CPG manufacturers and retailers still recovering from the last recession have relied on price increases for boosting the top and bottom line. Recognizing this is an unsustainable long-term strategy, management teams have turned to premiumization as one strategy to drive sustainable growth.
IRI research indicates that shoppers remain eager to try new products and are willing to pay more for new experiences. A premiumization strategy leverages the fact that many shoppers at all income brackets are in better financial shape than just a few years ago.
Making the right portfolio pricing decisions can have significant financial benefits. For a manufacturer with $1 billion in revenues, 10–15 percent topline revenue translates to $100–$150 million in growth. And, within the top 10 fastest-growing CPG categories, premium-tier products have gained share since 2010. This paper outlines a winning framework for manufacturers and retailers so that they can maximize their premiumization potential.