Why Is Premium Own Label NPD ON The Rise?

Waitrose has added 130 new lines, new branding and packaging to its No 1 Range.

Asda have launched their 500 strong Exceptional range in May. Tesco, Sainsbury and Iceland have also extended their premium ranges in recent months.

What is driving this premiumisation push?

According to Kantar data, spend on premium own label grew 12% in the year to June, compared with the previous 12 months, and volume sales grew 5.9% in premium compared with 0.5% for all own label.

Tesco reported 12.5% sales growth in its last quarter trading update to end May 2024, whilst M&S’s Dine In range sales were up by 40% in its full year to March.

Having focused on their value credentials for two years, grocers are now seizing the opportunity of easing inflation with their own NPD. According to IPLC analysis, the retail price of the premium private tier is 79% higher than the standard tier. Premiumisation also provides excellent opportunities for differentiation for retailers, higher basket spend and higher margins.

In my view, the cost of living crisis has seen a big move to own label from cash-strapped shoppers, and we’re not out of the inflationary woods yet, which will keep them in own label a while longer.

2. As shoppers buy basics in Aldi and Lidl and go to Waitrose for “treats”, it makes sense for that retailer to lean into own label premium ranges, as Waitrose can’t compete on price on essentials.

3. Tesco’s growth in premium own label will have made Waitrose want what they are having, and Waitrose enjoys huge trust from Waitrose shoppers in its own label ranges. Waitrose have also just bought Dishpatch, the chef-inspired home delivery dishes service.

4. As all shoppers go out to eat less frequently, they will trade up in ready meals as it’s still a fraction of the cost of eating out.

5. Expect this trend to premium own label to continue, unless brands start innovating again to fight back, eg Charlie Bigham’s Tuscan Pasta Bake with Rigatoni, a new product in Waitrose. (This was delicious!)

For more on this, read my additional comments in Stephen Jones’s recent The Grocer piece.