Despite a continued period of price deflation (caused by the supermarket price wars and intensive price-based promotions on more than 50% of FMCG products), the average shopper saves just £1.56 per week. Yet the cost of funding shopper savings costs supermarkets £1.5bn annually. This is the according to a detailed analysis by FMCG market and shopper intelligence firm IRI.
Based on real sales data collected across the UK for all major supermarkets, IRI believe this is the strongest indicator available that the price war is having no significant impact on shopping behaviour.
According to IRI, prices have been falling since April 2014 by -1.3%. But despite this continued period of price deflation, sales volumes continue to decline – by -2.7% for all packaged groceries (excluding alcohol) for the 52 weeks ending 11 October 2014.
Tim Eales, strategic insight director at IRI, said: “The price war only saves shoppers the cost of 2kg of granulated sugar. This is unlikely to make a significant impact on their weekly budgets as costs continue to rise, wages remain flat and Christmas and winter fuel bills loom. At the same time there is no evidence that they are helping the supermarkets on their paths to growth. Instead they are hastening sales declines, squeezing profits and potentially breaking the loyalty bond with consumers that they have worked hard to build.
“Continuing the downward spiral of price promotions is unlikely to keep shoppers loyal to a single store and makes them more price-sensitive than they were previously. Unless the supermarkets think differently about pricing and promotion, they will struggle to find paths to growth during the next few years.”