SPECIAL REPORT

Price and Promotion in

Western Economies
New areas to explore for retail recovery
JULY 2014
Introduction
Executive Summary
Turning Insights into Actions
Promotion is Sales, ight! Not Necessarily
Promotions do Still Wor"
#ore $reativity Needed to %oost Promotion Success
Prices and #argins set to ise
&ocal versus 'lo(al
Shoppers Prioritise )ood versus Non*)ood
$onclusion
A(out the eport
$ountry (y $ountry eview
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Introduction
2
II is delighted to provide "ey insights into the world of price and
promotion across Europe and in the +nited States,
The IRI European Price an Pro!o"ion 2014 special report
reveals how, as the fast moving consumer goods -)#$'. industry is
poised for growth after years of struggle, consumer confidence
remains fragile, There are signs in the +nited /ingdom -+/., )rance,
'ermany and the +nited States that with a little encouragement
shoppers will start spending again,
0espite this price wars continue and the industry must resist the
temptation to over*promote (oth in*store and online, Promotions do
not always transfer into sales and increased profit margins, %rands
must lose their focus on increasing sales volumes which doesn1t
necessarily impact their critical (ottom line,
$ountries such as Spain, 'reece and the Netherlands remain in the
grip of economic woe, (ut even here there are opportunities for sales
if pricing and promotion strategies are creative, Suppliers and stores
must also meet local needs and mar"et conditions,
$onsumer shopping (ehaviour has changed and will not revert to
pre*recession ha(its overnight, In the +nited States technology is
changing shopping (ehaviour faster than anywhere,
People are less loyal to (rands and retailers and only (y
understanding this and responding effectively will volume and value
sales (egin to rise, #anufacturers and retailers must wor" together,
We would welcome your feed(ac" on our findings,
Tim Eales
Strategic Insight 0irector
II
Au"#or$% p#o"o
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Executive Summary
improve the transparency of their
deals for sceptical shoppers,
Private la(el remains vital to
sustaining retailers1 margins in
the short term, #any chains are
investing in their own
manufacturing capacity and
ta"ing an analytical approach to
assessing in*store space
constraints and consumer
demand,
Coun"r& %u!!arie%'
(rance2 The price war
(etween $asino 'roup with its
hypermar"et chain '3ant has
had a negative impact on the
hard discounters, 4alue sales
in )rance grew (y 5,67, led
(y food, 4olume sales were up
(y 8,97, with non*food
performing strongest, The
average (as"et price is up (y
8,:7 as consumers ta"e
advantage of discounts and
promotions to trade up,
)er!an&2 Price competition
among retailers remains fierce
and is harming manufacturers1
attempts to pass on rising raw
material and energy costs and
retailers1 efforts to (oost
loyalty, 4alue sales have risen
5,;7, with food leading the
charge, although volume sales
fell 8,<7 driven down (y food
whilst non*food is increasing,
etailers want to invest in
more manufacturing capacity
to grow their private la(el
ranges,
)reece2 #anufacturers and
retailers expect more
economic pain and deeper
food=care, alcoholic drin"s and
fro>en food,
#anufacturers of household
products have seen their margins
continue to decline and the level
of trade promotion remains high
in this category as people trade
down or realise it is no longer
essential to (uy particular
products,
The result of rising prices has
(een a 5,87 ?ump in value sales
of food -@,6 (illion Euros for the
European countries surveyed.
while non*food sales declined (y
8,A7 -@5: million Euros for the
European countries surveyed.,
4olume sales have declined
overall (y 8,67 with food down
8,67 and non*food (y 8,97, in
Europe,
According to the European
$ommission, any recovery will (e
modest this year and only gather
momentum in @85< when
retailers and manufacturers can
realistically start to experience
more su(stantial returns and
confidently increase prices
without having to promote so
aggressively, '0P in the
European +nion is forecast to
expand (y 5,;7 this year and (y
@,87 in @85<,
No" a** pro!o"ion% are
e%"ine "o ri+e increa%e
%a*e% ,u" "#ere i% a c*ear nee
-or !ore crea"i+e pro!o"ion%,
such as themed offers,
experiential in*store events and
the use of mo(ile apps to ensure
that they deliver value for (rands
and retailers ali"e, Innovative
promotions can help retailers
T#e *en."# o- "#e o/n"urn
#a% !ean" a..re%%i+e pricin.
an pro!o"ion %"ra"e.ie%
#a+e ,eco!e nor!a* prac"ice
o+er "#e pa%" %i0 &ear%1
Shoppers in )rance, 'ermany,
'reece, Italy, the Netherlands,
Spain, the +/ and the +nited
States are now less loyal to
(rands and retailers, They are
not only hunting out (argains (ut
expecting them,
)ierce price wars are ta"ing place
across the Western world as
traditional stores (attle for
mar"et share (etween
themselves and try to compete
with the (ooming discounters
and convenience stores,
The proportion of )#$' products
sold on promotion rose (y 8,97
in @85A (ut this hasn1t resulted in
increased volume sales, which
are down in every sector
surveyed, The (iggest declines
for food are in am(ient, chilled
and fresh food,
An over*reliance on trade deals,
which has argua(ly damaged the
+/ grocery sector in recent
years, is (eing repeated in some
countries, nota(ly the
Netherlands and Italy,
Nevertheless, average prices
increased (y 5,B7 with food
prices accelerating faster than
non*food, $onsumers in the
Netherlands have experienced
the highest rise in the cost of
their grocery shopping while the
'ree"s have seen price deflation,
$ategories showing the largest
average price increases are pet
2
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Executive Summary
II1s Shopper Sentiment Index
provides deep insight into how
the economy is impacting
consumers and changing how
they approach grocery
shopping, The index provides
perspective in terms of price
sensitivity, (rand loyalty and
changes in spending reCuired
to maintain desired lifestyles,
With a (enchmar" score of
588 (ased on D5 @855
information, a Shopper
Sentiment Index score of
more than 588 reflects
consumers who are less price
driven, more loyal to favorite
(rands and (etter eCuipped to
maintain their desired lifestyle
without changes,
The decline in the index for
the fourth Cuarter is an
indication that while
consumers are more
comforta(le than they were at
the start of @855, they are
finding it difficult to maintain
their desired lifestyle without
ma"ing changes, As a result,
they are (ecoming more price
driven and less loyal to their
favorite (rands,
)or the year, value sales were
up 5,;7 as price rises were
possi(le in non*food -@,87.
