Indulgence
Earlier this week, IRI released a report detailing consumer spending and category growth/decline during the 2008-2009 recession.
Their premise is that the current environment feels a lot like the recession environment, and, if they are right, there are positioning lessons in the data.
An interesting report, we ended up gravitating to one insight into particular—that value brands and premium brands did better during the recession than mid-tier brands—because it was consistent with a trend that’s already been developing.
In its 2020 CPG Growth Leaders report, released about a year ago, IRI noted that while CPG growth accelerated to 10% YoY in 2020, “large CPG innovation and hyper-targeted small CPGs” are increasing premiums at the top-end of the market, while more value brands and private labels are capturing more of the rest of the market.
In other words, IRI spotted a bifurcation in the market a year ago. And it’s the same one that existed during the recession.
At the time of the 2020 Growth Leaders report, we wrote:
“On its face, this appears to be a win for DTC brands as more develop retail strategies. But in a highly competitive market (like breakfast cereal, for example) there’s also a dangerous dynamic at play: If the market is truly bifurcating, brands following the traditional DTC playbook risk getting stuck in the middle.
A slightly-better-for-you version of something at not-quite-a-premium price is how the traditional DTC brand could be described. You could also describe this as attempting to blur the lines between value and high end. And based on the IRI insight, it sounds like that approach may end up being an uphill battle.”
Perhaps this will continue to be true, but there was an additional insight in IRI’s latest report that lends a potential tailwind despite macro headwinds: consumers gravitated to comfort and personal indulgences during and after the recession.
Given this, positioning may be more valuable than ever.
Pricing, naturally, comes into play. But what of multi-purpose products that pack permissible indulgences with nutrition benefits?
While that’s been challenging for some brands, as it requires a specific niche, perhaps that becomes a benefit, if done well, as more consumers begin looking premium products that carry more than just an indulgence.