Commentary

 

The Premium Crunch

 

With every half baked publication jumping on the 'it's the end of the world' recession/depression bandwagon (having recently alighted from the 'it's the end of the world' global warming one), I have been reluctant to write about the current economic malaise in my column. The world has steered its way through worse crises before, and will inevitably steer its way through worse crises in the future, and adding my own voice to the growing noise on the subject has seemed to be a largely pointless endeavour.

However, there is one topic that is of sufficient interest for me to sidestep this rule - namely, the fate of premium brands in these turbulent economic times.

During the last decade there has been an increasing trend towards premium product fetishism - a notion in which the consumer directly correlates value and pricing, on an ever increasing scale. The value may be imagined, or so detached from the material aspects of the product that it is not far removed from being imagined, but this does not seem to matter. What matters is that the product is perceived as a premium one - perception is king.

This has brought us all sorts of tat dressed up as diamonds: Volkswagens disguised as Bentleys, 'designer' jeans, and perhaps worst of all, premium vodkas. The whole concept of a spirit that is, by design, free of flavour, being promoted as a luxury good neatly summarises the vacant idiocy and vanity that accompanied the rising prosperity of the pre-credit crunch West.

This does not mean, of course, that all high end brands are guilty of deception; it is only when the true value of an item is a fraction of the perceived value that the premium magic trick can be said to have taken place.

Determining true value might seem to be a somewhat abstract concept, but, like value investing, it is a good way to separate the winners from the pretenders; something that is especially important during an economic downturn. Simply ask the following questions of an item:

• Does it do something significantly better than cheaper competitors, (if there are any)?
• Is it a classic, or is it inextricably linked to a trend?
• Does it display real craftsmanship?

To take a real life example, a bottle of Dom Perignon may seem like the sort of extravagantly overpriced item that should meet the same end as fashion house sunglasses, but, further investigation shows that this is far from the truth. In fact it gives the correct answers to all of the above questions: better than cheaper champagnes - yes; a classic - most definitely; craftsmanship - grapes from only Grand Cru vineyards, so another yes.

Conversely, items such as the higher end prêt a porter Italian designer suit fares less well: better than cheaper suits - probably not, when a bespoke or tailor-made suit from a good provincial tailor can usually be had for significantly less; a classic - rarely, as these items often slavishly adhere to the current week's trend; real craftsmanship - sometimes, although the quality varies from brand to brand. Result - forget it.

So, whilst the credit crunch may have a negative effect on certain aspects of our lives, I do hope that it will encourage the public to be more discerning about which premium products they purchase. Only then may we see an end to the sort of ridiculous behaviour that has given us Diva Premium Vodka and Porsche Cayennes.