Retail Promo Activity Continues To Rise Despite Supplier Losses

The Grocer

Almost 60% of UK grocery trade promotions lose money for suppliers according to a study published this month – but that doesn’t stop activity continuing to rise.

A three-year international analysis by Nielsen of promotions showed UK brands second only to their US counterparts for making a loss on deals (The Grocer 20 June 2015). However, The Grocer’s monthly look at activity on featured space shows the total number of deals has risen 6.1% year on year in the four weeks ending 7 June, from 11,367 to 12,057 (Assosia).

Seven of the 10 most-promoted brands are running more deals than a year ago, with three offering at least 50% more. The market’s force on branded products (three-quarters of the cuts announced by Morrisons this month were on brands) is reflected in total branded deals rising as own label falls.

At category level, it appears retailers and brand owners may be driven by some of the trends highlighted in the Nielsen study. More space is being given to categories containing products flagged up by Nielsen as making good returns on promotions, including dishwasher detergent (which make money 78% of the time) and skin cosmetics (72%).

Assosia data reveals the household and beauty categories are both taking a greater share of total featured space across the top five than a year ago. An there has been a slight drop in space for ambient grocery deals, one area where suppliers could lose money, according to Nielsen. Conversely, space for chilled food deals – the category most likely to make a loss – has risen from 5% a year ago to 5.8%.

Effects are also being taken to mitigate the value-draining effect of promotions. While only three of the top 10 brands are offering shallower deals than a year ago, the average saving across all featured space promotions has dipped from 33.2% a year ago to 31.6%. Brands are also continuing to switch from bogof and half-price promotions to money-off deals – nine of the top 10 brands increased their use of the mechanic year on year – as it can have less impact on the bottom line.

4 weeks to 07/06/2015
RankingRank last monthBrandNumber of promotionsIncrease / Decrease on previous monthIncrease / Decrease on previous yearAverage % savingAverage savings % change m-o-mAverage savings % change y-o-y
42Birds Eye2503.73%62.34%32.95%1.2%-6.5%
97Mr Kipling1360.74%60.00%33.61%0.6%4.1%
Total o/l19731.08%-2.66%26.31%2.9%-2.6%
Total brands100840.54%7.97%32.63%-0.1%-1.5%

Published in The Grocer, 27 June 2015