and food -5,B7., When
com(ined, food and non*food
unit sales were relatively flat,
up ?ust 8,@7, led (y food,
Spain' The Spanish love affair
with private la(el has
intensified while shoppers are
devoting more time to
preparing and managing their
shopping lists, As a result
volume sales dipped (y 8,<7
with sales of food and non*
food (oth declining, 4alue
sales rose 8,67 as prices
increased, #anufacturers are
not focused solely on price (ut
are investing in innovation to
develop products that retailers
cannot replicate in their
private la(el ranges,
T#e Uni"e 3in.o!' A
change in direction from some
manufacturers has led to the
proportion of volume on
promotion dipping (y 8,;7,
ising consumer demand has
coincided with price cuts and
deals, although the proportion
of volume on promotion has
dipped (y 8,;7, 4alue sales
growth was ?ust 8,A7 while
volume sales are down 5,;7,
+/ shoppers li"e the
convenience channel and the
(attle (etween supermar"ets
and the discounters continues,
etailers have come under
pressure to improve the
transparency of their
promotions and meet new
guidelines from the Effice of
)air Trading -now "nown as
the $ompetition and #ar"ets
Authority.,
T#e Uni"e S"a"e%' II1s
Shopper Sentiment Index fell
at the end of @85A to 58@,@,
the lowest point for the year,
deals, although there are
indications that shoppers are
(eginning to spend again,
)ood prices fell *5,57 on
average and non*food (y
B,87, fuelled (y deep
discounting and promotions,
which helped volume sales to
increase (y 8,A7, 4alue sales
dipped (y 5,;7 with non*food
down @,:7 and food (y 5,@7,
#ore deals (y national (rands
have had an impact on private
la(el sales growth,
I"a*&' Italian consumers have
(ecome savvy during the
economic downturn and are
less loyal to (rands and
retailers, If we consider
hypermar"et and supermar"et
channels, value sales have
declined (y 8,:7, driven (y
non*food which has dipped (y
B,A7, 4olume sales have
decreased (y 5,97 in the
latest year, Shoppers are
visiting different stores to find
the (est prices, prompting
more promotions and deeper
deals,
T#e Ne"#er*an%' The level
of promotion has reached its
highest level in 58 years (ut
volume sales have declined
@,:7, further proof that
promotions don1t always have
the desired impact, 4alue
sales are down 8,;7, )or
manufacturers the rise in
some raw material costs
means prices have had to
increase at the shelf and this
has not gone down well with
consumers,
4
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Turning /ey Insights into Actions
4
Pro!o"ion% on$" a*/a&% e5ua* %a*e% F
The level of trade promotions has increased
(y 8,97 (ut volume sales are down 8,67 in
Europe, proving that they are no longer
effective at meeting their longer term
o(?ectives,
etailers and (rands must (e creative, for
instance (y meeting local shopper needs
with new promotion ideas and reducing their
reliance on price*led deals,
INSI)6T ACTION
Re"ai*er% ne""e an ai"iona* 7214,n a%
a+era.e price% increa%e ,& 1148/i"#
-oo price% acce*era"in. -a%"er "#an non9
-oo in Europe, This resulted in a 8,67
increase in value sales,
Shoppers will pay for innovative products
that add value in areas such as convenience
-@in5 or Ain5 products. and more specifically
for personal care, salon*Cuality and natural
and organic products,
Pro!o"ion% are #i""in. a cei*in. in "#e
U3 an "#e Ne"#er*an%
To avoid losing the impact of promotions,
retailers and (rands need more transparent
promotions, Promotions increase footfall and
volume sales across many categories (ut
retailers and manufacturers must (e closer
to local shopper needs and (e more critical
of a Gone si>e fits all1 approach, They must (e
more innovative and avoid focusing too
much on price, They must invest in powerful
analytics solutions to ma"e their deals more
efficient,
Loca* -ocu% i% :e& * $ountries will
experience economic recovery at different
speeds so pricing and promotion strategies
must have a local focus,
&ocal (rands can (e more flexi(le and
responsive to consumer needs, Pac"s that
promote a product1s local origins or its
natural ingredients can appeal to a shopper1s
patriotism, This is especially true in countries
where shoppers continue to face tough
times, %y optimising their range assortment
and wor"ing together, retailers and
manufacturers can identify new areas of
mutual (enefit,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Turning /ey Insights into Actions
;
So!e re"ai*er% are in+e%"in. in "#eir o/n
!anu-ac"urin. capaci"& "o ,oo%" "#eir
pri+a"e *a,e* %a*e%, Stores that increase
the amount of private la(el on their shelves
and cut (ac" on (rands without growing the
si>e of their stores ris" alienating shoppers,
Eptimising range assortment is a critical and
complex challenge that retailers and
manufacturers must wor" on together to
overcome,
INSI)6T ACTION
Acro%% Europe "#e e,a"e con"inue%
a,ou" #o/ re"ai*er% can !ain"ain "#eir
!ar.in% in "#e %#or" "er! a% price /ar%
con"inue, The categories where prices are
rising fastest are pet care, alcoholic drin"s
and fro>en food, while price increases of
personal care and household items are (elow
the non*food average,
Price wars are unsustaina(le for
manufacturers, retailers and even shoppers,
who won1t accept them if they mean lower
Cuality products, The emphasis must move
to improving the shopping experience and
meeting shopper needs, with innovation and
creative local promotions that match shopper
profiles and expectations * whatever
channels they use,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
7 figures show total mar"et year*on*year changes
<
Pro!o"ion% = Sa*e%1 Ri.#">
No" nece%%ari*&1
The level of trade promotions
across Europe has increased (y
8,97 (ut volume sales are down
8,67, illustrating that
(om(arding shoppers with deals
does not necessarily mean sales
growth,
The over*reliance on trade
promotions which has argua(ly
damaged the +/ grocery sector
in recent years is (eing repeated
in other countries, The
Netherlands has seen the
proportion of products sold on
promotion increase (y 9,@7 in
?ust 5@ months to reach its
highest level in 58 years, In Italy
there has (een a A,;7 rise in
deals, across the categories
included in this study, However
volume sales declined in (oth
countries, (y @,:7 and 5,97
respectively,
This means that much of the
money (eing put forward (y
manufacturers at the reCuest of
retailers is at worst (eing wasted
and at (est not generating the
return in volume sales that
everyone craves,
Ironically, trade promotions in
the +/ are down 8,;7 year on
year as the trade considers new
ways to excite offer*weary
consumers who shop more
