In its fourth annual European report on the pricing and promotion of fast-moving consumer goods (FMCG), IRI highlights the continued failure of promotions to boost volume sales across Europe. In the UK, the amount of food and non-food goods sold on promotion has dipped for the second consecutive year by 0.6% to 54% (compared to an average 27.5% across Europe) as manufacturers and retailers seeking other ways to benefit longer-term volume sales. However the volume of goods sold on deal still the highest in Europe in many categories.
The market and shopper intelligence firm calls for manufacturers to conduct an urgent review of their promotional strategies to assess whether pricing and promotion is working to the benefit of the long-term future of the brand.
Frozen food decreased its reliance on promotions the most – by more than -6% to 46%. The most promoted categories are non-alcoholic drinks (68%), personal care (64.5%), confectionery (61%), household (57%), alcoholic drinks (55%) and chilled and fresh food (49.5%).
Petcare and petfood was the category that showed the biggest increase in the volume of goods sold on promotion in the last year – it increased promotions by more than 7% to 43%. However the total sales value decreased by 0.2% to 2 billion Euros. Volume sales also declined by -5.5%.
With the cost of food and non-food items increasing across all categories, except confectionery, to cover rising costs, retailers netted an additional £189m as value sales increased by 0.3%, but below the European average of 0.7%. Average prices increased by 1.8% (compared to 1.44% across Europe) with non-food prices accelerating faster than food. The total sales value of the FMCG goods measured by IRI in the UK over the last year was 77.8 billion Euros (£64.8 billion).
With ongoing price wars forcing experts to question how British supermarkets will maintain their margins in the long term, the categories where prices are rising fastest are pet care, frozen food and chilled & fresh. Confectionery prices have reduced whilst non-alcoholic drinks and household items are rising slower than the 1.9% average price increase.
Tim Eales, strategic insight director at IRI, said: “Price wars are unsustainable for manufacturers, retailers and even shoppers, who won’t accept them if they mean lower quality products.
Not all promotions are destined to drive increased sales but eventually they must pay for themselves. The UK is ahead of the curve in Europe in recognising the failure of promotions to work in the way that they used to. New guidelines about promotions from the Office of Fair Trading (now CMA) are also responsible for retailers and brands reviewing their promotional strategies. They must lose their focus on increasing sales volumes and look to develop more innovative and creative promotions, such as themed offers, experiential in-store events and the use of mobile apps to ensure that they deliver value for brands and retailers alike and improve the transparency of their deals for sceptical shoppers.”