Supermarket food promotions dip to 11-year low

By Rick Pendrous

- Last updated on GMT

Supermarkets are focused on every-day low prices rather than promotions
Supermarkets are focused on every-day low prices rather than promotions

Related tags Promotional activity Pricing

Supermarket promotions are at their lowest level in 11 years, according to the latest retail sales figures from market researchers Nielsen and Kantar.

This, in part, had been in response to the supermarket price war and greater competition between retailers, according Jon Southcombe, co-founder and md of the shopper marketing consultancy Base Technologies.

It had also been influenced by the growth of the limited assortment discounters (LADs), Aldi and Lidl, which preferred every-day low prices rather than promotional activity to drive shopper footfall in their stores.

As a consequence, temporary price reductions had been turned into permanent cuts, resulting in fewer promotions as many products were now cheaper all-year round, added Southcombe.

Fewer promotions

Both Kantar and Nielsen reported that promotional activity by the supermarkets had fallen, said Dr Clive Black, a city analyst with stockbroker Shore Capital.

Interestingly, to our minds, both Kantar and Nielsen make mention of the easing of promotional participation within the trade; the latter referencing that 26% of spend in the four weeks to March 25 were on products with ‘temporary price cuts or multi-buy offers’,”​ said Black. “This is said to be the lowest participation since 2006.

“Equally, Kantar writes of promotional activity being 5.5% lower year-on-year, at 32.9%. Such a development is particularly interesting and perhaps ironic to our minds as 2006 was a threshold year for food inflation in the UK, when a poor harvest corresponded with rising oil prices and growing demand from Asia in particular for protein.”

As inflation took hold at that time, many proprietary brand manufacturers took to promotions as the prime tool with which to express value and so drive volumes, added Black.

“Accordingly, participation​ [in promotional activities] rose from a prevailing low level of circa 2025% to eventually reach circa 40%. So, it is interesting to note with the present cycle of deflation migrating to inflation in the UK that promotional activity continues to ease.”

Although Black expected promotions to continue to be used, he suggested that the leading multiples had learnt lessons from the LADs that had focused on every-day low prices rather than promotional activity to attract shoppers.

‘Base pricing more important’

“Promotions will feature in the mix for sure, but it will be interesting to see how much the supply side tries to reignite promotional activity,”​ said Black.

“We also expect the supermarkets to be a more active sieve on behalf of their customers for price recovery, with base pricing probably being a more important feature of the trading environment this time around.

“What all participants will be collectively seeking to avoid, we sense, is trading down, which is particularly margin corrosive should it take hold.”

Related topics Supply Chain

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