Can you ‘premiumise’ by lowering the prices instead of rising & gain brand recognition?
Premiumization was originally about managing to up scale a product or a service convincing customers to buy at higher prices by positioning a given brand, targeting the audience, telling a fascinating story, aspire, excelling at justifying the higher prices, keeping whatever promised and make sure to trigger both rational and emotional benefits in people’s mindsets.
Pernod Ricard, Diageo, Clarins, Carlsberg, Noma and even Kristian Brask Thomsen did it. In the businesses of diamonds, boats, luxury watches and televisions many front leaders have managed to premiumise for decades and longer. Either by establishing a new business or continue to sell at premium prices in a current, and for some even to grow. Also during times of crisis. Noma (former Best Restaurant in the World several years in a row according to “The World’s 50 best Restaurants” by San Pellegrino) was born in 2003, few years before the US recession took hold. Noma wasn’t born Best Restaurant. It became so. On top of the 00s crisis. Completely fully booked every single night. Around 50 seats, a private 25-30 persons dining room and an annual turnover of some €3,5 million —definitely not on the low for a restaurant.
And today Elvis (René) has practically left the building —he is heading to Mexico with the crew to create another kind of Noma, a 7-week long pop op restaurant situated between the jungle and the Caribbean Sea. And Noma is no longer n. 1 —Italian Bottura in Modena is – but the restaurant is still fully booked. For lunch and dinner. Amazing and price worthy.
In the early 10’s when everybody was still licking their wounds like cry babies (myself included) a young danish guy (former restaurateur and self-appointed Culinarian Ambassador; Kristian Brask Thomsen), created the Dining Impossible experience. The venue is about having dinner three evenings in a row in three different high-class restaurants somewhere in the world. By premiumization he managed – and still does – to gather celebrities, millionaires and ordinary foodies to join Michelin starred tables at roaring cover prices. People are not only spending important amounts on a stunning feast, people are flying in from all over the planet adding all those extra expends such activity requires.
Premium Quality – drink good or not at all
In the city of Gourmet Copenhagen in Denmark I’m part of a little authentic 35-seats family run Italian restaurant (my husband is from Naples). We serve lovely food in a heart-warming and hospitable environment with a core focus on convincing our guests to accompany their meal with Premium Quality Italian wine. Premium Quality because we’re absolutely convinced that it’s better to drink good or not at all.
15 years ago running an authentic Italian restaurant in Copenhagen was like living the American dream, you could walk on water. Sell anything labelled Italian like a doddle. Including high-end Italian wines like Brunello and Barolo in the range of €100-150. People bought not one, not two, but three, four and five bottles in the blink of an eye. What we didn’t know back then was that something was about to change. That change started some 50+ years ago when Claus Meyer was born. He is a food guy. A revolutionary one. And the spiritual father of Rene Redzepi, Mads Refslund (Noma/Acne – if you’re in to food, you’ve probably heard about all three or one or two of them) and the New Danish/Nordic Cuisine. The trio changed the culinary scene in Denmark forever and turned the difficulty level of staying in business as a restaurateur from overwhelmingly challenging and so difficult to completely exhausting and torturous.
But competition is not only good, it’s great. Or you die or you evolve.
We were about to die. Made in Italy was no longer enough. Lovely food and great wines were no longer enough. Hospitality, heart and affection was no longer enough. Italian was no longer enough.
24 months ago, shaking like a leaf, we made a radical decision and completely downscaled the revenue of our core business product; our wines (provenu in restauration is mainly on beverage and much less on food).
Falsification of the Italian brand
We cut the prices by 30-40% off all our wines and turned the restaurant into an integrated wine shop + restaurant (Enoteca), hoping to fill up the seats. To survive.
But we also did it out of an attempt to make the Italian brand flourish. Again. Don’t get me wrong, I’m not saying that Made in Italy is a stuporous brand with no market, actually the opposite is the case, never has so many Italian products been falsified worldwide, in fact almost double the Italian export. The arrival of the New Nordic/Danish Cuisine in the early 00s (The New Danish Cuisine is a component of the Nordic which aims to promote local, natural and seasonal produce) has been a huge challenge for the Italian counterpart, I repeat, nowadays it’s no longer enough just to ‘be Italian’. You need more than that, consumers are becoming ever more aware and critical. So maybe Italians were sleeping a bit to heavy and maybe it was only fair to scare Made in Italy till the blood turned cold? What goes for our family business, we are now surely awake and on to it.
But the real challenge —and the reason why we’ve lowered our prices to have something to get loud about and draw attention— might well, subconsciously, be buried in the tremendous damage the Italian brand has been exposed to; the huge falsification of Italian products, “Italian” & Made in Italy .
Made in Italy – not
The phenomena of falsifying Made in Italy has not only left consumers in a limbo state of confusion with regards to what DOP (Denominazione di Origine Protetta – Protected Designation of Origin) is really supposed to smell, taste or be like. It has also left many consumers with the simple (sub)conscious question: What is true Italian and what is not? What is it supposed to look like? Sell at? What’s it worth? It’s difficult to convince consumers to pay 10€ for 500 gr of Datterini, Pachino or Ciliegino DOP when they can get the falsified ‘same’ product from Holland half the price or less. Which of course have nothing to do with Meditteranean grown tomatoes. The same misery goes for falsified Mozzarella di Bufala DOP, Parmigiano Reggiano DOP, DOP Italian olive oil, pasta and more. When it comes to wine the situation is different. There is luckily (at least not officially) not a huge falsification wine wise, though there has been some serious issues, eg. Brunellogate in 2003. If it’s difficult to convince consumers to buy Brunello di Montalcino selling at €50 instead of a fruity (bulk) Nero D’Avola at 5, of course it has instantly most to do with people’s wine culture. There’s a wide gap from 5 to 50 €. The mind of a bulk Nero d’Avola wine enjoyer can however indeed be influenced and changed with time through PR, maybe too premiumization and if not today, maybe tomorrow (needless to say Siciliy is going through a viticultural revolution and now presents a very decent range of worthy examples of Nero d’Avola despite the bulk production).
