Lately the chatter across the pond has been about the “posh nosh” or the move among British retailers to sell more upscale items:
While “value” and “low-price guaranteed” tags can still boost sales of basic household items like flour and soap, in Britain today it’s the Finest, Taste the Difference or Extra Special labels that all but guarantee those vine-ripened tomatoes fly off the shelves.
Food scares have combined with campaigns promoting healthier food to change the way Britain shops and eats. Mad cow fears in 1996 all but halted beef eating in Britain, while poultry sales sagged after bird flu spread into Western Europe last winter.
As a result, U.K. consumers now care more about where the food comes from and how it was produced, and worry just that little bit less about the cost.
It is interesting. One wonders if we will see a flight to quality among consumers of fresh produce due to the food safety outbreaks on produce?
This piece claims the retailers are all in favor due to higher profit margins on upscale goods:
As the trend for premium foods gathers steam, retail leaders Tesco and J. Sainsbury have come to realize what’s good on the table can also beef up the bottom line. They’ve expanded their top-of-the-range offering of premium goods, which are described as organic, fair trade and products from niche luxury brands.
Organic food is produced according to legally regulated standards, for crops without the use of conventional pesticides and artificial fertilizers. For animals, organic means they’re reared without the routine use of antibiotics or growth hormones. Fair trade, meanwhile, promotes equitable international standards.
Even Asda, the U.K. supermarket chain owned by Wal-Mart Stores whose focus has traditionally been on low prices, is awake to the growing demand for posh nosh, catering to it with its Extra Special range. Asda is Wal-Mart’s largest business outside the U.S., representing half its international income and about 10% of overall sales.
Sales of premium foods typically represent less than 10% of overall revenue for supermarket operators in Britain, but the segment yields higher margins, making the rewards significant. Sainsbury shares have advanced 27% so far this year, Tesco shares have added 19% and Marks & Spencer has seen a 36% jump in its share price.
“The supermarkets see premium food as a major opportunity. It’s critical to their profit,” said Allegra’s Young.
The upscale move is also creating room for small upscale producers:
Sales for organic chocolate maker Green and Black’s, purchased by Cadbury Schweppes last year, grew a staggering 49% in 2005. Making chocolate since 1991, and originally distributed at an outdoor stand in edgy Portobello Market, in West London, Green and Black’s is now available at major supermarkets.
In the beverage category, Innocent drinks, which was launched in 1999 and uses only crushed fruit and natural ingredients, racked up sales of 75 million pounds this year. It went from selling 20 fruit smoothies on its first day from a stand at a small music festival in London to current volumes of one million smoothies a week.
Mintel forecasts that the smaller brands, whose size inspires the idea of exclusivity, will continue to flourish as restaurants and the retailers embrace their eats.
Could it be that the great bonds of English Speaking People will run through the contemporary upscale retailer?