Premiumisation is better than competing on price

During a recession premiumisation is a better long-term strategy than competing on price, according to David Peters, chocolate development manager at Cadbury.

He said that - with a lot of uncertainty surrounding ingredient and raw material costs, which go up and down "like a yo-yo" - the only way to maintain healthy profits is to put up prices, not reduce them. And the best way to do that is through premiumisation, claimed Peters, speaking at a Food Innovation conference organised by Leatherhead Food International last month. "In the food industry we are in the business of making something for as little as possible and selling it for as much as possible. Competing on price with supermarket own-label and other branded products is not a sustainable strategy."

The message of provenance, for example, can be exploited to indirectly convey a message of quality to consumers - for example, Stilton is perceived to be better quality than Cheddar. Despite sales dropping more recently, just look at Champagne, he added. For years, and for many more to come, the product has been commanding a higher price because it demonstrates a long-term commitment to provenance. "It has a hugely successful marketing message and is generally a trusted product." Peters said that Cadbury tried to cash in on the trend with the launch of a Champagne Crunchie. "Unfortunately, however, the product was taken off the market, not because of the added Champagne, it just tasted horrible," admitted Peters.

More recently, he said, Cadbury premiumised its chocolate bars by producing a fair trade variant. "The problem is, by claiming the ethical high ground, there's always someone that's against you. There is no point in trying to please everyone. Take the fair trade sugar we use, for example, we now have to import it from Ghana rather than source it from the Fens [in East Anglia] - just think of the increased carbon footprint on that."