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Food promotions failing across Europe

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Food promotions failing across Europe

July 22
11:07 2013

Food promotions are failing across Europe, as austerity-hit consumers are cutting back on non-essential products and sticking to shopping lists, says market research organisation Symphony IRI.

The market researcher said that there has been a 2.7% increase in volume on promotion across Europe, but sales volumes are dire, up just 0.1% for food items. Meanwhile, food prices at retail rose 1.9% on average over the past year, squeezing consumer spending on essential items.

“There is hard evidence that promotions are not working in the way they used to and manufacturers are fighting back in a desperate attempt to regain some of their margin which has been gradually eroded since the economic downturn began in 2008,”  Symphony IRI said in a new report.

“…The margins battle is something retailers will fight fiercely to win because they need manufacturers to continue to pay for trade promotions to drive footfall and retain increasingly fickle shoppers.

“However, the current situation is unsustainable for many manufacturers who cannot be squeezed much further in terms of funding promotions.”

Among manufacturers in the Netherlands, for example, most agree that promotions are no longer working, but brands are afraid that they will lose market share if they are the first to opt out, the report says.

“Brands on promotion benefit from a short-term sales hike which boosts volumes. Yet this can harm the health of whole categories as shoppers are more likely to switch stores to find the best value basket.”

Increased retailer investment in private label products has also increased the pressure on national brands to promote, as consumers increasingly associate private label with quality that equals that of branded products, although at a lower cost.

Historically, the UK has been the biggest market in Europe for promotions, but the volume on promotion declined by 0.7% last year – the first time volumes have ever dropped in the UK. The report says that the high level of promotion there has held back private label, leading many retailers to reduce trade promotions.

Private label share has increased across Europe, apart from in the UK and France, and private label growth has started to slow down in Spain, where it has a 43.3% share of market value.

Germany has the lowest volume of promotions, although it also has some of the lowest grocery prices.

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