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Fewer discounts lift costs for UK shoppers

News, 11 April 2017
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LONDON: Recent modest increases to food and drink prices in the UK have often been blamed on Brexit, the country's decision to leave the European Union, but a new report suggests the trend is almost entirely due to fewer promotions.

Research firm IRI analysed sales of all food and drink products sold in the UK, excluding those from discounters, between February 2014 and January 2017.

It found that average prices rose by 1% in the last year, but that was because there were 12% fewer trade promotions in 2016, and that the base prices of branded grocery items were actually lower than they were at the beginning of 2014.

Furthermore, at the end of February 2017 they were down by -1% compared to the previous year while base prices for alcohol brands were also down by -1%, the slowest rate of decline for more than two years.

Despite the small rise in the price of food and drink over the past year, IRI calculated that UK consumers have managed to save £9.3bn over the past three years from price cuts.

"With fewer deals on grocery items, the cost of the shopping basket is more expensive, but only by 1.2%. Importantly, the increase kicked off at the very end of last year and is not yet due to retailers increasing everyday prices," said Martin Wood, Head of Strategic Insight and Retail at IRI UK.

"The grocery industry has not only reduced the number of deals that they run throughout the year but also cut back the deepest levels of discount that used to be given," he added.

"There were over half a million fewer multi-buy opportunities for shoppers in 2016 compared with 2015, reducing particularly during the last six months of the year."

The IRI findings chime with a separate study from Nielsen, which recently reported that supermarket promotions in the UK have fallen to their lowest level in 11 years.

Nielsen said the UK supermarket sector last saw such a low level of promotional spend in 2006 and that the recent trend particularly affected own-brand or private label spend.

Meanwhile, IRI said it expects the number of promotions in the UK to continue to decline, while pressure on margins will also lead to more shrinkflation on the size of products.

Data sourced from IRI, Nielsen, Guardian; additional content by WARC staff

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