Even though the level of grocery products sold on promotion in the UK is the highest in Europe at 55.6%, sales volumes are still flat, according to a special report on European Pricing and Promotions from SymphonyIRI Group.
The findings of the report highlight the pressure facing grocery brands and retailers to sustain volumes during a period of austerity that has seen consumers become more frugal about what and how they purchase in the face of rising grocery and living costs.
More alcohol products are sold on promotion than any other category (72%). However, with minimum pricing legislation passed in Scotland last month, and expected to follow later this year in England and Wales, the cost of many products will increase significantly.
In some cases, prices for products such as cider will increase by as much as 50%. SymphonyIRI believes that the alcohol industry is going to have to address its promotion strategy head-on.
Confectionery products are the second most promoted category (67%), followed by:
- non-alcoholic drinks (65%)
- personal care (64%)
- household (56%)
- chilled and fresh food (54%)
- frozen (51%)
- ambient food (50%)
- pet care (43%).
Some 40% of own-label sales are on deal, too, but this level is rising slower than for brands that account for 75% of trade promoted volume.
The average price reduction is 25%, with non-food at 29% and food at 21%. The categories demonstrating the deepest price cuts are personal care (34%), confectionery (31%) and household (28%).
Buying 'more carefully'
Over the last year, food prices in the UK rose by an average 5.1% compared to 3.3% in Germany, 0.4% in Greece and 1.3% in Spain.
Driven by soaring raw material costs, the price increases are an attempt by retailers and brands to reclaim some of the margin lost since the recession began in 2008.
Food inflation, at 5.1%, is ahead of the European average (3.2%) and outstrips non-food at 2.8%.
Consumers, however, are holding their nerve in the face of rising prices and have responded by buying more carefully.
Sales volumes were down in five out of nine categories, with household (down 3.5%) taking the biggest hit as average prices rose by an average of 5.2%.
“Consumer feedback has prompted UK retailers to reduce their use of multi-buys by almost 5% and instead offer larger discounts on single items,” says Tim Eales, strategic insight director at SymphonyIRI Group. ”There are now less multi-buys and more price-led deals such as 'better than half price' offers.
"Increasingly, retailers are giving money off whole baskets and funding these promotions themselves when traditionally they would have expected the supplier to foot the bill.”
Source: SymphonyIRI Group
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- Beverage > Alcohol
- Food > Confectionery
- Beverage > Dairy
- Beverage > Juices
- Distribution > Retail
- Beverage > Soft Drinks
- Beverage > Tea & Coffee
- Beverage > Water