growth in grocery shopping sales, around 3% can be attributed to the introduction and expansion of premium ranges across various categories. The potential for further growth remains huge with TNS estimating that although a third of shoppers buy across the full range of value, standard and premium, only 7% of visits to the top four retailers currently lead to the purchase of a premium item. The big retailers all have their own premium ranges but there are clear differences in how each markets it to meet the demands of its specific customer demographic. Tesco, for instance, prefers to convey a prestigious brand message for Finest to convince shoppers they deserve to treat themselves, while Sainsbury puts more emphasis on taste by stressing on packaging and PoS material that only the finest ingredients have been used. Yet taste is only part of the jigsaw when attempting to convince shoppers to trade up, a fact which the Consumers' Association arguably failed to appreciate when it slammed the sector after carrying out a taste test earlier this year comparing standard and premium smoked salmon, quiche lorraine, chocolate cake, tomatoes and Wensleydale cheese from the four leading retailers. Its five Good Food Guide inspectors compared the chosen foods against versions from M&S and Waitrose and tasted all products blind. The results revealed that consumers are being asked to pay up to 75% more for some premium foods without a guarantee the items will taste better. Only Tesco's premium smoked salmon was rated tastier than a standard version, while the inspectors decided it was not worth shoppers paying more for premium cheeses at any supermarket. Overall M&S came out best with Tesco and Waitrose joint second, while Asda performed poorly. "In fact the Asda, Safeway, Sainsbury and Tesco premium products only scored higher than the standard ranges for just over half of the foods our experts tasted. None of the cakes, tomatoes or smoked salmon got top marks, suggesting that premium does not mean top taste," says Which? magazine editor Helen Parker. But according to business and consumer brand consultancy Link Consumer Strategies, which counts Tesco, Guinness and Britvic among its clients, the reason why premium foods is a growth area is much more complex than the fact they can be tastier. Its research to discover what premium means to the consumer, and what triggers the feelgood factor in a shopper's mind and persuades them to trade up, found that shoppers relate to words on the packaging which convey that a food is genuinely good, such as fineness or freshness, while the less a product appears to have been tampered with the better. For instance, coffee beans which stress they are unprocessed or vegetables that have been hand-picked tell the shopper they are getting greater value despite the higher price. And retailers are increasingly using instore theatre to ensure consumers feel they are making a special purchase. Consumers must also have faith in a product, maybe through recommendation, while they want a brand to reflect their personal aspirations and the image they are trying to portray of themselves. "A ready meal from Marks and Spencer might be the same quality as a similar product from a supermarket but if shoppers are looking to reward themselves after a hard week at work, they might still prefer to pay more for a Marks and Spencer version because of the brand's reputation," says Link's research director Alison Falconer. Link also discovered that consumers accept that the cost of premium foods is often disproportionate to the extra enjoyment they get. They may pay about 200% more for a malt whisky or a fine wine but in their minds the product will taste only around 20% better. "With a true premium product this did not matter because we found consumers willingly fill the gap in performance by sheer force of belief. The premiumness of the product is its own reward, although other things have to fall into line, such as, does the product deliver a taste or experience which is rewarding and different? Or does the way the product looks, and in the context within which it was purchased, support the luxury cues?" says Falconer. She adds: "The five individual chocolates selected by a shopper might taste the same as five pre-packaged ones but people often feel better if they have made the choice themselves." Sainsbury claims 70% of its customers buy from the Taste The Difference range and feedback from shoppers reveals 30% of them would prefer an even wider choice. The top 10 selling Taste The Difference products are vine tomatoes, West Country whole chicken, Orkney salmon fillet, Pomodorino tomatoes, dry cured breaded ham, Delicata Four Seasons ultra thin pizza, premium crumpets, traditional beef roasting joint, skinless boneless cod loin and freshly squeezed orange juice. "The requirement for inclusion in the range is that a product must have been made with extra time, care and attention," claims a Sainsbury spokesman. He is, naturally, critical of the Consumers' Association taste test which put Tesco's Finest ahead of Taste The Difference. "This was not representative of a potential difference in quality between 600 Taste The Difference and standard Sainsbury lines. Before we introduce any premium product it is quality tested to ensure the offer is a distinct improvement on our other ranges. For instance, earlier this year a test showed that 73% of consumers asked preferred Taste The Difference tomatoes against standard." Claire Nuttall, director at brand consultancy Dragon, says by choosing such a name for its premium range, Sainsbury is under more pressure than its rivals to ensure that its products do actually taste better. "The name Taste The Difference is asking consumers for a taste evaluation and with good photography on the packaging, Sainsbury must ensure the product lives up to the image," she says. But for many shoppers who fit Sainsbury customer demographic, Taste The Difference provides a style statement, she adds. Cash-rich but time-poor executives who buy premium products as the norm are choosing items from the range because in their minds the store they trust has made quality food choices for them, saving them the trouble and time of selecting good food. "For other consumers, premium foods which contain better quality ingredients ease any concerns people may have after recent food scares and they are considered the next best thing to buying organic," says Nuttall. The manufacturers are also gaining from the trend in premium foods and are only too pleased to add value to their offer if it brings an improved margin. The Food and Drink Federation says if consumers weren't happy with the products they wouldn't spend the extra money. A spokeswoman says: "Shoppers know that if they are being asked to pay a premium the manufacturer has made improvements, even if they are not immediately obvious." The strong reputation Marks and Spencer's food range retains among consumers is something the supermarkets are eager to emulate. M&S has responded to the threat to its traditional market with innovative launches of its own such as the Chef Specials restaurant-quality range. But just how far the market for premium products can grow will depend on how retailers develop and promote their ranges and how long consumers continue to feel they are getting added value for money. Innovation remains key, because the premium brands of today are destined to be the standard of tomorrow. n {{FEATURES }}