Leading retailers have dismissed claims by one of the UK’s top manufacturers that their focus on price cutting is destroying brand value.
Speaking at the IGD Convention, Nestlé UK chairman and chief executive Alistair Sykes said: “In the current climate there is a danger that the industry will fail to grow or will achieve growth that destroys value.
“Competition is good for any industry, but I have to say there are real dangers that the competition between the major retailers has become too focused on short-term, unsustainable price-cutting and promotions, and that is happening in the UK market.”
Sykes said that price cuts
could affect market share, but did nothing to change the overall market, and led to a lack of investment in innovation and marketing.
“Of course there are short-term price advantages for consumers but as an industry if we fail to invest in new technology and products we will fail to meet their future needs so in the long-term consumers will lose out.”
However, EDLP’s strongest advocate, Asda president and chief executive Tony DeNunzio, argued that it was brand enhancing.
He said high:low pricing damaged brands in the eyes of consumers because of constantly changing prices. “EDLP means customers buy the product at a great value price when they want it, not when promotions force them to.”
“And EDLP means people on tight budgets are not excluded from the best value just because they may not have the spare cash to buy into a promotion that happens to be available that week.”
Marks and Spencer food business unit director Justin King also weighed into the argument.
He said: “If the prices on products are deflating it is because they are failing to deliver against customer expectations. The idea there is some kind of conspiracy dragging us all to a crisis which is going to bankrupt us all is just plain wrong.”
And Niall FitzGerald, chairman of Unilever, suggested the UK industry was a shining example compared with many European counterparts.
He said: “There are bruising battles but it means we continue to serve the UK consumer with choice and quality at extremely competitive prices.
“It is striking how unusual the UK market is in this respect compared with the position in Europe where hostility or mutual incomprehension characterises retailer and manufacturer relationships.”
>>p8 IGD Convention 2003
John Wood
Speaking at the IGD Convention, Nestlé UK chairman and chief executive Alistair Sykes said: “In the current climate there is a danger that the industry will fail to grow or will achieve growth that destroys value.
“Competition is good for any industry, but I have to say there are real dangers that the competition between the major retailers has become too focused on short-term, unsustainable price-cutting and promotions, and that is happening in the UK market.”
Sykes said that price cuts
could affect market share, but did nothing to change the overall market, and led to a lack of investment in innovation and marketing.
“Of course there are short-term price advantages for consumers but as an industry if we fail to invest in new technology and products we will fail to meet their future needs so in the long-term consumers will lose out.”
However, EDLP’s strongest advocate, Asda president and chief executive Tony DeNunzio, argued that it was brand enhancing.
He said high:low pricing damaged brands in the eyes of consumers because of constantly changing prices. “EDLP means customers buy the product at a great value price when they want it, not when promotions force them to.”
“And EDLP means people on tight budgets are not excluded from the best value just because they may not have the spare cash to buy into a promotion that happens to be available that week.”
Marks and Spencer food business unit director Justin King also weighed into the argument.
He said: “If the prices on products are deflating it is because they are failing to deliver against customer expectations. The idea there is some kind of conspiracy dragging us all to a crisis which is going to bankrupt us all is just plain wrong.”
And Niall FitzGerald, chairman of Unilever, suggested the UK industry was a shining example compared with many European counterparts.
He said: “There are bruising battles but it means we continue to serve the UK consumer with choice and quality at extremely competitive prices.
“It is striking how unusual the UK market is in this respect compared with the position in Europe where hostility or mutual incomprehension characterises retailer and manufacturer relationships.”
>>p8 IGD Convention 2003
John Wood
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