Award Winning Blog

Saturday, March 4, 2023

Premiumization: A New Word and Another Sneaky Way to Increase Profit Margins

             The Sat. March 4, 2023 edition of the New York Times introduces a new word describing another way companies can offer consumers a "gentrified," higher priced product or service that accrues a higher profit margin. See

             While informative, the article missed a major point: the touted higher value proposition often results not from offering something truly better, and more expensive to provide.  Instead, the company finds a way to reduce its costs, by substituting a cheaper, inferior ingredient such as high fructose corn syrup.  Consumers can buy a "premium" version of the product with the restored, originally used cane sugar, albeit at a higher cost, far above the miniscule cost difference between the old ingredient and its cheaper replacement.

             How clever: ketchup, bread, and other common products now have two versions: 1) the inferior, high fructose option for price sensitive consumers; and 2) a more costly, "enhanced" product that simply continues to contain cane sugar that originally was offered to everyone.

             I am sure well trusted companies, such as Heinz, will claim, Covid-19, supply chain disruption, labor shortages, cane sugar shortages, inflation, higher operating costs, etc. necessitate its deliberate reduction in the value proposition of a long-treasured product.  Maybe they can get away with this brazen, sneaky strategy, particularly for products that consumers perceive as not substitutable ("Accept no substitutes.")

             I used to be brand loyal to Heinz ketchup, but have migrated to an organic option from another company that uses can sugar and manages to offer this enhanced product for significantly less than Heinz. My tastebuds are happy and I am pleased to "vote with my dollars."

             In the words of Nancy Reagan: "Just say no" to yet another ploy to goose profit margins.