freCuently (ut (uy fewer goods
each time they shop, Promotions
effectively hit a ceiling in the +/
and the average level of deal
depth is now falling, 0eal depth
stands at a(out @;7 -5 in B of all
products sold is sold on deal.,
the same as in many other
European countries, (ut is on a
downward curve, In the first
three months of @85B deal depth
fell 8,A7 versus the first Cuarter
of @85A,
#anufacturers and retailers in the
Netherlands should ta"e note of
what has happened in the +/, To
their credit they do accept that
there is a need to rein (ac" their
own spending on promotions,
#ainstream stores have
reluctantly (een forced to
(oo an non9-oo +o*u!e %a*e% are in ec*ine a" a "o"a* European *e+e*1
S!a** increa%e in pro!o"iona* ac"i+i"& in Europe /#ic# i% #i.#er in "#e non9
-oo ca"e.or& ?/i"# "#e e0cep"ion o- Spain an "#e )er!an&@1
4olume Sales on Promotion Evolution across $ountries
4olume Sales Evolution across $ountries
Promotions is Sales, ight! Not Necessarily
7 figures show total mar"et year*on*year changes
*8,67 I8,97 *@,:7 *5,97 *8,<7 *5,;7 *8,<7 I8,A7 I8,@7
* Unit sales
* Unit sales
I8,97 I8,@7 I9,@7 IA,;7 I8,67 *8,;7 I5,@7 I8,87
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Promotions do Still Wor"
A
Pro!o"ion% o %"i** /or:
It is not all (ad news for
promotions, Among the
mechanics that wor" well across
Europe are round pound=euro
offers that help customers to
(udget and calculate their
shopping, These deals also
ena(le the larger mainstream
retailers to compete with the
discounters,
II1s research demonstrates that
the sales uplift on round euro
promotions is greater than an
eCuivalent discount that does not
ta"e the price down to a rounded
price point, )or instance, a price
cut from J5,<8 to J5,88 will have
a (igger effect on sales than a
<87 reduction from a different
price point,
ound euro offers are also a
response to shopper complaints
that deals can (e too complex,
They demonstrate transparency,
something which has (ecome an
important issue in the +/ where
the $ompetition #ar"ets
Authority has pu(lished
guidelines to ensure a retail
promotion does actually offer
consumers genuine savings,
Promotional support has declined
in Spain (ut leaflets still (ring
positive results for the
hypermar"ets, In )rance, II1s
partner AA 0istri( which trac"s
leaflet promotions has seen an
increase in activity following a
period of sta(ility with shoppers
ta"ing a particular interest in
%E'E)s, &eaflets are also
popular in 'ermany where, as in
introduce aggressive deals to
compete with the discounters,
although some categories can
still demand a premium price,
including cheese and freshly
sCuee>ed orange ?uice,
#anufacturers in the Netherlands
certainly want to stop the deal
escalation, In the first few
months of @85B there were signs
that promotional pressure is
sta(ilising, although the level of
deals remains worryingly high,
#anufacturers in 'ermany also
want to stop any escalation in
discounting and for retailers to
run productions that add value
and (oost margins,
The huge investment in
promotions in Italy is designed to
sustain short*term sales although
here too there is an acceptance
that this could damage the
long*term health of the grocery
mar"et, The opinion in Italy is
that too much effort is (eing
focused on promotions rather
than on other forms of
mar"eting,
%etween @85@ and @85A the
entire Italian grocery mar"et lost
J5(n due to promotions (eing
largely ineffective, This is
eCuivalent to the country1s )#$'
sector potentially growing (y 57,
The household category was one
of the most heavily promoted in
Italy (ut volume and value sales
still declined,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
#ore $reativity Needed to %oost Promotion Success
B
the +/, consumers are ma"ing
fewer shopping trips and
increasingly using online price
comparison we(sites,
etailers need to segment their
different audiences and wor" with
manufacturers to ensure the
effects of any new promotion
mechanic can (e measured
accurately, They must invest in
analytics solutions to re*engineer
their promotions, retain margins
and meet consumers1
expectations in terms of a
num(er of different factors * from
price to convenience, Shoppers
also prefer to use different retail
channels at different times so
any promotion must ta"e this
into account and (e adapta(le,
More crea"i+i"& neee "o
,oo%" pro!o"ion %ucce%%
Promotions remain vital to
increase footfall and volume sales
across many categories (ut
retailers and manufacturers must
(e innovative and thin" creatively
a(out which offers they run and
where they implement them,
To avoid promotions hitting a
ceiling and the deal*weariness
seen in the +/ spreading across
Europe, retailers should thin"
differently for each country,
category and retail channel,
The industry must also (e
cleverer at creating promotions
that ta"e into account the
different (uying (ehaviour
consumers display offline and
online,
Themed promotions are reducing
the negative hard*sell perception
held (y some shoppers and ma"e
the idea of funding it more
attractive to manufacturers,
'reece has seen a num(er of
themed promotions which are
often repeated and heavily
supported (y retailers1 a(ove*
the*line promotion, In the
Netherlands a(ove*the*line
mar"eting has also raised
consumer awareness of themed
campaigns at a time when
shoppers are (ecoming weary of
promotions, We are also seeing
more experiential in*store
mar"eting events which ena(le
shoppers to see, feel, smell and
touch a (rand, These can
enhance (rand loyalty and
reduce over*reliance on price,
A priCe /or"# #a+in.D
T#e c#a**en.e
A multinational )#$'
manufacturer with presence in
health, hygiene and home
categories is facing a declining
trend in its volume share of
%rand A, especially its flagship
<88g si>e, This is despite
heavy promotional support
throughout the year,
T#e c*ien"$% ,u%ine%% nee
To understand if the decline
was due to the new entry or
price! Promotion! Portfolio!
T#e %o*u"ion
II #ar"eting )oresight
analysis leveraged price and
promo data at store level for
the top B retailers, specifying
pre and post new entry of the
competitor,
T#e ou"co!e
The manufacturer shared
findings with each retailer to
(uild a solid case for the
changes reCuested, As a
result2
%rand A increased volume
share <pts in ; months,
e*allocation of spending
from trade to mar"eting
improved the (rands PK& (y
@87,
The analysis provided by IRI
has helped us greatly in
understanding subtle
dynamics in the market that
we could not spot with such
detail. We now have a
stronger plan that benefits
both our brand and the
retailers profit.
