Retail sales of speciality food in the UK, which were worth GBP3.6bn (US$7.04bn) last year, are expected to increase by 16% to GBP4.2bn by 2011, Datamonitor has predicted. This rise, the market analysts have warned, could put branded sales and margins under increasing pressure.

The UK is Europe's second largest speciality food and drink market, behind France, with UK consumers spending an average of GBP56 each a year on speciality food products.

Consumers, Datamonitor suggested, are increasingly buying premium goods thanks to increasing wealth and changing consumer tastes. Health, Datamonitor added, is another factor contributing to the increase in premium sales with consumers on the whole making a conscious effort to eat more healthily. This trend has been closely linked to the increase in organic sales, an important section of the premium market.

"One of the most important drivers has been the 'democratisation of luxury', with consumers of all income groups purchasing whichever premium products they can afford," Matthew Adams, consumer markets analyst at Datamonitor, commented. 

However, this increasing spend on premium products is not necessarily good news for all food manufacturers Datamonitor warned, with big brands coming under pressure from premium competition.

Private label has taken advantage of the premiumisation trend, leading the way in rolling out premium products with Tesco's Finest, Sainsbury's Taste the Difference and Asda's Extra Special ranges all performing well. Consequently, margins on branded producers have been squeezed and consumer perceptions of private label as inferior have eroded.

For brands to avoid brand erosion they must respond by ensuring that their products have a clear point of differentiation and are aligned with existing and emerging consumer trends, Datamonitor said.