There has been a drop in the proportion of FMCG products across Europe sold on promotion, according to new data from IRI.
The latest study claims that the proportion of FMCG volume sold on promotion in supermarkets across Europe declined by 0.7% on the previous year, which registered 28.1% of sales purchased where trade promotions were available.
“This indicates the first serious pause in promotional escalation seen by the region since 2012 and is a sign that manufacturers are evaluating whether the high cost of promotions gives them sufficient returns in the form of increased sales and profit,” IRI stated.
More than a quarter of food is now bought on promotion, but the figure of 27.7% is a decline of 0.8% on the year before. The steepest decline in the use of promotional tactics for food products was seen in the UK, falling 3.4% to 49.8%.
While manufacturers are using promotions less, when they do engage with shoppers in a battle over price they are often providing better offers, meaning the overall amount that has been saved by consumers from promotions is relatively unchanged, IRI said. The IRI report highlighted noticeable increases to the depth of deals in the Netherlands, Spain and the UK.
Tim Eales, strategic insight director for IRI UK and author of the report, said: “Retailers rely on manufacturer promotions to increase store footfall, but manufacturers cannot afford to play the promotion game anymore. We expect that more brands will follow by redirecting their marketing spend from consumer promotion to activities that communicate brand benefits such as advertising, as well as new product development. Marketers are more alert to the detrimental impact that continuous promotions can have on their brand equity.”
Other highlights from the report include that alcohol is the most promoted category across all of Europe, with 35.9% of volume being sold on promotion, which is confirmed by research from Hive that last month found alcohol promotions in the UK outstripped any other category by two to one.
Confectionery came in a close second place in IRI’s research, with one-third of all volume being sold on offer, and non-alcoholic drinks were next.
Retailers’ own brands are promoted far less than national and international brands; in 2015, just 13% of all own brand products across Europe were sold on promotion, which represented a fall of 1.7%.
Eales concluded: “It’s not all doom and gloom when it comes to promotions. We may be at a tipping point but many promotions can have a positive impact on revenue when they are executed in the right place at the right time, helping to grow a retailer’s business, and excite the shopper. The key is identifying promotions that genuinely drive sales and provide a win-win situation for retailer, manufacturer and the shopper.”
© FoodBev Media Ltd 2024