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
#ore $reativity Needed to %oost Promotion Success
10
cross*promotions to increase
average (as"et value and to put
more emphasis on premium and
natural products, Shoppers can
(e persuaded to (uy products
that complement or contri(ute to
their lifestyle, their demand for
Cuality or their wish to follow a
greener agenda, )or instance,
'ermany, Spain and Italy are
using feature promotions and
coupons to get products to the
front of consumers1 minds when
they wal" into a store,
#anufacturers are (eing
innovative too, In the +/
producers are com(ining their
resources, In Lanuary Hein> and
/ingsmill ?oined forces to
promote eating (eans on toast,
Across Europe suppliers are
ta"ing advantage of economies of
scale to offer innovative products
that private la(els cannot match
(ecause of the manufacturing
costs involved, This can provide
them with the differentiating
factor they need to attract and
retain customers,
etailers must (e more creative
when it comes to improving the
in*store shopping experience, In
Spain wor" is (eing done to
improve in*store navigation,
more price transparency and the
re*design of shelves and
planograms to ma"e displays,
pricing and promotions clearer to
shoppers,
+ltimately customers will respond
to new promotions and new
products they feel are special and
uniCue,
$reative promotions drive people
to spend at the point of sales
-PES. and (oost impulse sales
which have (een damaged during
the economic downturn,
What the recession has taught
the industry is how shoppers
respond as much to relevance as
they do to a good deal on price,
In the +/ we have seen #ar"s K
Spencer en?oy incredi(le success
with its G0ine in for Two for M581
promotion, for instance,
etailers have to thin" differently
to capture shoppers1
imaginations, In 'ermany Ede"a,
the country1s largest
supermar"et chain, has tried viral
video mar"eting as a new
mechanic to promote its private
la(el, #any retailers in 'ermany
are also investing in mo(ile
mar"eting and using apps to
communicate and tempt
consumers with coupons and
local offers,
Similarly, in the +nited States,
new media has moved into the
limelight, According to II1s
#ar"etPulse survey, 587 of
consumers expect that
smartphone applications will
influence their (rand decisions in
@85B, Similarly, mo(ile
advertising will (e a (rand choice
influencer for ;7 of consumers
in @85B, versus B7 in @855,
In Italy some retailers are
developing different mechanics to
try to re*(uild longer*term
loyalty, Stores are issuing
coupons for entire categories
rather than ?ust single products
and are allowing shoppers to
choose which items they would
li"e the discount applied to,
There is room to implement more
Tec#no*o.&9ena,*e !ar:e"in. "oo*% are 5uic:*& pic:in. up %"ea!1
%rand Selection Process for @85B in the +nited States
7 of Shoppers
Source2 II #ar"etPulse Survey DB @85A
NEW #E0IA TEE&S
B7
B7
:7
<7
:7
<7
;7
:7
587
557
In*store Touch Screen
#o(ile Advertising
ecommendations=Information from
we(site=email
Smartphone apps
Enline Advertising
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Prices and #argins set to ise
11
categories fail to excite the
shopper ?ust when they start
having money to spend again,
+ltimately retailers and
manufacturers must wor"
together to find new ways to
attract and retain shoppers
without relying too much on price
cuts,
Price% an !ar.in% %e" "o ri%e
a% "#e -ee*9.oo -ac"or
re"urn% "o Europe
$onsumers are emerging from
the economic downturn (attered
and (ruised, having learnt to
shop differently and to do
without during the past six
years,
Across Europe average prices for
the categories surveyed for this
report increased (y 5,B7 with
food prices -5,67. accelerating
faster than non*food -8,<7.,
Shoppers in the Netherlands
have experienced the highest
price ?umps, although some of
this rise is attri(uted to tax hi"es
in some categories including
alcohol, plus increases in raw
material costs, The industry here
has tried a num(er of ways to
counter price increases including
experimenting with different pac"
si>es, #argins, and prices, are
increasing faster than for national
(rand prices (ecause consumers
cannot easily compare private
la(el prices (etween retailers,
So even though the European
economy is improving there could
(e damaging conseCuences this
year from aggressive price wars
and over*>ealous range
assortment strategies,
The result will (e less money for
manufacturers to spend on
research and development or to
invest in talented staff, It could
also mean smaller (rands
disappear for ever, The outcome
would (e that less competitive
A+era.e price% #a+e increa%e ,& 1148 acro%% Europe in "#e *a%" &ear1 (oo
price% #a+e acce*era"e -a%"er "#an non9-oo price% in !o%" coun"rie% an
"#e #i.#e%" price ri%e% #a+e ,een %een in "#e Ne"#er*an% /#i*e "#e *o/e%"
o,%er+e are in )reece1
Price Evolution across $ountries
7 figures show total mar"et year*on*year changes
* Unit sales
I5,B7 I8,:7 I@,@7 I5,87 I5,@7 I5,:7 I@,87 *5,:7 I5,B7
)ood Average in Europe I5,67
Non*)ood Average in Europe I8,<7
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
&ocal versus 'lo(al
12
that (y (uying local he or she is
helping their region and "eeping
employment in the country, The
G%uy %ritish1 campaign has also
(een used for many years as a
nationalistic mar"eting message
(y the +/ food industry,
There are opportunities for
manufacturers to (enefit (y
thin"ing local even if their (rands
are distri(uted and mar"eted
nationally, They should (e a(le to
identify regional and local
variations in tastes and
preferences and create new
products that meet the needs of
shoppers,
There are many opportunities to
get closer to consumers at a
country, regional and even town
level to ensure the right
promotions reach the right
people at the (est time for them,
In 'ermany, for instance, there
is a determination to slow the
rise in discount promotions and
move to more creative local and
retailer*specific deals that protect
margins, In a promotion*
intensive category such as
confectionery, in 'ermany top
(rand )errero is ta"ing the lead,
It has introduced nationwide
promotions (ut complemented
these with different offers around
the country that are specific to
particular retail "ey accounts and
vary (y type and timing to
prevent aggressive price
competition, The Cuality of
displays has also improved with
some (rands, such as #K#s,
attempting to gain permanent
high*value displays in
Loca* +er%u% .*o,a*
European consumers react
differently to (rands, prices and
deals depending on where they
live, which is why one*si>e*fits*all
glo(al promotions do not always
wor",
Price sensitivity is often "ey to
determining which promotions
will wor" the most effectively in
particular countries, In some
mar"ets such as the +/,
'ermany and )rance prices are
fairly inelastic and rises do not
su(stantially hit demand, Prices
are much more elastic in
countries where the local
economy is struggling to
improve, Price elasticity can also
vary (y category in different
countries,
#anufacturers have moved in
recent years to more
international and standardised
promotional strategies to control
costs and maintain a more
homogenous (rand image across
countries,
Net shoppers feel enormous pride
towards their local (rands and
their heritage, particularly in
food, &ocal (rands can (e more
flexi(le and responsive to
consumer needs while pac"s that
promote a product1s local origins
or its natural ingredients can
appeal to a shopper1s patriotism,
This is especially true in countries
where shoppers continue to face
tough times, In 'reece, for
instance, consumers have rallied
around their own producers in
defiance against the European
+nion which many people
mistrust, In )rance there is a
proud Gciti>en shopper1 who feels
A+era.e European price e*a%"ici"& -or "#e (MC) %ec"or a" 9110A1
Sou"# EuropeE !o%" #i" ,& "#e econo!ic cri%i%E i% ri.#"-u**& !ore e*a%"ic1
)#$' Price Elasticity across Europe, (y $ountry
Source2 II Price elasticity analysis with modelling period ending @85@ F @85A
OE+ average price elasticity, (ased on numeric average of countries analysed
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
12
strategically*important stores,
etailers in all countries that de*
escalate the sheer num(er of
