Spilling the beans on premiumization

Trading consumers up is an eternal challenge for brands today to achieve and maintain growth. The slippery slope of commoditizing your product, eroding its value, spells the death of the brand. Strong brands give value, and healthy brands maintain and grow that value. Yet post-financial crisis consumers seek ‘value’ in new ways and small players are finding new platforms to grow thanks to the liberation of a new digital age. The mid-tier is vanishing in many categories and markets, and the only choice for established brands is between premiumization and commoditization.

The first wave of Premiumization between 1990s and early noughties saw brands create value through previously unavailable quality and projecting aspirational lifestyles. Remember those Nescafe ads…

Even Starbucks taps in to this first wave of Premiumization, elevating quality and peppering on top an experience, a more personalized touch that helped them drive massively higher per capita spending on coffee…

Today however there are new kids on the block. New brands that emerge that are more targeted to specific groups, feel more local and thus more authentic in the ‘fake’ world we live in; feel more connected and encourage more human connection with the community they serve and are part of. Brands like Stumptown…

And these brands are doing things differently with new brewing methods and launching new innovations fast and in disruptive ways…

The lessons to be learnt for brands are that if Premiumization used to be about quality, the new age is about connection and disruption. The slower established brands are to acknowledge this, take some risks and try new ways to connect and disrupt, the more certain their path to commoditization may be.

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