Big brands are showing few signs of easing back on the number of promotions they are running - and are funding them by reducing the savings offered to shoppers.
Data for the past four weeks shows the industry is maintaining the current trend for running far more featured space promotions - those in locations such as gondola ends and pallets - than they were a year ago. In the four weeks to 26 June, the top five ran 11,174 promotions - up from the 8,778 recorded in the same period a year ago - and virtually the same number they ran in May this year.
Six of the top 10 most-promoted brands offered more featured space deals than a year ago. McVitie’s ran 236 compared with 148 last year Birds Eye 209 compared with 155.
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Wholesale prices 29 June 2013: eggs & dairy
Eggs long dominated our list of wholesale price risers, but now dairy commodities are firmly in the ascendency. UK butter prices have soared by more than 80% over the past 12 months because of falling production and tighter milk supplies. Drought earlier in the year in New Zealand and continued strong demand from China have also affected the butter market, and helped push up prices in the UK.
Production problems in the UK and New Zealand and demand from emerging markets are also to blame for rising powder prices. At £2,690/t, skimmed milk powder is up 66% year-on-year, while whole milk powder is up by 58.7%. UK liquid milk prices, meanwhile, have risen by a more modest 7.8% year-on-year, to £292.3/t.
In the egg market, prices are falling as the market continues to adjust from the record prices seen last year following the introduction of the EU battery cage ban.
Brands felt increasingly compelled to spend on featured space to maintain a high-profile promotional presence, said Kay Staniland, MD of retail analyst Assosia. Customer loyalty had become so eroded that some shoppers did the bulk of their buying from promotional space and only visited the standard fixture for what they couldn’t buy on deal, she added.
With demand for featured space - and costs - rising, only the bigger players could maintain their presence, she said. “But even they may reduce the total saving on a promotion.”
Year-on-year, the average saving offered by featured space promotions has dropped 2.3 points from 35% to 32.7%, with five of the 10 most-promoted brands reducing their depth of deal.
The sharpest decline was from Cadbury - regularly the supermarkets’ most-promoted brand - which slashed the average saving 7.5 points from 37.8% to 30.3% year-on-year. Mars, which boasted some of the deepest deals a year ago, cut savings by 6.8 points to 36.5%.
The drop in saving has been accompanied by a reduction in the use of bogofs by the top brands, which Staniland suggested was being driven by a change in retailers’ demands. In the case of Mars, for example, bogofs have plunged from 17.6% of the brand’s total activity a year ago to less than 1%.
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