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Jury out on grocery promotions

News, 22 October 2015

BRACKNELL: Across Europe, promotional activity in the grocery sector has been largely static in the past year but individual markets have experienced very different outcomes, according to a new report.

An analysis by insight provider IRI – Price & Promotion in Western Europe: Encouraging signs of Recovery – said that the proportion of product sales on promotion in Europe last year edged upwards 0.5 points to 28.7% for food and remained steady at 28.1% for non-food items.

In the UK, however, more than half of all goods sold – 54.6% by volume – were on promotion. Despite this, both the volume and value of sales fell – down 1.5% and 1.6% respectively – as a consequence of the price war driven by the growth of the hard discounters.

The picture in Germany, home of those same discounters, was rather more encouraging for brands. There, only 13.2% of the volume of goods sold were on promotion, but the value of sales rose 3.4% while the volume was up 2.3%.

"When it comes to predicting consumer behaviour around price and promotions, it seems the challenge to understand how shoppers are going to react to change is getting more difficult," said Tim Eales, industry insight director at IRI.

"During recessionary times, it is generally easy to forecast how consumers might respond to price changes or promotions, but it seems that across Europe as markets recover, behaviour – from manufacturers, retailers and consumers alike – is getting more unpredictable than ever."

The danger, as he saw it, was that UK shoppers were now expecting high levels of promotions, "which brands will find it hard to recover from".

At the same time, however, it was clear that in a market such as Germany "promotions can be an effective growth driver when used selectively – i.e. as an incentive to persuade the customer to make an unusual purchase".

Across the six European markets considered – the UK, France, Italy, Spain, Germany and Greece – the value of food sales rose by 0.5% to €276.3bn, while that of non-food increased 0.7% to €64.2bn.

Data sourced from IRI; additional content by Warc staff