Jared Koerten, a Euromonitor senior food analyst, sees premiumization as "a characteristic, trait or feature of a product that elevates consumer perception, creating a willingness to pay more," Bakery and Snacks reported.
Premiumization also conveys a commitment to the time and investment it takes to achieve premium product status for a brand such as Godiva or Lindt chocolate, he said recently at the Sweets and Snacks Expo in Chicago.
Compared to those brands, Nestlé's KitKat is considered on the way to premiumization, Koerten said. The product is benefiting from the ruby chocolate variety introduced in Asia and from the company's Chocolatory retail outlet in Japan. He said ingredients, packaging and channel comprise "the three pillars of premiumization." (Hershey has an agreement to sell the brand under license in the U.S.).
Premiumization can not only highlight a product in consumers' value systems, but it can convince them it's worth a higher price tag. However, it also can mean higher quality, organic and non-GMO ingredients, unique flavors, a better-for-you nutritional profile, and cleaner labels without additives, pesticide residues or artificial ingredients.
These in-demand aspects can push a product to premium status through labeling and other marketing techniques calling out health and wellness characteristics, Euromonitor's Koerten said.
According to a January 2019 report from FONA International, the premiumization of foods and beverages stems in part from the influence of millennial consumers and their interest in new and interesting products, different experiences and the desire to be healthier.
The transition of a product to premium status takes time and money, but it's worth the effort, according to Euromonitor statistics cited by Bakery and Snacks. The snack segment has increased more than 30% in the past decade, and snacks that are savory, bars or fruit have driven much of that growth. As these items have increased in popularity and become premiumized, their retail value has almost doubled the volume, the publication said.
When it comes to doing premiumization well, Koerten cited the examples of chocolate makers Godiva and Lindt. The latter has introduced fancy retail shops, gold gift boxes of assorted chocolates, and special Valentine's products, while Godiva also has classy retail outlets, a full-service cafe concept, and it just introduced premium chocolate desserts to make at home.
Branded premium chocolate also has an advantage in that it's been largely immune from the popularity of private-label products that has hit many other segments, including everything from cereal and nuts to canned goods and bottled water. Brand-name chocolate products can have an advantage over private-label ones when it comes to impulse buys, but those private-label sweets are often specifically targeted to the customer.
Chocolate is not the only space where premiumization is taking place. Constellation Brands has been praised for marketing its Mexican brands — including Corona and Modelo Especial — to stand out from its competitors and give people a reason to pay up for the products. Constellation, which controls the lion's share of the premium beer market, has managed to grow sales while its competitors in the beer space struggle with mounting competition from craft beer, wine and spirits.
AB InBev has undertaken a similar move to reposition Stella Artois as a premium brand. Vita Coco's parent company recently launch into recyclable aluminum cans for its Ever & Ever premium water, and now Godiva is collaborating with General Mills on premium dessert baking mixes. Molson Coors, which owns MillerCoors, purchased Aspall Cider, a nearly 300-year-old maker of premium ciders and specialty vinegars. These companies all stand to gain sales and market share by elevating their products in the minds of consumers.
Quality isn't just a fad, so it's likely the premiumization trend will continue to attract sales for manufacturers willing to make the time and investment necessary to reach that status. The process will continue, as other products — including Jeni's, Unilever's Talenti gelato and Conagra's Healthy Choice and Banquet frozen meals, among others — adopt fancier flavors, higher-quality ingredients and other marketing strategies to achieve the coveted reputation of premium items.