Summing it up, all this leaves the Italian F&B challenge in Denmark to be a combination of the Nordic Cuisine invasion, falsification of Made in Italy, products and whether or not you have thriving marketing skills with the ability to evolve.
Tradition vs Inventions – Invaded by the Nordic Cuisine
In a Danish market where citizens and tourists are completely blinded by the tremendously strong New Nordic Cuisine trend (its vague concept despite, it’s difficult to build a deep-rooting food culture on ten years of existence and local produce like different herbs, herbs and herbs), anything that is not ‘Nordic’ is destined to be challenged. Might you say it’s only fair that a Nordic Cuisine is leading in its own country. Absolutely. But we all enjoy diversity and good meals. Room for different cuisines is therefore a blessing to anyone who beliefs in this, that of course doesn’t mean that your right to survive as a restaurateur side-a-side with Noma and all the other Nordic restaurants is protected by default. It isn’t, nor should it be. What is actually going on is us (all other Cuisines) and them (the Danish/Nordic one) having a good old-fashioned competition.
It’s called ’Tradition vs Inventions’. Not innovation. Pure inventions.
Danish chefs want a culture of their own. Fully understandable but not on the expends of DOP. Not that it was ever in their intention to cause any harm to us or anybody else, it just happened. As a natural result of evolving.
You might invent the Danish Cuisine, cause it really doesn’t have any core values on it’s own. Most of what it has was borrowed from butter, cream and the French. Now we have herbs too. The rest few things like different kinds of porridge and cabbage is together with ‘Smørrebrød’ relics of the past and among few things poor Danes could afford to eat centuries ago (it stands to say that ‘smørrebrød’ — the dark bread with toppings like hearing and pate— is considered very Danish, today quite reputable and normally only served for lunch in traditional Danish restaurant with little, if any, resemblance with the New Nordic Cuisine)
But can you invent a Danish non-existing cuisine in 10-15 years time? Or would it take longer? Probably. You certainly cannot invent the Italian. That has been a process that started millennia and centuries ago, based on the different people who reigned the Roman Empire, before, during and after it. Phoenicians, Greeks, Romans, Germanic tribes, Arabs, African Berbers, Spanish Muslims. The cuisine of Enotria —Enotria, the land of wine as ancient Italy was called— has evolved from a journey long thousands of years. Not of the last decade’s latest tendency. A tendency however in decline, the new hot thing is no longer New Nordic but insects.
The history of our different cultures is important to remember.
Appeal to people’s emotions and rationality.
So in order to draw back a little attention to some Italian trademark, can you downscale a given Premium Quality and increase it’s worth? Can you lower the prices of Brunello di Montalcino to upscale this brand’s recognition and call it premiumization?
It could sound like an opposite logic. But it isn’t. If Mohammed doesn’t want to come to the mountain the mountain must come to him. So that everyone can see how powerful he is. Our guests are mountains and we’re not powerful. But we aim to become to premiumise Italy. We’ve lowered the prices on all our premium quality Italian wine (not only Brunello) to (re)gain and recall consumer recognition. Risky business? Attention; we have not lowered the prices for a short period of time. That is a strategy we don’t believe in, it will harm your business in the long term. Instead we have re-positioned our brand and changed our restaurant from being just that to become a combined Restaurant-Enoteca. To give our guests an authentic Italian experience in symbiosis with extraordinary value for money. It has long been old news that few are satisfied with the price level required if you’re out to have a decent bottle of wine served with your meal dining in restaurants. This is very much the case in Copenhagen as well. We too were multiplying the cost price of our wines minimum 3 and more likely 4 and 5 times. Simply because it was necessary. Salaries in DK are high. So are taxes. Rent. Food. And wine too. Working hours are low. People are spoiled -which is mainly a good thing, but 37 hours a week is 37 hours a week to a Dane, and not more (that’s why we only hire Italians ;-)).
Choosing to cut the prices to allow our guests to have a premium quality wine experience at wine shop prices when dining at our restaurant ought to mean that we’d loose money, you might say. Because we now make less money per item. This was our biggest concern, when we did it. But on the other hand we hoped it’d bring us more people. Concern number 2, was hope enough to make it in time? Would the word spread fast enough? We took a calculated risk and were lucky that the word spread even faster than we could have hoped for.
People are not only passing it on but they also keep coming back, the percentage of returning visitors keeps climbing.
Our strategy has worked so far. Our ace is at the heart of premiumization; we appeal to people’s rationality and emotions. People adore quality, very fair prices and highly enjoy the obvious and true story about how and why such quality and such prices are possible. Rationally and emotionally. The next big question remains. How far will we be able to take this? Passing on the authentic Italian Torch by being and giving an easier access to the real, premium Italian stuff in an effort to combat the important brand damage Made in Italy suffers, the tremendous falsification of non-Italian made products and continue not only to survive but to thrive, (re-)flourish and premiumise?