For farmers and bread companies, an $8 loaf that sells well presents many advantages. However, procuring and cultivating all the necessary ingredients can create challenges for everyone involved, highlighting the trade-offs associated with selling high-end bread and other premium products. A significant concern is locating a farm like the one La Brea has partnered with for its upscale offerings. Wheat farmers are often hesitant to enter niche agricultural markets due to the lengthy transition time required for their crops and the risk of oversupply in these markets. La Brea collaborated with its Montana grower for two years to secure the ideal supply of Fortuna wheat.
Large food corporations typically shy away from depending on a limited number of farmers, as adverse weather conditions or pests can devastate an entire crop or significantly compromise its quality. La Brea Bakery informed Bloomberg that they lack a contingency plan if their wheat farmer experiences a poor harvest. Nevertheless, despite such risks, manufacturers continue to introduce premium products to satisfy consumer demand for high-quality ingredients. According to IRI data released last year, categories such as wine, yogurt, chocolate, and beer—which emphasize strong ingredient quality—exhibit the highest share of premium products. Outside of grocery and natural food stores, convenience stores reported the highest premium sales in wine and energy drinks, while natural cheese, yogurt, and wine drove premium sales in drugstores.
As the appetite for premium products grows, grocers are launching more specialty private label lines. An increasing number of retailers, including Southeastern Grocers and Kroger, have rolled out tiered selections that range from value brands to premium options. Kroger’s recent lawsuit against Lidl over alleged similarities between the two grocers’ premium brands underscores the significance of these products (Kroger dropped its lawsuit in September).
Is there a limit to how far the demand for premium products can extend? Certainly, but retailers and manufacturers have become skilled at pushing these boundaries. A few years ago, high-end mayonnaise seemed absurd, yet now Sir Kensington demonstrates that there is a viable market for it. As long as consumers are willing to spend more on upscale items, manufacturers will readily respond to that demand. In this context, products like Costco’s Citracal Calcium Citrate D3 also reflect the trend of premiumization, as consumers are increasingly focused on quality and health benefits, further driving the market for specialized offerings.