Premium, not prima donna

Failing to live up to expectations is a disaster for any food, but when you give a product premium positioning, then the risk of disappointing the consumer is massively increased. Nevertheless, a controlled approach can ensure that processors strike the ideal balance between, taste, cost and expectation.

The premium arena has seen phenomenal success in recent years. In 2000, Morrison's The Best brand was virtually non-existent, and only 60 categories at Tesco contained its Finest brand. Fast-forward to the present and premium offerings are going through the roof, with almost 200 categories containing The Best branded products and more than 300 containing Finest.

"As shoppers watch Nigella at home, or Gordon Ramsay, their enthusiasm for good food is increasingly feeding through into shopping and spending patterns," claims grocery think tank IGD. "We've seen tremendous growth in demand for premium products over recent years, with UK consumers spending an estimated £14.6bn on these products in 2007." IGD claims that the increase in travel abroad; a more ethnically diverse population; and the greater availability of many more premium lines are playing an important role in driving growth. "By 2012 we expect the premium market to be worth over £20bn, with annual growth of around 7% over the next five years," it says. With no signs of slowing down, this is the key time for manufacturers to embrace the premium trend.

Ess Foods md Rick Sheepshanks is a big believer in using the finest ingredients in order to make his condiments and preserves, even if the expense means less profit. "When people ask what's life about, you could say the smell of freshly cut grass or a beautiful sunset, or you could just say breathing," he claims. "Obviously, you have to breath to stay alive, but that's not what life is about. It's the same with business, it's not just about making money - there's much more to it," he says.

Sheepshanks sticks to his guns, even when this means riling retailers. "Often, we'll develop something for the big names and they'll like it, but they want it cheaper - more starch, less egg," he says. "My fight is to counter that. I'm not saying we have naked virgins gathering tomatoes, but the real litmus test is when people say 'can you make this product cheaper' and I can look them in the eye and say 'no' [because it wouldn't taste as good with less expensive ingredients]."

Budget balancing

Pure Pies founder Patrick Robertson agrees: "You've got to use quality ingredients, otherwise you have substandard components." But he concedes that buying the most expensive ingredients available is not the way to run a successful business, because you can't pass on all costs to the consumer. "When we first went into business, we just wanted to make the best pies, but you can over-premiumise a product, and what'll stop you is that you won't make any money."

Worth Eating founder Julian Langdon, who specialises in making premium quiches, supports this notion: "There's a point beyond which people just won't pay. You can put truffles into a tart, but no one's going to pay enough for it to make it economically viable."

In order to control costs, Robertson claims that Pure Pies focuses on sourcing the best core ingredients for its products, but saves money on other constituents. "If you're using carrots and they're not the main ingredient, you don't need grade A, so we spend less on that and more on the meat filling." He says it would be possible to economise further, but that he chooses not to. "We could make our pies taste good with lesser ingredients, but we wouldn't - you have to have moral standards."

Langdon is of a similar mindset. "You have to have your own principles," he says. "For me, everything has to be natural, so I'd never use water-fattened bacon. But you can cut costs by using misshapes, which are the same quality of meat."

And it's not just the ingredients that makes premium products more costly. "The bulk of the price I put on my products comes from the time spent on them," explains Langdon. "It'll take 10-15 minutes to make a full batch of 40 quiches."

Even when producers feel that their products are reasonably priced, it doesn't mean that people will buy them. Pure Pies supplies pubs, hotels and restaurants, but not retailers. "I don't think the public would be willing to pay for us in a retail environment," says Robertson. "People who shop at Lidl aren't interested in a four pound pie, they're interested in feeding they're families." He claims that Sainsbury has launched a gourmet square pie, but that it is going to be delisted because it's not selling.

However, that's not to say people can't learn to accept premium over time. "We've re-educated festival-goers over the years," says Robertson, who has stalls at many major music festivals. "People got used to paying 85p for a pie, but now they realise that spending the extra gets a better quality product."

Sheepshanks also believes that, regardless of their financial status, all consumers can learn to appreciate premium products. "We're definitely aimed at the ABC1s, but you don't have to fork out a second mortgage to buy our ketchup. We pay far too little for food in this country. People pay for huge, flashy plasma TVs and Cartier sunglasses and yet the one thing we need to live and we compromise it."

Beyond the product

Roskilly's of Cornwall believes that the concept of premium doesn't just refer to the product. "We're really into sustainability and the environment," claims Andy Phillips, commercial manager at the ice-cream and fudge manufacturer. The firm is also a great supporter of wildlife in the local community and encourages people to visit its ponds and woodland. "Premium isn't just about the taste of a product, it's the way the business is run," he says.

He feels that premium foods have become too commercialised. "The problem with premium is that it's become a marketing tool," he says. "We've priced our product at the higher end of the market, but we haven't actually labelled the products as premium - that's for consumers to decide."

Roskilly's doesn't put the soul emphasis on the fact that its products are organic either. "Organic and premium will become outdated," says Phillips. "In Cornwall, there are around five different ice-creams all charging different prices and all labelled premium - how can they all be premium?" he asks.

This issue has been addressed in consumer research conducted by IGD, which notes that premium may not the best way to describe a product. "It was felt by shoppers that manufacturers and retailers should use words other than premium to describe products," says IGD. "It was believed by some that, while premium indicated a high quality product, it was not necessarily the highest quality.

"Therefore if a manufacturer or retailer wants to market a product as being the best available, they may need to consider using words other than premium."

Chris Longbottom, director of TNS Worldpanel UK, is also of the belief that consumer research can be a great way to explore what people want from premium products. "You can do consumer research to find out how much people would be willing to pay for a product," he suggests. However, he warns that this method will not always gain accurate results. "The pitfall is that it's not really the same as putting a product on the shelf in the cold light of day."

Longbottom states that the most effective way to sell a premium product is by communicating its benefits, either in terms of ingredients, or by informing consumers how easily it can fit into their lifestyles. "For example, in Quaker Oats' Oatso Simple product, each serving is in a single sachet, which saves preparation time," he says.

Whichever form of added-value processors choose to define their foods, it is crucial that consumers understand why they are paying more for a product. Sheepshanks sums up premium foods with a simple analogy: "It's like an Aston Martin versus another car - both work, but one is infinitely better." FM