Premium Prices
The goal of all businesses is to capture as nearly as possible the value to the consumer of the product they are selling. I get immense benefit from the computer I am using. I would probably buy it if it were priced at twice what I paid for it. But I will not because it is fairly clear what I'm getting and it is quite clear that manufactures can sell such things at a profit at a price which is much lower than my personal marginal utility.
Food usually is in this category: cabbages are a fairly standardized product, and it is easy enough to make a slight adjustment for freshness, or other indications of condition. Obviously Savoy cabbages should command a substantial price premium over white cabbage, but this is a digression. Amazingly the biggest development in supermarket food has been the introduction of premium lines, originally mainly chilled ready meals, but more recently more traditional grocery staples. These seem to be priced with an enormously higher margin than the basic alternative, even though their production costs are only slightly higher. They seem to have extravagant descriptions and packaging but are otherwise unremarkable products.
I don't quite understand how shops like ASDA and Tesco can succeed in selling premium brands alongside their value range. Even M&S, which is the market leader, sells only 25% of its food under premium label, is hardly a gourmet brand. I suppose it is control of channels.
Personally we find that the best approach is to buy premium meat direct from premiuplaces like Colleton Manor, Chumleigh. I have never been able to tell any difference in taste between organic and inorganic veg, and I much prefer nice regular well-washed veg!
References
Indpendent article on profit contribution from premium brands
Food usually is in this category: cabbages are a fairly standardized product, and it is easy enough to make a slight adjustment for freshness, or other indications of condition. Obviously Savoy cabbages should command a substantial price premium over white cabbage, but this is a digression. Amazingly the biggest development in supermarket food has been the introduction of premium lines, originally mainly chilled ready meals, but more recently more traditional grocery staples. These seem to be priced with an enormously higher margin than the basic alternative, even though their production costs are only slightly higher. They seem to have extravagant descriptions and packaging but are otherwise unremarkable products.
I don't quite understand how shops like ASDA and Tesco can succeed in selling premium brands alongside their value range. Even M&S, which is the market leader, sells only 25% of its food under premium label, is hardly a gourmet brand. I suppose it is control of channels.
Personally we find that the best approach is to buy premium meat direct from premiuplaces like Colleton Manor, Chumleigh. I have never been able to tell any difference in taste between organic and inorganic veg, and I much prefer nice regular well-washed veg!
References
Indpendent article on profit contribution from premium brands