The premiumization trade-off

Posted by Oliver Koll on Dec 12, 2018

Over the past four years about an equal number of the thousands of brands in the BG20 database has increased, decreased or not changed their price premium versus the category’s PL price.* This is how they fared regarding several important purchase-based key performance indicators:

  • Increasing price hurts volume share. The average winner with respect to volume share has lowered its price relative to PL.
  • Increasing price helps value share. Brands that have upped their prices relative to PL have gained value share points. They have compensated the typical volume reduction and outpaced brands that have lowered price regarding value sales.
  • Penetration has dropped for brands that have increased prices, with the opposite effect for brands that have lowered prices. The impact on frequency has been negligible respectively.

Summarizing, becoming a more expensive brand shows nuanced results, with volume and penetration typically hurting, as opposed to value. However, these averages hide a lot of variation and there are numerous examples of brands that have increased prices without losing volume.