Everywhere you turn we are being told premiumisation is what the beer sector is all about. The demand for ever more sought after, exclusive and special brands that beer lovers are happy to pay more for. But is that really the case and what does the term premiumisation even mean? Richard Siddle looks at the market and what we can learn from other consumer good sectors where premiumisation has been convincing us to pay more for what’s on offer for years.

Advertising legend Sir John Hegarty knows a thing or two about how to get people to pay for things they don’t know they want. He and his agency, Bartle Bogle & Hegarty, were the creative minds that convinced us buying a car in the 1980s was all about its “Vorsprung durch Technik” even though we didn't know what it meant.

Around the same time another London advertising team (BMP DDB) was dreaming up what was to become arguably an even more famous tagline with Hofmeister’s “For great lager, follow the bear”. A slogan that lives and breathes with people 30 years later. A core message that was essentially saying if you want quality, premium beer then “follow the bear” to its home in the Bavarian forests of Germany. The place where the best beers come from (…and still do).

Drinks brands, and the marketing, sales and advertising teams behind them, have long tried to turn basic liquids into aspirational, inspiring products that somehow transport you to another world of luxury, escapism and hedonism simply by drinking them.

It’s what brand marketers now call ‘premiumisation’. There is not a shelf down an aisle in your local supermarket that is not heaving with products shouting out for attention, all dressed up to be a little more premium and sought after than the brands around them.

It’s not just advertising slogans that have stood the test of time, but consumers too. We have all become so much more sophisticated, but also conscious and wary of brands trying to get us to pay more for their products simply because they have the power to do so.

If you really want to ‘premiumise’ your brand then you are going to have to do a lot more than changing its design, or telling us the ingredients are somehow better than they were before. The average shopper will quickly see through that.

Power of persuasion

No, you need to give the shopper something they need, or better still something they did not even know they needed, but now they have seen it, they want it even more and are willing to pay more for it.

Premiumisation has created the bridge between the desirability of the luxury world and the function and necessity of the mass market. It’s the same persuasive mindset at play in convincing us to trade up to double quilted toilet paper that might only cost 5p a roll, as it is craving a new Rolex watch, or the latest BMW on the market.

If you look at how the world’s biggest and most successful brands are tackling premiumisation then you can only sit back in wonder. Sports shoe companies like Nike and Adidas are the true champions of premiumisation.

Adidas has a partnership with rap star Kanye West to sell his ultra exclusive and sought after Yeezy range of footwear. Together they run competitions that attract thousands of people to enter, simply for the chance for you to ‘win’ the right to buy an exclusive new Yeezy sports shoe not available on general sale. Your prize might actually cost you £250 plus to pay for your ‘winning’ shoes, but the real ‘prize’ is how special it makes you feel, how envious your friends are of you by the shoes you are wearing. But Adidas - and Kanye West - have made that happen. That’s the ultimate in premiumisation.

Let’s go back to the “Vorsprung durch Technik” tagline. It’s not just a throwaway line dreamt up by advertising gurus, but has become the core to everything it does - meaning literally “progress through technology”. As Oliver Hoffmann, head of Audi’s technical development, says: “At Audi we live and breathe passion and pioneering spirit. We aim to establish a clear definition of what the experience of driving an Audi should feel like.”

Premiumisation for Audi is what it makes you feel like to drive one of its cars. It’s a ‘feeling’ millions of people around the world are willing to pay a lot more money to experience.

Drinks and beers premiumisation

It’s the same “feeling” that beer brands and breweries are using to convince beer drinkers to trade up and spend a bit more on their beer over its rivals. And it works.

Data from CGA, the on-trade analysts, shows premiumisation has transformed the lager category over the last 10 years. It now claims nearly half (47%) of all serves sold can be classified as premium, compared to 34% in 2010. In spirits closer to 75% of all drinks sold are for premium brands. Of the average 19 new spirits brands that have been added to back bars in the last 10 years, 14 are premium.

It’s what consumers like and expect when they are out drinking - 48% say they will typically spend more to get a higher quality drink in the on-trade, says CGA.

It is a trend that has only strengthened during the Covid lockdowns as we all looked to treat ourselves and trade up to not just better drinks, but food, clothes and home appliances too.

Restaurants, pubs and bars are all reporting increased sales of premium drinks brands since re-opening this spring and into summer. CGA says premium beers have done particularly well with two in five (41%) lager drinkers now opting for premium brands.

World beer demand

It also reports the premiumisation drive in beer is being lead by the enormous rise and demand for premium world beers, which is now a £2.5 billion-a-year category and stocked by more than 100,000 outlets.

The enormous demand for premium world beers is summed up in this CGA data:

  • 21% of British beer drinkers now buy premium world beers, some nine million people of which 600,000 new drinkers have been added in the last three years.
  • 42% of these people go out drinking at least weekly.
  • 27% are in CGA’s Trending Tastemakers and Sparkling Socialisers consumer groups that tend to visit venues often, spend heavily and influence the choices of others.
  • The average price of a world beer is £4.52 on draught, compared to £3.74 for draught premium lager.

The demand for world beers has also gone up in lockdown and since re-opening premium world beers accounted for 33% of all lager sales by value in the second quarter of 2021 - up six percentage points from the same period in 2019. What’s more that growth has been across all regions and outlet types.

“The category has gone from strength to strength since reopening, and new brand launches and acquisitions by big brewers are likely to sustain the trend for the foreseeable future,” says CGA’s Paul Bolton.

What next for premiumisation?

But brands and venues can’t take the premiumisation trend for granted. There is a now whole science behind what makes people trade up and the behaviours learnt in lockdown still need to be fully understood.

As Phil Montgomery, CGA’s director of client services for UK and Ireland, says: “If we are to make the most of premiumisation, it is more important than ever to understand the drivers, dynamics and habits of consumer behaviour in the new-look trading environment.”

There is also a danger of consumer fatigue with just too many brands claiming to be the most exclusive, the most caring, the biggest, best and most innovative. It is now becoming a real problem for brands and the exclusivity they seek to create.

Beer brands, for example, need to rediscover what made them premium in the first place or risk just becoming another beer on draught.

Sophie Maxell, futures and insight partner at Pearlfisher the consumer trends experts, says brands can keep themselves ahead of the demand for premiumisation by looking at how your brand can build “new expressions of desire”. It might mean bringing in fresh creative thinking to re-identify what drives your real point of difference and staying true to that. What new meanings, values and occasions can people enjoy and apply to your brand? How can you reach different audiences that might currently be aware of your brand?

Look around at all the premium brands we use every day and each has its point of difference, the reason why we will pay more to buy or use them. Be it making our lives easier - like with Amazon Prime, the most cutting edge with Apple, a better experience with a brand like Red Bull, or even Lego, or all the big household brands from Heinz Ketchup, to Kellogg’s to Persil that play on being safe, tried and trusted. Then there are the brands that come out of nowhere, that surprise us, wake us up and disrupt the norm, like Uber, Deliveroo, Spotify or Netflix.

It really is all about finding how we can bring a bit of ‘Vorsprung durch Technik’ to our brands and lives.