offers could also see sales rise,
They can replace national
promotions with less freCuent
retailer or locally*specific ones
that allow for deals to continue
for longer, Shoppers want to (e
sure that any special offer is not
?ust another promotion on the
on*going conveyor (elt of deals
they have witnessed since @889,
&arge local (rands are winning
sales in the +/, According to II
measurements, +/ favourites
include War(urtons, #c4ities,
$ad(ury1s 0airy #il", &uco>ade
and Nivea,
To succeed locally retailers must
ensure that their price and
promotion strategy is lin"ed to a
num(er of factors, These include
provenance as consumers
demand greater transparency
and tracea(ility in the supply
chain, especially following the
horsemeat scandal,
European shoppers are also
concerned, depending on where
they live, a(out food miles and
sustaina(le pac"aging, )resh
food and am(ient food are two
categories widely*affected (y
shoppers1 concerns a(out how far
the food they are (uying has
travelled,
etailers and suppliers should
also tailor their promotions to
country*specific needs so
different messages resonate
more effectively with segmented
consumer groups across Europe
and the +nited States,
We are seeing this in the
Netherlands with more
discounting in the north east
region where shoppers tend to
(uy larger volumes of private
la(el, While in the cities there is
extra emphasis on deals that add
value and promote premium
products,
S#opper% priori"i%e -oo a%
non9-oo %a*e% %u--er
Although everyone must eat and
people can opt out of (uying some
non*food items, the evidence from
II is that (oth sectors continued
to suffer,
0espite the proportion of volume
sold on promotion rising (y 8,97
average volume sales have
declined for food -8,67. and non*
food -8,97., Enly )rance saw
volumes rise across (oth sectors,
4olumes are down in every sector
surveyed, with the (iggest
declines for am(ient, chilled and
fresh food,
When it comes to prices, food
does (etter than non*food with
manufacturers and retailers a(le
to regain some lost margin, Any
additional return, however, was
compromised in @85A (y the high
degree of promotions in many
categories as the trade chased
volumes,
)ood value sales rose (y 5,87 (ut
non*food dipped (y another 8,A7,
although the only categories to
actually see falls across Europe
were confectionery -(lamed on a
late Easter. and household, The
decline in (oth of these categories
was enough to (ring down the
overall performance of the food
and non*food sectors,
Argua(ly the category facing the
toughest time is household as
consumers trade down or stop
(uying items they view as non*
essential,
Shoppers Prioritise )ood versus Non*)ood
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
A** -oo %ec"or% are .ro/in. +a*ue %a*e% a" a "o"a* European *e+e* /i"# "#e
e0cep"ion o- con-ec"ioner& ?cau%e ,& "#e *a"e Ea%"er in 2014@1 T#e *e+e* o-
.ro/"# con"ri,u"e ,& c#i**e an -re%# -oo appear% "o ,e a %"ron. inica"or
o- o+era** +a*ue %a*e% .ro/"#1
14
In the Netherlands there is a shift
from the supermar"ets to other
channels for non*food, including
drugstores and online,
Shoppers are also (uying multi*
use cleaning products and
investing in more efficient
technology,
In the +nited States some people
are even su(stituting food
products such as vinegar for
cleaning products to save money
and to (e more environmentally
friendly,
There are still some areas where
national (rands do well, including
in laundry powders and washing
up liCuids,
etailers are loo"ing closely at
their range assortment in
household, although they must
(e careful not to remove those
national (rands that consumers
remain loyal to,
Ene category that could reverse
its recent slump is personal care
which should do well as each
country comes out of its
economic slump, This category
was growing (efore the recession
(ecause it thrives on a shopper1s
willingness to experiment and to
treat themselves, This is
something they are unwilling to
do when money is tight, When
people do have money they are
prepared to try different hair
sprays or shampoos that claim to
offer something different,
0o it yourself personal care
products offer consumers a
chance to en?oy a salon
experience at home,
Self*administered spa
treatments, such as facials,
manicures and pedicures, have
(ecome commonplace
throughout the downturn,
0emand for these products will
continue to grow as innovators
launch products that are more
powerful and pampering, at a
cost well (elow salon treatments,
Per%ona* care an pe" -oo are in !ar.ina* +a*ue %a*e% .ro/"# a" a European
*e+e* ,u" a *ar.er ecrea%e in #ou%e#o* %a*e% !ean% "#a" non9-oo %a*e% are
in o+era** ec*ine a" a "o"a* *e+e*1 )er!an& an (rance Foin "#e Uni"e S"a"e%
a% "#e on*& coun"rie% in non9-oo +a*ue .ro/"#1
Non*)ood $ategories 4alue Sales across $ountries
)ood $ategories 4alue Sales across $ountries
Shoppers Prioritise )ood versus Non*)ood
7 figures show total mar"et year*on*year changes
7 figures show total mar"et year*on*year changes
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
$onclusion
14
0elicate consumer confidence
across Europe and the +nited
States must (e nurtured (y
retailers and manufacturers
through the clever use of pricing
and promotions,
If the industry can resist the urge
to over*promote and ensure that
its deals are clear and
transparent then shoppers will
spend,
People will trade up and accept
price rises if they can see real
added value, innovation or
relevance when shopping in
particular categories,
The increase in average prices
has had an impact on volumes
(ut consumers will still (uy
products they need, Trade
promotions are on the rise (ut if
these deals are to fuel an
increase in volumes the industry
must (e more creative, (oth
offline and online,
etailers and manufacturers
must also optimise their range
assortment locally, regionally and
nationally using a granular level
of information, Analysis into the
contri(ution every product and
promotion ma"es will help
retailers to differentiate
themselves and plan their price
and promotion strategy,
$ountries will see economic
recovery at different speeds over
the next year so pricing and
promotion strategies must have a
local focus whilst retailers ensure
that the in*store shopping
experience is the (est it can (e,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
A(out the eport
1;
A,ou" IRI1 II is a leader in delivering powerful mar"et and shopper information, predictive analysis and the
foresight that leads to action, We go (eyond the data to ignite extraordinary growth for our clients in the )#$', retail
and over*the*counter healthcare industries (y pinpointing what matters and illuminating how it can impact their
(usinesses across sales and mar"eting, #ove your (usiness forward at IRI/or*/ie1eu
International HeadCuarters2 5 Arlington SCuare, %rac"nell, %er"shire '5@ 5WA, +/, IBB 5ABB 6B;888
$opyright P@85B Information esources, Inc, -II., All rights reserved, II, the II logo and the names of II products and services referenced herein
are either trademar"s or registered trademar"s of II, All other trademar"s are the property of their respective owners,
This report contains data gathered from seven countries in Europe2 )rance, Italy, Spain, the +nited
/ingdom, 'ermany, the Netherlands and 'reece, 0ata has also (een collected from the +nited
States, The data has (een sourced from II Infoscan retail data(ases for the <@ wee"s ending
)e(ruary -or #arch. @85B and <@ wee"s ending )e(ruary -or #arch. @85A,
#acro*categories we are loo"ing at are2 chilled and fresh food, am(ient food, fro>en food, non*
alcoholic drin"s -it includes tea and coffee., household, personal care, confectionery, pet food=pet
care and alcoholic drin"s -it doesn1t include wine for the +/ and for 'reece it includes (eer and
ou>o only.,
The mar"et channels used for each country in this report are as follows2
Coun"r& C#anne*% u%e
+/ Hypermar"ets, supermar"ets, %oots and Superdrug
SP Hypermar"ets and supermar"ets
' Hypermar"ets and supermar"ets
'N Hypermar"ets, supermar"ets and hard and soft discounters
N& Hypermar"ets and supermar"ets
IT Hypermar"ets and supermar"ets
) Hypermar"ets and supermar"ets
+S
#ulti*outlet with c*store -supermar"ets, drugstores, mass mar"et retailers,
gas=c*stores, military commissaries and select clu( and dollar retail chains.
