Drinks: what is premium?

By Andrew Don

- Last updated on GMT

Pleasure principle: for some, paying for premium is a marker of success (image based on TAW4/iStock/Thinkstock.co.uk)
Pleasure principle: for some, paying for premium is a marker of success (image based on TAW4/iStock/Thinkstock.co.uk)

Related tags: Premium soft drinks, Alcoholic beverage, Beer, Managing director

Premium drinks offer potential for enhanced profits, but when is a drink ‘premium’ and when is it not? The answer isn’t always clear cut.

Put a fancy label on a bottle, give it an even fancier price, serve it in a fancy glass – better still, hire a barman who does Tom Cruise Cocktail​ impressions and get 100 Del Boys to prop up the bar, shouting “cushty” in unison. Perhaps not.

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Francoise Sonneville, senior beverage industry analyst at Rabobank, identifies six drivers of premium consumption: price, health, convenience, indulgence, experience and sustainability.

Hi-Spirits managing director Dan Bolton says: “Positioning spirit brands and serves as premium enables operators to differentiate their offer from the competition, as well as helping customers navigate the spirits category and select their drinks according to whether it’s an everyday or treat occasion.”

Gareth Bateman, head brewer of Wye Valley Brewery, which has eight pubs, says ingredients and craftsmanship are the two points of difference when it comes to creating premium products.

Those ingredients must then be coupled with “unflinching high standards” in the manufacture.

“In the beer industry, in particular, the rise in enthusiasm in craft beers correlates with a willingness to pay more for smaller measures of stronger products,” Bateman says.

Defined by ABV

Premium points:

43% of consumers choose a high-quality drink or are likely to pay extra to upgrade

54% of 18 to 34-year-olds are more likely to buy a high-quality drink or pay to upgrade than anyone else

Premium drinkers are likely to be younger and more affluent than the average consumer

Premium drinkers are 10% more likely than anyone else to experiment

A single-serve bottle is essential in determining whether a mixer is premium

33% state the quality of drinks on offer is important when choosing where to drink

Source: CGA Strategy Brand Track February 2017

When it comes to lager, a premium product has been traditionally defined by its ABV – of 4.5% and above – but Griff Maggs, brewer at Renegade Brewery, says: “We believe that in the eyes of the consumer, the word ‘premium’ implies quality, not necessarily strength.

“Any premium beer should be chock-full of class ingredients and brewed with style and character. You should know at first sip that this really is a beer worthy of the tag ‘premium’.”

Premium lager is one of the bar mainstays, but there are many “rather bland and less than tasty versions” out there, Maggs says. “We recommend publicans choose one or two really good on-tap versions and then back them up with a selection of two or three bottled varieties, each individual in its own right.”

Ben Parmar, managing director of Viiking Ventures, which imports Goa Beer, says premium status is also down to successful marketing, distribution, perception of key influencers and opinion formers and, ultimately, consumer acceptance.

Steve Magnall, chief executive of St Peter’s Brewery which owns the Jersualem Tavern in Clerkenwell, in the City of London, says consumer spending is tightening but people still want to feel special.

“To achieve this they’d rather have a small amount of something that’s really good, than a lot of something that’s mediocre.”

Premium softs

TOP PREMIUM SOFT DRINKS TIPS

Put premium in pride of place

Make the most of point of sale

Get soft drinks on menu

Use lifestyle images

Quench your team’s thirst for knowledge by ensuring they have tasted the drinks

Balance your offer

Source: Vimto Out of Home

Coca-Cola European Partners trade communications manager Amy Burgess says: “With 21% of adults now opting to be teetotal, it is more important than ever for pub and bar operators to offer consumers a range of great-tasting, premium soft drink alternatives.

“As well as delivering on taste and refreshment, premium soft drinks offer consumers a sophisticated alternative to alcohol that they are happy to consume while others may be drinking wine or cocktails.”

Russell Goldman, Britvic commercial director, licensed and leisure, reveals: “The way consumers behave in the on-trade has changed immensely in recent years and this is reflected in soft drinks sales in the channel, which were up by 3.3% in 2016.

“People don’t just visit the pub with the sole purpose of drinking booze these days; the pub has become an environment for a variety of occasions.

“Consumers are increasingly discerning so soft drinks need to look premium if they’re to persuade the public to part with their hard-earned cash these days.”

Pose factor

Premium also has the pose factor. Viiking’s Parmar says: “For some people it’s about ‘look at me – I’m cool, successful, discerning’, or whatever. It gives the consumer more pleasure so they’re prepared to pay a premium.”

Lucozade Ribena Suntory category development manager out of home Lee Cannon says premium soft and mixed drinks should always be presented in appropriate glassware with ice, a fresh garnish and a napkin on the bar to add premium cues and ensure the drinker has the best possible experience.

Belvoir Fruit Farms managing director Pev Manners says pricing is determined by the operator and the experience they are selling to the public but Belvoir’s pricing is driven largely by the cost of production, which he says is far higher than lower-quality drinks.

Rabobank’s Sonneville points out premium products generally offer higher revenues but ingredient costs are also higher.

Brand owners also spend more on advertising but other costs such as personnel and depreciation are fairly fixed.

“Obviously, if revenues per litre are up 10% and costs per litre are up 10%, profits per litre will be up 10% too. Given that some costs will not go up, the effect of premiumisation on profits will be even greater.”

Education is key

Education and persuading consumers to trade up is key to making more gross profit, says Craig Allison, director of Bullards Spirits, which makes handcrafted gin in small batches.

Bar staff should be knowledgeable about the premium products they are selling to give the consumer confidence. “Products with accolades are also a great selling point that bars should capitalise on,” he says.

Heineken trade marketing manager Paul Gordon says many consumers are receptive to recommendations, and bar staff should have the confidence to engage with customers, talking knowledgeably about their beer and even offer a try-before-you-buy taster to prompt customers to trade up.

CASE STUDY: THE BETTER HALF, HOVE, EAST SUSSEX 

Former City trader Simon Stern, owner of the Better Half in Hove, East Sussex, and joint-managers Renata Dabrowska and Tom Campbell, have put the heart and soul back into one of the oldest pubs in the area.

The pub appears in the Top 50 Gastropub Awards 2017 list and it was a national finalist for Best Newcomer in the Great British Pub Awards 2016.

Drinks account for 60% of total sales, and blend mainstream and niche brands, including local ales, craft beers, premium gins, world whiskies, quality wines, cocktails and a beer for dogs.

Ten-year-aged Eagle Rare Bourbon, made at the Buffalo Trace Distillery in Kentucky, USA, is one of its key products in its ‘World Whiskey’ selection.

The premium Bourbon is also offered as a Rare and Stormy cocktail, mixed with Luscombe ginger beer, Angostura Bitters and fresh lime.

Stern says: “Eagle Rare is a good seller and works well on its own or in cocktails and delivers the quality we want.”

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