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Promo Dynamic – Tesco ramps up promos…but still lags behind big four rivals

The Grocer

Entering the final furlong of its financial year, Tesco has turbo-charged its promotions – compared with last February anyway. While it only ran 1.9% more featured space promotions month-on-month compared with 4.5% at Asda and Sainsbury’s, this was a massive 25% more than last February, and its promotions also offered a heftier saving.

Wine and sweets lovers benefited the most from the extra promos. The number of wine offers in the four weeks to 19 February was almost treble what it was a year ago. And impulse deals – covering confectionery, biscuits, fizzy drinks and snacks – overtook grocery to be the most promoted category at Tesco, accounting for 18.8% of its total promotions.

“With the top four price-tracking, it’s important for Tesco to refocus on secondary space for promotional activity,” said Assosia MD Kay Staniland. “It realised it made some errors on its promotional strategy over Christmas by finishing promotions too quickly and swapping out offers – changing featured space promotions can be quite time-consuming in store. It has got back on track.

” However, with 1,625 deals, it still has some way to go before it catches its big four rivals with their 1,800 plus deals and it won’t have been helped by the fact that both Asda and Sainsbury’s increased their activity 14.1% and 16.9% respectively year-on-year.

Despite the surge from Sainsbury’s, it was Asda that offered the highest number of deals, overtaking Morrisons, the only retailer to reduce its deals year-on-year and month-on-month.

Asda’s promotional mix bore out COO Judith McKenna’s observations this week that it is meeting customers’ preference for price cuts over multibuys – 70.4% of its deals offered a straightforward price cut, up from 66.4% last year. “When you have a cash budget for the week, you can’t necessarily afford to buy a multipack of something at the end of the week. It may be better value but you can’t afford it,” she said, as Asda revealed a 1% increase in like-for-like sales in the 14 weeks to 7 January.

The switch in promotional mechanics marks a continuation of Asda’s EDLP policies, and one that Tesco has followed. Last February, 48.3% of deals at Tesco offered money off. This February it was 68.5% of all promotions.

Published in The Grocer, 25 February 2012