Deep price promotions are damaging the long-term profitability of the butter and spreads category, retailers have admitted.
This year, some 49% of butters, spreads and margarine have been sold on deal which is more than double the 20% that was seen in 2007.
And with category value falling 3% over the last quarter alone, retailers have conceded the category is facing long-term deflation if the approach is not reversed.
"The market has become massively deflationary as the value has been stripped out of the category through price reductions and increased promo participation," said Matt Hood, Tesco's senior buying manager for BSMs.
"We need to find a way of giving customers value whilst recovering from the deflationary position."
Almost all the leading brands have spent a considerable time discounted this year, with Clover, Country Life and I Can't Believe It's Not Butter! particularly promoted.
Yet the promotional activity was unlikely to lead to increased volume sales, said Sainsbury's butter buyer Sophie Hogg.
"Consumers are becoming promotional junkies and base sales are suffering as a result. How do we reverse that trend? Butter's not an expandable category consumers will not buy more."
Traditionally, there had not been much deep promotion in the category, as retailers knew sales would not benefit, she added. However, the tough retail market made it impossible for any single retailer to hold back. "I have to be in line with the rest of the trade," she said.
Retailers and suppliers needed to work together to scale back promotions in 2010, claimed Nathan King, Dairy Crest's head of marketing for butters and spreads.
"We are talking to retailers and the consensus from both a manufacturing and retail perspective is that we need to step back. Unless we come up with the next big innovation [to grow volumes] then we'll all just be shuffling share."
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Hot Topic: Vicious price war has pushed promotions to unprecedented levels (28 November 2009)
This year, some 49% of butters, spreads and margarine have been sold on deal which is more than double the 20% that was seen in 2007.
And with category value falling 3% over the last quarter alone, retailers have conceded the category is facing long-term deflation if the approach is not reversed.
"The market has become massively deflationary as the value has been stripped out of the category through price reductions and increased promo participation," said Matt Hood, Tesco's senior buying manager for BSMs.
"We need to find a way of giving customers value whilst recovering from the deflationary position."
Almost all the leading brands have spent a considerable time discounted this year, with Clover, Country Life and I Can't Believe It's Not Butter! particularly promoted.
Yet the promotional activity was unlikely to lead to increased volume sales, said Sainsbury's butter buyer Sophie Hogg.
"Consumers are becoming promotional junkies and base sales are suffering as a result. How do we reverse that trend? Butter's not an expandable category consumers will not buy more."
Traditionally, there had not been much deep promotion in the category, as retailers knew sales would not benefit, she added. However, the tough retail market made it impossible for any single retailer to hold back. "I have to be in line with the rest of the trade," she said.
Retailers and suppliers needed to work together to scale back promotions in 2010, claimed Nathan King, Dairy Crest's head of marketing for butters and spreads.
"We are talking to retailers and the consensus from both a manufacturing and retail perspective is that we need to step back. Unless we come up with the next big innovation [to grow volumes] then we'll all just be shuffling share."
Read more
Hot Topic: Vicious price war has pushed promotions to unprecedented levels (28 November 2009)
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