To gain insight into opportunities across specific categories, segments, channels or retailers, contact your
II client service representative regarding custom analyses leveraging the following resources2
IRI In-oScan Cen%u%
G
is a syndicated retail trac"ing service that ena(les manufacturers and retailers
to acCuire industry insights used to ma"e (etter (usiness decisions, II InfoScan $ensus utilises the data
that II collects from grocery, drug and mass merchandise retailers to provide the most comprehensive
and accurate syndicated data offering in the )#$' sector, With access to accurate, granular detail (y
category, geography, measure and time period, clients have the tools needed to develop mar"eting and
sales strategies (ased on product performance, distri(ution and promotion responsiveness,
IRI Mar:e"in. (ore%i.#" is a uniCue mar"eting mix management solution that delivers the most
accurate mar"eting EI and efficiency measures, ItQs the only solution that gives a full category view that
allows you to anticipate and simulate your own and competitor actions, II #ar"eting )oresight provides
)#$' manufacturers and retailers with actiona(le results to plan, monitor, analyse and optimise their
mar"eting mix and (udgets,
)E #EE IN)E#ATIEN
Please contact your II $onsultant or send an email to E+,#ar"etingRIIworldwide,com
SPECIAL REPORT
Appendix
$ountry (y $ountry eview
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
1A
Shoppers were the winners in the
price war which gripped )rance in
@85A, $asino 'roup1s president
Lean*$harles Naouri wanted to (e
as competitive as rival chain
&eclerc and his determination to
succeed resulted in deflation for
the )#$' sector, The price war
also had a negative impact on
the hard discounters,
As the fight for mar"et share
(ecame increasingly (loody,
prices for national (rands fell (y
5,;7, Everall value sales in
)rance grew (y 5,67, led (y
food, 4olume sales were up (y
8,97, with non*food performing
strongest, )rance was the only
European country not to see a
decline in food volumes,
The )rench economic recovery
remains delicate with the country
o(liged to meet the Euro>one1s
deficit reCuirements while
unemployment is unli"ely to fall
for many months, In this context
and with tax rises for many
people, aggressive retailer price
competition will continue for the
foreseea(le future,
The aftermath from such a tough
pricing (attle in @85A has (een
(itter with early @85B seeing
some tense commercial
negotiations (etween retailers
and manufacturers, With (oth
sides trying to hold their ground
products have (een de*listed in
some stores that are loo"ing
closely at their range assortment,
Some retailers have (een
persuaded to ad?ust their private
la(el prices so the savings for
shoppers are less (latant,
etailers1 promotion strategies
are eCually hard*hitting and
shoppers are responding,
particularly to %E'E)s, Although
the overall level of promotion for
most retailers has sta(ilised, with
the exceptions (eing $arrefour
'roup and '3ant,
Trade promotions for national
(rands are rising (ut falling for
private la(el as clic" and collect
(ecomes more popular, It now
accounts for a(out B7 of the
mar"et and private la(el has a
greater share in clic" and collect
as retailers use their we(sites to
display everyday items rather
than impulse products which are
easier to promote in*store,
T#e a+era.e ,a%:e" price i% up ,& 01B8 /#ic# inica"e% "#a" !an& (renc#
con%u!er% are "a:in. a+an"a.e o- "#e a..re%%i+e price an pro!o"ion
ac"i+i"& "o "rae up1
Ho*u!e on pro!o"ion #a% increa%e ,& 0128 in (rance urin. "#e *a"e%" &ear1
4olume on Promotion (y $ategory F )rance
Average Price Increases (y $ategory F )rance
Trends in )rance
Near*on*year 7 change in average
$ategory la(el a(ove each (ar shows latest year 7 volume on deal,
)ood Average I5,87
Non*)ood Average I8,A7
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in )rance
1B
The on*going price war has not
had an impact on the price that
people are ultimately paying,
The average (as"et price is up (y
8,:7 which indicates that many
)rench consumers are ta"ing
advantage of the aggressive price
and promotion activity to trade
up, They are also switching from
private la(els to national (rands,
although private la(el in )rance is
decreasing more in value than in
volume,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
20
With the world1s fourth largest
national economy and a
population of 9@ million,
'ermany is leading Europe1s
economic recovery, (ut many
challenges still exist for its )#$'
sector,
Price competition amongst
retailers remains fierce and this
is scuppering attempts (y
manufacturers to pass on rising
raw material and energy costs,
The stores are also (usy trying to
decipher who exactly is their core
customer in @85B, &oyalty is
Cuite an old fashioned concept it
seems,
The high density of stores and an
increase in discount outlets
means most consumers are
shopping in different places at
different times depending on the
occasion and their specific
category needs, People have no
Cualms a(out visiting a
discounter one day and trading
up to a mainstream retailer1s
private la(el or a national (rand
the next, This trend is li"ely to
continue throughout @85B as
each traditional retailer
(enchmar"s itself against the
li"es of Aldi and &idl, who
continue to increase their own
selection of national (rands,
This led to a rise in value sales
-5,;7. with food leading the
charge, although volumes fell
8,<7 with food performing worse
than non*food,
etailers still li"e to use leaflets
and discounting to tempt
shoppers (ut seasonal*themed
promotions and events are
growing in popularity, &idl is
promoting premium products
around national holidays while
the convenience sector is
focusing on the Gfood on the go1
concept,
Nevertheless, the convenience
sector continues to struggle as
regular retailers introduce
convenience >ones in their own
stores and open for longer,
#ulti*channel shopping is not yet
a reality in 'ermany, $onsumers
are gathering information online
in greater num(ers (ut they still
prefer to shop in*store where
they can ta"e advantage of
T#e increa%e o- na"iona* ,ran% a" #ar i%coun"er% con"ri,u"e% par"ia**& "o
price increa%e1
Ho*u!e on pro!o"ion #a% increa%e ,& 1128 in )er!an& urin. "#e *a"e%"
&ear1
Average Price Increases (y $ategory F 'ermany
Trends in 'ermany
Near*on*year 7 change in average
4olume on Promotion (y $ategory F 'ermany
$ategory la(el a(ove each (ar shows latest year 7 volume on deal
)ood Average I @,<7
Non*)ood Average I8,87
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in 'ermany
21
promotions, There are some
signs that e*commerce and
hy(rids such as clic" and collect
could ma"e a greater impact this
year,
Product innovation is gra((ing
shoppers1 imaginations, In the
(everages category the 0ie &imo
car(onated lemonade from Ec"es
has (een a successful launch
into the higher priced refreshing
soft drin" for adults category,
etailers want to invest in more
manufacturing capacity to grow
