Blog: Dean BestThe unresolved debate on trading up in the UK

Dean Best | 4 May 2007

UK consumers are starting to trade up when it comes to their food shopping. That’s pretty much a fact.

For decades, spending on food as a proportion of total consumer expenditure has fallen. Now, that trend has stopped and there are signs that it is reversing.

Tesco chief executive Terry Leahy has been very bullish about the greater willingness among some consumers to trade up. Leahy says consumers are demanding greater diversity in food and are taking more interest in cooking and the provenance of food. According to Leahy, it’s not just the affluent consumer spending more on food; it’s everyone.

What’s more, at the IGD Global Retail Conference 2007 held in London yesterday (3 May), just-food heard that the market for premium foods would grow by 46% to reach GBP19bn (US$38bn) in the UK by 2012. We were told that rising demand for more “ethical” products – organics, Fair Trade and so on – was driving the growth in premium foods. And suppliers had to react to that change now or face being left behind.

However, before the country’s big retailers get too excited about the prospect of higher margins, questions remain over how widespread the trend is – and its longevity. Are all UK consumers reacting this way? That seems doubtful. Such demand also seems reliant on the health of the economy; if there’s a downturn, “premium” foods would most likely be among the first goods consumers cut back on as they tighten their belts.

And it’s not clear that all retailers would benefit from this popularity of premium food. As Merrill Lynch analyst Andrew Fowler argued, as a brand, Asda seems out of step with the trend to premium. Fowler also asserted that, among the major retailers, Tesco is not seen as a particularly upmarket brand, especially when compared to Sainsbury’s or Waitrose.

Something for all of us to chew on.


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