It is far from a surprise that shoppers of all demographics have flocked to cheaper brands as a strategy to save money in the current recession, however a move toward premium brands may come as a shock to some.

The latest IRI Times & Trends Report, “The Value/Premium Dichotomy,” reveals that value brands are growing rapidly in terms of dollars, while mid-tier brands lag in America. Premium brands are also picking up steam.

On a unit sales basis, value brands enjoyed more growth in 2009 than 2008, while premium brand sales shrank a measly 1 per cent (increasing in $ terms) and mid-tier brands shrank nearly 3 per cent.

“Several shopper trends have converged to create this dichotomy,” President of IRI Consulting and Innovation Thom Blischok. “The most obvious trend is the move to trade down. Shoppers have moved away from their traditional brands to value brands, including both retailers’ private brands as well as economy brands from national brand manufacturers.”

But, shoppers are also focused on premium brands, through what IRI has dubbed “sophisticated splurging.” Shoppers are holding onto the premium brands they crave but are purchasing them at value stores. Premium brand purchases have grown the most at dollar stores, supercenters and Walmart, while shrinking at grocery, drug, mass merchandise and club stores.

In addition, retailers have dramatically increased the sophistication of their private brand strategies. Many now offer high-end private brands that offer a premium experience at a lower cost versus premium national brands.

Shoppers’ concerns about health and wellness are also driving the spike in premium brand sales. For example, while bottled water unit sales decreased 3 per cent during the last year, premium bottled water unit sales jumped 11 per cent, driven by innovations, such as Glaceau’s vitaminwater. Similarly, yoghurt sales were essentially flat during the last year, while premium yogurt sales grew 34 per cent.

The shift toward more at-home consumption can also be linked to the solid result for premium products, with consumers looking for a cheaper replacement for the restaurant meal that is as close to restaurant quality as possible.

Notably, shoppers have swapped dining out for maintaining at least a few indulgences. And, they haven’t lost their sweet tooth. Of the top 10 items where brand preference surpasses price as the most important decision influencer, chocolate is number one, and biscuits and ice cream/sherbet also make the list.

“These findings remind us that shoppers often act in unpredictable ways, and that the results of one action, such as dining out less, often has repercussions in other CPG segments,” Mr Blischok added. “It underscores the need for CPG manufacturers and retailers to build and maintain a highly-detailed understanding of shopper attitudes and behaviours.”

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