and differentiate their private
la(el ranges, We have already
seen the launch of the Ede"a
winery, heinfels /ellerei,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
22
Italian consumers have certainly
(ecome savvy shoppers during
the economic downturn, They
watch in*store and online pricing
and promotions carefully and are
much less loyal to (rands and
retailers than they were (efore
the financial crisis,
An II Shopper Insights survey
reveals how consumers pay more
attention to prices, up BA7, than
they did a year ago and how they
are more interested in
promotions -up @A7., They are
also increasingly using
promotional flyers to compile
shopping lists so they avoid
impulse purchases,
It is understanda(le why Italian
consumers are so focused on
price and promotion when (uying
their wee"ly shop, The economic
situation is improving (ut it
remains difficult for many people,
with unemployment high and
extreme pressure on family
(udgets,
4alue sales have declined (y
8,:7, affected largely (y a B,A7
slump in non*food, Household
saw the (iggest fall while among
the categories experiencing a rise
in value were pet care, alcoholic
drin"s, am(ient food and
confectionery,
4olume sales have decreased (y
5,97 in the latest year with the
deepest declines suffered (y
household, personal care and
fro>en food,
Shoppers are visiting different
shops to find the (est prices and
deals so retailers are wor"ing
harder to woo shoppers with
more promotions and deeper
deals, Promotional pressure at
$hristmas @85A was @:7, up @,@
points in a year, while across
@85A promotional activity
increased (y A,;7,
The categories most heavily
promoted were confectionery,
personal care, non*alcoholic
drin"s and household, Some 987
of )#$' categories registered an
increase in deal pressure in @85A
with deals especially aggressive
in the supermar"ets and
drugstores,
It is noticea(le that with so much
emphasis on promotion in Italy
I"a*ian %#opper% #a+e ,eco!e %a++&1 T#e& /a"c# in9%"ore an on*ine pricin.
an pro!o"ion% care-u**& an are !uc# *e%% *o&a* "o ,ran% an re"ai*er%1
Ho*u!e on pro!o"ion #a% increa%e ,& 21;8 in I"a*& urin. "#e *a"e%" &ear1
Trends in Italy
Average Price Increases (y $ategory F Italy
Near*on*year 7 change in average
4olume on Promotion (y $ategory F Italy
$ategory la(el a(ove each (ar shows latest year 7 volume on deal
)ood Average I5,A7
Non*)ood Average *8,<7
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in Italy
22
retailers are not always getting
their range assortment or price
positioning correct within
different categories, Premium
products, private la(els and
convenient items need to (e
more clearly availa(le on the
shelf,
A lac" of differentiation in
promotion activities (etween
retailers has also (een a
pro(lem, while there is not
enough coordination (etween in*
store offers and the a(ove the
line advertising designed to
support them,
National (rands are still more
heavily promoted than private
la(el,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
24
The level of promotion in the
Netherlands has reached its
highest level in 58 years as
retailers and manufacturers try
desperately to (oost volumes
that have fallen (y @,:7 in the
past year, 4alue sales are down
8,;7,
The grand coalition government
of the pro*(usiness &i(erals and
the centre left &a(our Party is set
to hold power until @856 which
does provide (usiness with some
sta(ility in a country hit hard (y
economic difficulties, '0P fell
8,97 in @85A (ut is expected to
return to growth this year as
consumer confidence improves
steadily,
The )#$' sector certainly needs
some good news as prices have
soared on the (ac" of tax
increases on alcoholic drin"s and
rising raw material costs, In non*
food, retailers are facing a hard
time competing against (udget
stores that provide the same
products at often lower prices,
etailers are trying to regain
shopper loyalty, Al(ert Hei?n, the
mar"et leader, (egan the year
with personalised email
promotions and more online
deals, It is facing tough
competition from the discounters
li"e Aldi and &idl and regional
players li"e Nettorama and
Hoogvliet, It is focusing on price
to dispel a perception held (y
many shoppers that it is
expensive, It has also revamped
its (asic private la(el range,
The $5888 retail (rand has
almost disappeared as all its
stores are re(randed as Lum(o
and position themselves as price
competitive than"s to the every
day low price -E0&P. formula,
The difficulty it faces now is how
to retain its price*driven image
as it grows from a strong
regional player to a national
chain,
Smaller players such as Spar and
#$0 have the highest prices (ut
this fits their strategy which is to
focus on delivering good
customer service and
convenience,
)or manufacturers the rise in
T#e (MC) %ec"or cer"ain*& nee% %o!e .oo ne/% a% price% #a+e %oare on
"#e ,ac: o- "a0 increa%e% on a*co#o*ic rin:% an ri%in. ra/ !a"eria* co%"%1
Ho*u!e on pro!o"ion #a% increa%e ,& A8 in "#e Ne"#er*an% urin. "#e
*a"e%" &ear1
Trends in the Netherlands
Average Price Increases (y $ategory F Netherlands
Near*on*year 7 change in average
4olume on Promotion (y $ategory F Netherlands
$ategory la(el a(ove each (ar shows latest year 7 volume on deal
)ood Average I@,@7 Non-Food Average +2.3%
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in the Netherlands
24
some raw material costs means
prices have had to increase, This
has not gone down well with
consumers, and suppliers have
tried to soften the (low (y
producing (igger value pac"s or
(y reducing pac" si>es to reach a
unit price that shoppers find
more accepta(le,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
2;
The relationship (etween
retailers and manufacturers has
changed in Spain since the start
of the financial crisis as
consumers1 love for private la(el
has intensified,
Private la(el is up in many
categories as stores such as
#ercadona, &idl and Aldi position
themselves as private la(el
supermar"ets while other stores
continue to ta"e the stance that
promoting national (rands too is
the (est way to grow sales, #il"
and (eers are two of the clearest
examples where private la(el
remains strong and prices have
fallen,
Spanish shoppers are devoting
more time to preparing and
managing their shopping lists,
They are comparing flyers and
coupons from different retailers
and chec"ing prices online,
although ecommerce is still a
relatively immature area,
4olume sales dipped (y 8,<7
last year in @85A with sales of
food and non*food (oth declining,
4alue sales, however, increased
(y 8,67,
Price rises -5,@7. helped value
sales of food increase with
promotional support for food up
5,97, led (y national (rands,
This has closed the price gap
with private la(el, The A*for*@
mechanic has (een particularly
popular,
#anufacturers are not focused
solely on price, They are also
investing in innovation and
producing products that retailers
cannot replicate in their private
la(el ranges at a lower price,
There are examples at the J5
price point, including Thins -from
%im(o., Natecomo -', %lanca.
