Premium brands – selection is key

Posted by Oliver Koll on Dec 12, 2018

High price brands do not prosper everywhere. Amongst top ten brands they are disproportionately frequent in Western Europe and in petfood categories: Examples of categories with disproportionately few high priced top ten brands are yoghurt, olive oil or beer. Some other interesting patterns emerge:

  • Of all top 10 brands, the leading brand is the least likely to feature a price that is more than twice the PL price. Only 1 in 4 leading brands has such a price point as opposed to almost 1 in 3 of smaller top 10
  • Top ten brands owned by leading FMCG manufacturers are more likely to be premium. While on average 28% of all top ten brands are at least twice the PL price, almost all top ten FMCG manufacturers boast 30% or more high-price top ten brands in their portfolio.
  • The more often a category is purchased, the more price-conscious consumers are (also retailers are more promo-prone in such categories). In categories with a purchase frequency of above 10 per year only 1 in 7 boast national brand price levels that are more than twice the price of PL. Among categories where purchase frequency is below 5 per year, national brands are twice the PL price for almost 1 in 2.

We have two possible interpretations of the selective appearance of premium brands in specific contexts: They either are less suited for a high-price strategy or manufacturers have been less successful in creating a proposition justifying a high price. Understanding whether the second interpretation can be rejected requires a thorough understanding of consumer needs and product benefits that justify price premia.