Spending of Specialty Food Poised to Grow

A specialty food boom has gripped the UK, with retail sales of specialty foods and drinks worth GBP3.6 billion in 2006 and set to increase to GBP4.2 billion by 2011.

The UK is one of Europe’s largest specialty food and drink markets and sales have risen in almost all premium categories over recent years. A new report from Datamonitor reveals that the UK is Europe’s second largest specialty food and drinks market, behind France.

According to Datamonitor, 2006 sales of specialty food and drinks were worth GBP3.6 billion in the UK and forecast to increase by 16%, to GBP4.2bn in 2011.

People in the UK spend an average GBP56 each year on specialty foods and drinks, such as gourmet coffee, artisanal chocolates, and craft beers.

“One of the most important drivers has been the ‘democratization of luxury’, with consumers of all income groups purchasing whichever premium products they can afford,” comments Matthew Adams, Consumer Markets Analyst at Datamonitor and author of the report.

Consumers are increasingly buying premium goods – not only luxury, expensive goods, but also everyday treating items such as Starbucks coffee. This is driven by increasing wealth and changing consumer tastes.

Health is arguably another factor in the increasing consumption of premium goods. Consumers are making conscious efforts to eat more healthily by an overwhelming margin to those who are demonstrating the opposite tendency. In the UK, almost two-thirds of the population thinks it is important or very important to reduce their consumption of processed food and drink.

One of the key ways in which consumers are trying to eat more healthily is by purchasing organic variants of products rather than standard versions. Organic versions of food and drinks tend to include a price premium as they require a different set of production input costs.

Democratization of luxury is putting brands at risk. The growing wealth of consumers is creating a new trend towards mass consumption of premium goods, and the democratization of luxury is pressuring marketers to innovate faster to maintain the premium image of their brand.

“Premiumization is a bar that is being constantly raised,” comments Adams. “The UK is the world’s most developed private label market and has been the leader in rolling out premium private label products. For example, the UK’s leading supermarket Tesco has successfully driven uptake of its Finest range. Other retailers have followed suit, with ranges such as Sainsbury’s Taste the Difference and Asda’s Extra Special. The result has been to squeeze margins on branded producers and to erode consumer perceptions of private label as inferior.

“For premium brands to avoid brand erosion they must do two major things. Firstly, ensure that their products have a genuine point of differentiation that makes them stand out from the mainstream. Secondly, such products must be aligned with existing and emerging consumer trends to avoid the flash-in-the-pan success associated with Atkins diet type products.”