Euromonitor International's proprietary Megatrends Quantification Model, which quantifies consumers’ propensity to spend towards megatrends, predicts that between 2022 and 2032, spend on products and services relating to premiumisation will record a 1% CAGR in per capita terms. The positive yet slow growth can be attributed to the ongoing challenging macroenvironment and high inflation, whereby consumers have adopted a price-conscious normality. This will result in continued discretionary spending habits for some time, alongside the maturity of premium products and services in some sectors.
In response, brands have introduced affordable premiumisation solutions, given the high cost-of- living environment. This involves brands replacing materials and ingredients to reduce costs, but also realigning existing brand portfolios, where prices are marginally lowered while still being positioned as premium.
Premiumisation continues to appeal to consumers
Having said that, consumers continue to value premium products. This is driven by wellness, technological benefits and convenience. Although they are more discretionary in their spending, they purchase fewer items yet with better quality, and are willing to spend a premium on products and services with specific benefits that serve their distinct lifestyles and gratify their own needs. This includes personalisation, where consumers prioritise quality over quantity, preferring fewer items that are meticulously tailored to their individual preferences.
In response, brands can leverage digital technology, particularly artificial intelligence, to provide enhanced solutions that offer efficiency. One standout solution in this space is Zoe, a UK health-tech startup that empowers individuals to unlock insights into their gut and circulatory health, enabling the creation of a tailored nutrition plan.
Another aspect would be consumers spending on quality experiences and products to enhance their wellbeing. With growing health consciousness and desire for better experiences in the on-trade channel, consumers seek to invest and pay more to enhance their wellbeing in products and services to become their “best selves”. Euromonitor International’s Voice of the Consumer: Health and Nutrition Survey (fielded February 2023) echoes this shift, with consumers valuing emotional, mental and holistic wellbeing. Lower stress levels and better sleep are indicators of being healthy, along with a good immune system and physical wellbeing.
35% of Gen Z consumers enjoy spending their money rather than saving it
Source: Euromonitor International’s Voice of the Consumer: Lifestyles Survey (fielded February 2024)
They are more likely to indulge in luxury products compared to older consumers. This is due to a shift away from traditional milestone purchases of buying a home, car or raising a family, redirecting spending on premium products and services, especially through personalisation and digital experiences.
In response, premium products and services can leverage digitalisation to strengthen brands’ reach, especially engaging young consumers. For example, according to Euromonitor International’s Voice of the Consumer: Lifestyles Survey (fielded February 2024), 29% of Gen Z consumers purchase their products via a social media platform. Platforms such as TikTok have the potential to generate greater value over the next few years.
Growth will come from emerging regions such as Eastern Europe and Asia Pacific
Between 2022 and 2032, propensity to spend per capita growth on premiumisation will come from developing regions such as Eastern Europe and Asia Pacific at 2.7% and 2.1%, respectively
Source: Euromonitor International’s Megatrends Quantification Model
This highlights growing disposable incomes and greater propensity to spend by consumers led by developing markets such as Vietnam and Indonesia, as consumers invest more in themselves by enhancing their quality of life.
This is attributed to rising disposable incomes as well as employment levels, with consumers becoming increasingly sophisticated and enhancing their quality of life through the purchase of premium products and services. Nevertheless, per capita consumption within North America and Australasia is much higher at USD103 and USD83 in 2022, given the higher disposable incomes and employment rates in these markets.
Read our article Innovating Around Premiumisation in Today's Economy for further analysis on premium innovation or learn more about premiumisation in our report, Megatrends: Premiumisation.