In its latest annual European report on the pricing and promotion of fast-moving consumer goods (FMCG), research firm IRI highlights the continued failure of promotions to boost volume sales in the supermarkets.
The market and shopper intelligence company calls for FMCG manufacturers to conduct an urgent review of their promotional strategies to assess whether pricing and promotion is working to the benefit of the long-term future of the brand.
The amount of food and non-food goods sold on promotion was up by 0.8 per cent in the last year, to 27.5 per cent.
Although this was a slower increase than in previous years, it continued a period of promotional intensity for many countries in Europe.
More promotions have not boosted volume sales, however, which continued to decline in food categories (down by -0.7 per cent in the last year) and non-food (down by -0.8 per cent in the last year), as consumers remain cautious about the future.
Pet care and pet food were the categories with the biggest increase in the volume of goods sold on promotion in the last year, increasing promotions by 4.8 per cent to 21 per cent. However, volume sales declined by 2.2 per cent.
The alcoholic drinks category increased its promotional intensity by 2.8 per cent to 35 per cent, and remains the most promoted category in Europe.
Although this assisted a 2.5-per-cent increase in value sales, sales volumes declined by 0.1 per cent.
A culture of price wars is developing across Europe, forcing analysts to question how retailers will maintain their margins in the long term.
The categories where prices are rising fastest are pet care, alcoholic drinks and frozen food, while price increases of personal care and household items are below the non-food average.
Tim Eales, strategic insight director at IRI, said, "Price wars are unsustainable for manufacturers, retailers and even shoppers, who won’t accept them if they mean lower-quality products."
Not all promotions are destined to drive increased sales, but eventually, they must pay for themselves, Eales continued.
"Brands must lose their focus on increasing sales volumes and look to develop more innovative and creative promotions, such as themed offers, experiential in-store events and the use of mobile apps to ensure that they deliver value for brands and retailers alike, and improve the transparency of their deals for sceptical shoppers."
© 2014 European Supermarket Magazine
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