Supermarket price promotions hit a new low

Supermarket Promotions At Lowest Level For Over Seven Years

The proportion of consumer spend at UK supermarkets that goes on items on promotion has hit its lowest level in over seven years, according to the latest data from Nielsen. .

In the four weeks ending 23 April 2016, 29% of spend at UK supermarkets went on products with temporary price cuts or multi-buy offers, the lowest level since February 2009 (also 29%).

Mike Watkins, Nielsen’s UK head of retailer and business insight, explained: “Over the last two years, around 34% of a typical supermarket shopping bill went on promotional items. However, to help combat the rise of the discounters, supermarkets are now turning temporary price reductions into permanent cuts. Consequently, there’s now less promotional activity as many prices are cheaper all-year round.”

What promotions look like

What promotions look like

Nielsen’s data showed that Aldi and Lid’s share of the grocery market reached 11.5% in the twelve weeks ending 23 April 2016, compared to 10.1% a year ago – a relative rise of 13.9%. Nearly half of all households now shop at a discounter every month – up from 40% two years ago.

All four of the major supermarkets saw a decline in sales. Aside from the discounters, only Marks & Spencer (3.1%), Waitrose (2.7%) and The Co-Operative (1.6%) saw higher sales than a year ago, and a rise in market share.

“Only M&S, Waitrose and the Co-op seem able to fight off the rise of the discounters and attract more shoppers, which is set to become even harder in the second half of 2016 as both Aldi and Lidl open more stores,” said Watkins. “The Co-operative Group, for example, has opened more convenience stores to capture a greater share of ‘little and often’ shopping trips, typically no more than 10 items.”

Market Share – Nielsen

Nielsen April Share

Due to Easter falling earlier this year and not in the latest four-week figures, sales value was down 5.1% and volume down 3.6% versus the same period a year ago – which did include Easter.

Watkins commented: “Looking across the last eight weeks, to negate the Easter impact, value growths were still down 1.3% and volume down 1.1%. Prices are lower than a year ago and there’s been little sales momentum at the supermarkets since Easter, not helped by the cool weather. Some sunshine over the next few weeks could be the kick-start for sales growth the industry needs.”

However, RVS believe that this is only a re-adjustment to the market. There are always changes in the way shoppers see the way they shop. EDLP has been there or there abouts for some time. It was a plank on which Asda was built. However, ASDA rapidly learned that it was not enough for the UK market. Every time they have consolidated around a price platform (we are stopping promotions so give us the money you would normally spend in base price….) they have found they had to give store theatre to drive volume.

There is also the issue that brands have much of their investment based around swings in volumes, and EDLP has always lead in the past to reduced volume sales. This will certainly hasten the kind of product engineering that Which? seem to hate – when you pitch a price point you are always going to give less for the money.

What brands need to do is to improve the theatre in and around their brand on retail shelves, not waiting for retailers to wake up to need. This is likely to take some time.