Decline in promotional activity is good news for manufacturers, says IRI

By Niamh Michail contact

- Last updated on GMT

Concerns over unnecessary food waste are also changing the type of promotions seen, with a fall in 'buy-one-get-one-free' and multi-buy offers. © iStock.
Concerns over unnecessary food waste are also changing the type of promotions seen, with a fall in 'buy-one-get-one-free' and multi-buy offers. © iStock.

Related tags: New product development, United kingdom, Europe

The first serious pause in price promotions in the UK could be good news for manufacturers across Europe, stemming a rising trend that will allow more investment for new product development, says market research firm IRI.

The UK by far leads the way for price promotions in Europe with almost half (49.8%) of all food products sold on some kind of promotion. And although promotional activity in mainland Europe has typically been at much lower levels, levels have been creeping upwards in recent years.

But a decline in British promotions this year, which fell by 2.6 points according to data from market research firm IRI, could benefit manufacturers across Europe.

The big decline in sales of food products on deal comes from the UK this year but we might expect to see the rest of Europe stabilise over the next few years,” ​said strategic insight director at IRI Tim Eales.

“This decline in promotional intensity indicates the first serious pause in promotional escalation ever seen in the UK and that it is a sign that manufacturers are evaluating whether the high cost of promotions gives them sufficient returns in the form of increased sales and profit​,” reads a new report, entitled IRI Price and Promotion in Western Europe.

The report is based on data taken from nine food categories in seven European countries: France, the Netherlands, Italy, Spain, the UK, Germany and Greece.

Good news for manufacturers

According to Eales, this drop in retailers’ reliance on price promotions should be welcomed as good news by food manufacturers.

Promotions have been increasing for some years,” ​he told FoodNavigator. “They are higher in the UK than any other country yet evidence shows us that promotions often lose money and they are not helping manufacturers to improve sales at the normal price which means they are not helping their margins. Further they can erode brand equity.” 

Money invested into promoting special offers also drains marketing budgets and erodes new product development, he says.

Goodbye to multi-buys

The type of promotion used by retailers and manufatcurers is also changing. Multi-buy offers, for instance, have come under increased scrutiny for fuelling food waste, and have fallen from 15% to 12% of all products sold.

The UK has the highest levels of trade promotion in Europe while Spain has the lowest level at 19.4%, just below France and Germany.

Italy has one of the highest levels of promotional activity for food in mainland Europe, with around €32 for every €100 spent on special offer. However, some retailers are now opting for an ‘every day low price’ policy to move beyond this approach.

Auchan, for example, enlarged its private label value tier offering in Italy last year which it advertised with the slogan: At Auchan’s you save money without waiting for promotions’​.

Furthermore, in cases where more than one pack has to be paid for, in order to benefit from the offer, it works against those on a budget who want to spend less overall on their shopping trip, so they prefer to buy things one at a time but at a lower price,” ​said Eales.

Simple and clear communication

In their place, money-off offers for a single item are becoming popular with shoppers. Where retailers or manufacturers do choose to use a price promotion, they must make sure it stands out.

“Promotions need to be simple and clear to the shopper in store and must genuinely excite them. Promotions around new product innovations for example can achieve this as do promotions with genuine reductions that are linked to key events such as Black Friday,” ​he added.

IRI's analysis covered every major supermarket and hypermarket in France, Italy, the UK and the Netherlands while for Spain 83% of major retailers were covered and around half in Greece and Germany.

Related topics: Bakery, Beverage, Market Trends, Confectionery

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