Enjoy a 15% discount on all purchases until the 31st of March 2023 using the promo code EOFWEB22 at check out!

Drinks From coffee and kombucha to seltzer and champagne, we explore the latest insights on the consumer trends and new products shaping the drinks industry.

The Limits of Premiumisation and the Economising Taboo

Spiros Malandrakis Profile Picture
Spiros Malandrakis Bio

On the face of it, it all makes sense. The forces of premiumisation have seemingly trampled the trading down narrative on the back of rising sophistication, the sustained provision of higher end offerings from glowing hot innovation pipelines going into overdrive, and an austerity driven take on moderation; If consumers could not afford to drink more - or even the same, they would indeed drink less but better.

But beyond the obvious aspirational dynamics driving sales in emerging markets, an apparently infinite trading up process seems to be the basic strategic assumption in financially challenged and overly mature western markets as well. This assumption is dubious at best and an ominous sign of complacency in any case.

The added value of lower pricing

Here is why; Alcoholic drinks’ heady and shifting consumption patterns do not mature in a vacuum. Socieconomic, cultural, gender, and generational factors provide the volatile distillate base and it’s a highly flammable one. With Western European markets counting the dips of their respective recessions, consumer confidence metrics fighting a losing battle against the laws of gravity and a series of black swan events hatched in the EU’s very foundations, the downside risks to the premiumisation mantra appear solid. Unfortunately, company’s economising-driven offerings, do not.

Looking back at the depth’s of the Great Recession and studying the short list of winners in still depressed western markets can hence provide some key learnings for overcoming the inevitable obstacles just down the road.

The –admittedly short lived but indisputably timely - success of Diageo’s Popov vodka in the shell-shocked US market is one of these examples. In 2008 and as the post-Lehman drinking patterns enforced an almost violent shift towards economising, Popov provided a very competitive price point while escaping the need for potentially devaluing discounting initiatives. A similar story was behind White Horse’s meteoric success in Russia, not least due to the offering of a smaller packaging that made it (even) more affordable to struggling drinkers in the country. The brands did not pretend to be something that they were not and answered a genuine need for trusted yet affordable products.

The same can be said of Larios, the once snubbed economy English gin that appeared to be doomed to an irreversible decline in Spain as drinkers’ fully embraced premiumisation – even in the face of unrelenting depressionary forces. While brands such as Hendrick’s are still impressively fighting off the rising pressure to largely remain static, according to Euromonitor International’s latest research a tipping point appears to have been reached in 2012. Larios managed to grow by more than 4% in total volume terms in 2012 and is now surfacing as a palatable option for cash strapped Spaniards as the first signs of a reversal of its chronic declines are the harbingers of the eventual shift towards economising.

Interestingly, private label offerings do not seem to do particularly well during downturns. Key players’ well documented propensity to opt for heavy discounting of their standard and even premium brands makes such propositions obsolete. And yet there is a cost; Pricing and positioning might take years to recover while having a readily available economy brand can work as a safety net practically minimising such a risk.

Premiumisation is still relevant, enjoying surprising levels of momentum and boasting yet to be tapped potential. Nevertheless, the mono-dimensional fetishisation of premium and luxury offerings and a complete lack of readily available trading down alternatives is myopic and a major risk when and not if the next crisis hits. Diversification is the key. Prepare accordingly.

Interested in more insights? Subscribe to our content

Shop Our Reports

Tea in Middle East and Africa

Tea has continued to record positive growth rates in volume terms in recent years, but has also seen declining sales in real value terms in Middle East and…

View Report

Juice in Asia Pacific

Health concerns are influencing the performances of the various juice products across Asia Pacific, with NFC 100% juice, for example, seeing dynamic growth in a…

View Report

Coffee in Asia Pacific

Per capita consumption of coffee in Asia Pacific is the lowest in the world, and is growing only slowly, as the dominant instant coffee category is mature.…

View Report
Passport Our premier global market research database with detailed data and analysis on industries, companies, economies and consumers. Track existing and future opportunities to support critical decision-making across all functions within your organisation Learn More