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Where next for premium in the cost of living crisis?


Consumers remain willing to premiumise their drinks despite soaring household costs—but only if suppliers and venues give them full value for money.


CGA by NIQ’s consumer research shows nine in ten people have been affected by the cost of living crisis in some way, and 45% are reducing their spend when they eat and drink out. However, a core group of 17% of consumers are spending more despite mounting costs. Two in five (40%) of those who are going out more frequently say they have been treating themselves when they do so. This dynamic is polarising the market, with some trading down their drinks choices and opting for cheaper serves, while others trade up to premium options. More than two in five (42%) consumers remain willing to spend more on a better quality drink—but with spending tight, they want to be sure they get full value for the extra money. Premiumisation dynamics vary from category to category. In spirits, CGA’s sales data shows that premium and super-premium brands now account for just over a third (34.4%) of On Premise sales by value—up by 2.8 percentage points from 12 months ago. The value rate of sale for super-premium (+5.4%) and premium (+11.4%) has been much higher than standard (-0.2%). This indicates that while some spirit and cocktail drinkers remain focused on price, others have been seeking to treat themselves since the end of COVID-19 restrictions. There are similar patterns in the lager category. Here, growth in sales of premium brands over the last 12 months (+15.8%) has been much higher than standard ones (-2.0%), with growth largely driven by the success of World Lager. However, in the short-term standard lager has closed the gap on premium, suggesting that some lager drinkers are becoming more focused on price. CGA client director Paul Bolton said: “While the cost of living crisis has changed some people’s On Premise drinking habits, it hasn’t dented the long-term trend towards premiumisation. A treat mindset and a preference for buying fewer but better drinks mean there are good opportunities for suppliers and operators to establish and grow premium brands in 2023—but only if they find the sweet spot of quality and value. With other drinkers increasingly focused on expense, it will be crucial to establish the right ranges and pricing ladders to cater for everyone.”

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