Premiumisation: An Asian norm

Dave McCaughan
Source: Admap Magazine, July 2019
Downloaded from WARC

Looks at how, across Asia, there is a rising, still fast-growing middle, and more importantly upper-
middle class who want a slightly better, rarer, more unique experience.

In Bangkok, and across Asia, there is a rising, still fast-growing middle, and more importantly
upper-middle class who want a slightly better, rarer, more unique experience.
The “premium ingredient” strategy works in many ways, but usually involves taking something that
has a known culturally relevant reputation and adding claims to enhance the “it’s good for you”
factor.
Premiumization often means pricing that is not “luxury” but implies a better quality than the
expected norm or products with added features that allow the marketer to charge higher prices –
an example would be the constant seasonal and regional special flavour releases for KitKat in
Japan.
Constant innovation with new premium offerings can be the only way for brands to survive in
urban markets.

How to grow via premiumisation

This article is part of a series of articles on premiumisation. Read more.

Need to know
In urban Asian markets the growing middle class consider a huge choice of brands in store as an indicator
of success. To keep up with constant novelty and innovation brands take several approaches to
premiumise.
A common theme is to take what is seen as an added value ingredient offering proven benefits in one
category and then borrowing it for another, such as adding green tea to toothpaste.
 Consuming a traditional food in a premium way also adds value – for example, premium packaged coconut
water rather than drinking straight from nature.
Creating a premium experience is also a key tactic, but this must truly different to what other brands are
doing or the premium effect is lost.
Constant innovation with new premium offerings can be the only way for brands to survive in urban
markets. When a new variant becomes less appealing, another new option must quickly take its place.

The supermarket near my apartment in Bangkok had 82 brands of toothpaste on the shelves last time I counted.
Admittedly it is an upmarket supermarket in a fancy mall, but even so 82 seems like over kill. Many of the brands
are there simply to show that the store can “bring you the world”. It’s that that type of “premiumised” retail
promise that characterizes shopping in Asia. Stores stock all the brands you would expect, all the leading brands
in Asia and a whole lot of expensive and obscure rare imports.

In Bangkok, and across Asia, there is a rising, still fast-growing middle, and more importantly upper-middle class
who want a slightly better, rarer, more unique experience. Something more premium. Basic economics. As a
marketplace gets wealthier people get used to being able to buy a wider range of products and services.
Toothpaste is a good guide. Last time I checked around 3 billion people around the world have not used
toothpaste yet. Plenty of room to grow. But for the majority of the new middle class in Asia and elsewhere
modern, western style oral care products became normal one or two or three generations ago. Annual “super
brand” survey results tell us year after year that Colgate, or Close-Up, or Pepsident , or maybe an Asian giant
like Darlie or a local market leader like GUM are near universally known and used.

As local markets develop, only using Darlie or Close-Up is not enough. People learn that oral care and, even
more so oral beauty, are part of success and so they look for more. Whitening products (in oral care but also in
skincare) took off as a premiumization of the role of healthy teeth as a measure of family success. Then other
ingredients. Starting around 2005 Darlie toothpaste “premiumised” with a drop of green-tea extract in each tube
and followed by other brands in China and markets with a strong Chinese heritage. It added some value to the
tooth cleaning ritual and suggested more care and a better life by using a well known “health” ingredient.

Premium ingredients
Green tea, or matcha as the Japanese version is called, has become a shortcut to premiumization for just about
anything you can put in your mouth. It seems that every confectionary brand (think KitKat), ice-cream (think
Haagen Daaz), and all kinds of coffee, tea and juice chains all have matcha variants. A common theme is to take
what is seen as an added value ingredient offering proven benefits in one category and then borrowing it for
another.

The “premium ingredient” strategy works in many ways, but usually involves taking something that has a known
culturally relevant reputation or is associated with a known ingredient and then adding claims to enhance the
“it’s good for you” factor. As well as matcha or green tea, the use of TCM (traditional Chinese medicine)
ingredients has been rising – watch out for the rise of Starbucks style TCM tea chains soon.
Coconut water was cool a few years ago and adding that to anything seemed to make it premium in developed
markets. It’s interesting that what seemed part of a cultural background comes to the fore again as a
premiumising ingredient. Cocoxim is a local Vietnam brand of natural and flavoured coconut milk drinks
promoted as natural and having health benefits which are slightly premium priced against other packaged water
drinks. Of course, in most of Vietnam actually buying a fresh coconut and drinking it is an option too, but that
would be “just what everyone can do”. And what anyone can do is not premium, so aspirational people buy the
packaged product. In Vietnam we also see brands like Cobote offering a wide range of natural personal care
products made from natural ingredients including coconut, cucumber, ginger, lemon grass and others that are
part of local food heritage and blending them into premiumised products.

Maybe my favorite recent example of a brand “premiumising” a category has been the success of Paperboat in
India. These are fruit juice mixes based on traditional recipes, “the mango drink your grandmother used to
make”, delivered in paper packaging. It promotes itself as “drinks and memories”, and uses the added value of
“being just like you remember from homemade drinks as a child”. It also has a feel good factor with the
environmentally responsible packaging, which has been that way for five years rather than a new response to
recent anti-plastic opinion.

