What’s driving the flurry of premium own label NPD?

Waitrose last week became the latest supermarket to double down on premium own label by adding 130 new lines, and new branding and packaging to its No.1 range. Customer director Nathan Ansell boldly called it the “biggest” relaunch in UK grocery this year.

That followed Asda, in May, launching a new 500-strong Exceptional range, which it said would “elevate” its premium tier to a new level.

Tesco, Sainsbury’s and Iceland have also extended premium ranges in recent months.

So what’s driving the premiumisation push? And how big is the opportunity?

Premium demand

Demand for premium lines has “ramped up” steadily as inflation has slowed, particularly over the past six months, says Kantar strategic insight director Tom Steel.

Spend on premium own label grew 12% in the year to 9 June compared with the previous 12 months, according to Kantar’s latest figures. That’s nearly double the 6.9% growth in total own label. Volume sales grew 5.9% in premium compared with 0.5% for all own label.

“Shoppers are generally buying more of it, and more often,” Steel says.

Hence, Tesco’s recent quarter one trading update reported 12.5% sales growth for its Finest range in the 13 weeks to 25 May.

The supermarket launched its Finest summer range this week, with new lines for BBQ season.

For M&S, sales of its ‘Dine In’ range – pitched as restaurant-quality – were up 40% in its full year to 30 March.

For Paul Stainton, UK partner at private label consultancy IPLC, M&S’s recent success – enjoyed while it has upgraded thousands of products under its ‘Trusted Value’ mantra – is one driving factor of the premiumisation trend.

M&S Food sales were up 13% in the year, and its in store market share climbed from 3.6% to 3.7%.

But which retailer’s premium lines have stood out most over the past 12 to 18 months?

“If I’m a buyer from any of the other supermarkets, I would go into M&S to see what they’re doing, and select products that I would then put into my premium tier,” says Stainton

He adds it should also come as no surprise that, having focused on their value credentials for two years, grocers are now seizing the opportunity of easing inflation with NPD.

After all, the retail price of the premium private tier is 79% higher than standard tier, according to IPLC analysis.

“Retailers are looking to increase their basket spend, and in the process increase their margins,” Stainton says. “Premium private label does both.”

Premiumisation also provides excellent opportunities for differentiation for retailers, after a period in which brands have generally slowed their rate of innovation, Stainton adds.

At Asda, insiders have previously spoken about the need to improve quality perception. The supermarket could certainly do with improving perception somewhere, with its market share down year on year from 13.7% to 12.8% in new Kantar data this week [12 w/e 9 June] and its sales down 4%, against total market growth of 2.4%.

Premium own label is also “very important” for Asda’s convenience store rollout, where consumers are more likely to want food for tonight, says PwC senior retail advisor Kien Tan.

Meanwhile for high-end Waitrose, whose own label ranges have traditionally enjoyed “huge levels of trust”, enhanced premiumisation is an area of opportunity where pressure to compete on price is less, says Tessa Stuart, a shopper research expert and founder of Asset Research.

Read more:

• Asda launches Exceptional premium range to ‘elevate’ quality

• Waitrose relaunches premium own label No.1

• M&S refreshes own-label spirits offer

• Asda rolls out canned wine range promising ‘uncompromising value’

Consumer confidence

With inflation falling back to the Bank of England target of 2% in May, according to the latest ONS Consumer Prices Index this week, much of the opportunity may still be ahead.

Consumer sentiment is showing “positive shoots” in signs of confidence to increase spending more consistently, says Kantar’s Steel. According to the company’s latest consumer sentiment poll [4 w/e 9 June], the number of consumers describing their financial position as comfortable was the highest since 2021, at 36%.

Sales of premium lines are typically boosted by strong weather and Christmas, where they can reach up to 6% of market share, from around 4% typically, adds Steel.

If supermarkets can continue to give customers reasons to get excited, they will be “knocking on an open door with a premium own label range”, says Stuart.