The market and shopper intelligence firm has called 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.
The amount of food and non-food goods sold on promotion was up by 0.8% in the last year to 27.5%. Although this is a slower increase than in previous years, it continues a period of promotional intensity for many countries in Europe. However, more promotions haven’t boosted volume sales, which continue to decline in food categories (down by -0.7% in the last year) and non-food (down by -0.8% in the last year), as consumers remain cautious.
Pet care and pet food was the category with the biggest increase in the volume of goods sold on promotion in the last year; it increased promotions by 4.8% to 21%. Sales value for this category increased by 1.2% to €7.4bn. However, volume sales declined by 2.2%.
The alcoholic drinks category increased its promotional intensity by 2.8% to 35% and remains the most promoted category in Europe. Although this assisted a 2.5% increase in value sales, sales volumes declined by 0.1%.
With the cost of food and non-food items increasing to cover rising costs, retailers netted an additional €2.5bn as value sales increased by 0.7% and average prices increased by 1.4%, with food prices accelerating faster than non-food. Total value sales for FMCG goods across Europe over the last year were €345bn.
A culture of ‘price war’ is developing across Europe, forcing experts to question how retailers will maintain their margins in the long-term. The categories where prices are rising fastest are pet care, alcoholic drinks and frozen food, while price increases of personal care and household items are below the non-food average.
“Price wars are unsustainable for manufacturers, retailers and even shoppers, who won’t accept them if they mean lower-quality products,” said IRI strategic insight director Tim Eales. “Not all promotions are destined to drive increased sales, but eventually they must pay for themselves. Brands 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.”
© FoodBev Media Ltd 2024