Premiumisation and pricing

It seems obvious but the “premium” perception of a brand is often involved in its price. Premiumization often
means pricing that is not “luxury” but implies a better quality than the expected norm. Premiumisation happens in
every market. As the middle class expands and the option to spend becomes more normal so brands provide
alternatives to fit increasing incomes. Take Bangladesh which has seen a boom in more premium brands in the
last few years. Not long ago a regular Dhaka visitor like me rarely saw recent model automobiles of any kind,
now there are luxury vehicles such as Mercedes, BMWs and Teslas in the main shopping districts. And for the
fast-expanding middle class, there are also changes happening as local brands premiumise. For example:

Apex: A local shoe brand that competes below Marks & Spencers shoes that are seen as premium level,
but above the regular local brands.
Bellisimo Ice Cream: Another local brand that has a quality product, new flavours and a more premium level
in-store presence than other local players, while fitting below “luxury” brands like Movenpick.
Sailor: premium quality clothing, which is better than many local brands with an appealing in-store
experience, but again priced below real luxury brands both international and local, such as Yellow.

A premium experience
Premiumization is often more about the added experience rather than product features. Brands of all kinds are
creating experiences that both act as a means of adding aura to the core brand and offer new higher-priced
revenue streams.

Haidilao is a very popular Chinese hotpot restaurant chain. Hotpot chains have boomed in China for two
decades and generally have been positioned as friendly, easy to go to places for meals with family and friends.
Haidilao has restaurnats have become an added aspirational experience with 3D outlets that have robots
cooking and serving the food and projected, themed wall decorations that change every 15 minutes constantly
recreating the feel. Futurism becomes everyday modern for a traditional social occasion.

Earlier this year two international beer brands tried to add something to their aura in Korea with a focus on
women. Same product, but different marketing experiences to add value. Stella Artois focused on bringing
together three female celebrities to re-record a hit of the 1990s. It expanded the brand messaging and was a
good policy to be inclusive, but the campaign didn’t have a ‘premium’ message. In contrast, in a campaign titled
“How Bold Are You?” Budweiser embraced tattoo culture. In a country where tattoos are still edgy and a bit
risky, it put together a series of live immersive events celebrating tattoo culture and encouraging it as the leading
edge of style. The result was premiumisation by adoption and experience. And just being cool.

Pop-up, immersive experiences are of course common attempts to add a premium value. And therefore creating
a ‘new experience’ in a tried and tested way adds no premiumization. A premium experience constantly needs to
be upgraded. When Etude House first came to Hong Kong a few years ago it was different. As it did elsewhere it
added a premium quality to its cosmetic products by making the retail experience ever changing. A total store
redecoration every three months made each new look something to look forward to.

Leveling up
Some refer to premiumisation as “leveling up” – taking a category and adding another level. Products with
added features that allow the marketer to charge higher prices or to get more people involved in the category by
raising its image. An example would be the well-documented KitKat story in Japan. The constant seasonal and
regional special flavour releases for the last two decades has not only made KitKat the number one in chocolate
but dramatically grown the sales of the category.

In a saturated market like Japan, where there is a mix of very sophisticated shoppers and retail that constantly
offers new options, you might call it the premiumization model or just see it as survival. Go in to a combini
(convenience store) on any given day and there is probably a new drink on the shelf. The only way to stand out
is to do something extra.

You don’t have to look much further that beverages to see how premiumization is changing the Asia shoppers’
options. The explosion of more and more premium “bubble tea” brands and products across the region for
example in the last decade has meant that was not so long ago seen as a novelty has become a norm and now
a category where adding something extra in terms of experience, flavours, and ingredients is a must to survive
and to see the category keep growing. The problem is that in any big city in Asia now bubble tea outlets and
sales is a red ocean territory with cut-throat competition.

To break through, major brands like China’s HeyTea are deep in to creating new value chains by providing new
levels of geekiness and science to what has often been positioned as a just a fun category. It is launching
unique outlets like “HeyTea Black” with an emphasis on creating a laboratory of advances in bubble tea or
“HeyTea Pink”, which has a unique aesthetic approach.

Conclusion
In most of urban Asia there is access to ever an wider range of products and options. Brands are launched and
try to initially compete as alternatives, but eventually make the mistake of turning to reduced prices to keep up
sales. There comes a point where it just doesn't make sense to sell any more since profit is too low. So, the
brand creates a new "technology" (maybe an ingredient or format variation or experience) and introduces it as
an epoch-making invention to initiate a paradigm shift in that market or category. The approach works once
again with a higher price range for an existing category, until reinvention is required once more.

About the author

Dave McCaughan
Founder, Bibliosexual
https://bibliosexual.weebly.com/

Dave McCaughan has been in the Strategy Planning game for over three decades.

He spent 28 years with McCann, mostly living in Bangkok, Hong Kong and Tokyo leading strategy and research
development across Asia.

In 2015 he set up Bibliosexual as a freelance group of services helping companies in Asia understand the
intersection of people, media and brands.

Read more articles on premiumisation

Shifting signifiers of premium, and how brands can adapt
Alex Gordon

How to be premium in an age of high expectations

Andy Wardlaw

Leaving the walled garden: Lessons from a luxury brand that embraced the super market shelves
David Adamson

Premiumisation strategy as a way to grow

John Dawes, Magda Nenycz-Thiel, Charles Graham and Bruce McColl

The art of premiumisation: Stop guessing, start innovating

Joanna Parman
Why it’s hard to reposition a brand
Peter Matthews

Range extension to deliver a double whammy: Penetration and premiumization

David Taylor

The new rules of luxury and premium branding

Vicky Bullen and Elayne Read

The redefinition of affluence in an evolving Middle East

Tahaab Rais

The new challenge of China’s emerging affluent class: Juggling it all

Tom Doctoroff

China’s premium strategy

Doreen Wang

How to grow via premiumisation: Admap summary deck

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