and Snats -'refusa.,
Stores remain reluctant to cut
the price of their own la(el food
(ecause of rising raw material
costs so the narrowing of the
price differential is a slight
concern for them,
4olume on promotion overall has
increased (y 8,67 in the past
year with confectionery -@9,97.
and alcoholic drin"s -@;,;7.
having the highest percentages
on deal, $ategories to see a
Price ri%e% ?1128@ #e*pe +a*ue %a*e% o- -oo increa%e /i"# pro!o"iona*
%uppor" -or -oo up 11A8E *e ,& na"iona* ,ran%1
Ho*u!e on pro!o"ion #a% .ro/n ,& 01<8 in Spain urin. "#e *a"e%" &ear1
Trends in Spain
Average Price Increases (y $ategory F Spain
Near*on*year 7 change in average
4olume on Promotion (y $ategory F Spain
$ategory la(el a(ove each (ar shows latest year 7 volume on deal
)ood Average I5,B7
Non*)ood Average I8,57
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in Spain
2<
reduction included fro>en food,
personal care and household,
The differences in promotions
and prices across Spain are
affected (y the impact of private
la(el in each region,
All this is happening amid an on*
going economic struggle, '0P
growth has stagnated in Spain
and the country1s attempt to
(oost exports has stalled, It
means consumer spending will
remain tight and unemployment
frustratingly high for some time,
There are signs that retailers and
manufacturers are wor"ing more
effectively together, They are
finding ways to rotate range
assortment and sell higher
volume Cuantities of particular
products more cheaply for
shorter periods of time,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
2A
Efficial government figures
confirm that the +/ is on the
road to recovery with retail sales
up A,@7 in #ay @85B as
consumer confidence returns and
politicians de(ate raising interest
rates to cool the housing mar"et,
The Effice for National Statistics
says strong food sales were
(ehind the rise in retail sales as
consumers cele(rated the late
Easter holidays, It is not all good
news, however, as many families
are still waiting to see their
wages rise and there has (een an
increase in food (an"s and high
personal de(t across the country,
A change in direction from some
manufacturers has led to the
proportion of volume on
promotion dipping (y 8,;7,
#ost of this decline has come
from a reduction in private la(el
deals, The volume on deal in
some categories -pet food
B@,97., alcoholic drin"s -<B,:7.
and personal care -;B,<7.
remains high,
In @85A value sales growth was
8,A7, (elow the European
average -8,67. while volume
sales were down 5,;7,
+/ shoppers li"e to use the
convenience channel, As a result
the ma?or supermar"ets such as
Tesco and Sains(ury1s are
winning a greater share of this
mar"et as people shop more
freCuently (ut have smaller
(as"ets, As the supermar"ets
gain sales in this sector they
must continue to (attle the
discounters who are expanding
their range of national (rands,
The supermar"ets are
responding, #orrisons is cutting
prices (y an average 567 and
some products (y as much as
;87, Tesco has put Gpoundshops1
inside A88 of its stores, Top*end
retailer Waitrose has added the
lower price GEssentials1 range to
its own la(el offering, while
Sains(ury1s has %randmatch
which automatically reduces the
cost of an item to the lowest
price amongst itself, Tesco and
Asda, etailers have come under
pressure to improve the
transparency of their promotions
with the Effice of )air Trading
Ri%in. con%u!er e!an #a% coincie /i"# price cu"% a% %uper!ar:e"%
!u%" con"inue "o -i.#" a.ain%" #ar i%coun"er% "o .ain %a*e% .ro/"#1
Ho*u!e on pro!o"ion #a% ecrea%e ,& 01;8 in "#e U3 urin. "#e *a"e%" &ear1
Trends in the +nited /ingdom
Average Price Increases (y $ategory F +nited /ingdom
Near*on*year 7 change in average
4olume on Promotion (y $ategory F +nited /ingdom
$ategory la(el a(ove each (ar shows latest year 7 volume on deal
)ood Average I5,:7
Non*)ood Average I5,:7
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in the +nited /ingdom
2B
issuing new guidelines to ensure
shoppers can trust the deals they
see, &ast summer Tesco was
fined MA88 888 for misleading the
pu(lic over a half*price offer on
straw(erries,
#anufacturers want to reduce the
level of promotions (ut they are
struggling to convince the
retailers,
Enline shopping is growing with
#orrisons having finally ?oined
the party in Lanuary to increase
competition,
$lic" and collect is driving
incremental sales with a potential
roll*out of collection points such
as schools and at underground
stations in &ondon,
0iscounters are gaining mar"et
share and are challenging other
retailers2 Aldi vows to dou(le in
si>e over the next seven years,
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in 'reece
20
The optimists in 'reece (elieve
the worst of the country1s
economic woes are over (ut any
return to growth will (e very
slow,
This means more pain for
manufacturers and retailers as
well as their customers as
unemployment remains high at
more than @<7 and wages stay
flat, Soup "itchens are still
appearing in some of the more
affluent areas of ma?or cities,
The result will (e more retail
price wars and aggressive
promotions, although the
shopping malls are (ecoming
(usier, )ood prices fell 5,57 on
average and non*food (y B,87
with household and personal care
suffering particularly (adly, Net
discounting and deals helped
volume sales increase very
slightly (y 8,A7 which provides
some reasons to (e cheerful,
4alue sales have dipped (y
5,;7, with non*food down @,:7
and food (y 5,@7, The only
category to see a value and
volume increase was
confectionery, while price rises in
non*alcoholic drin"s turned off
consumers and this category saw
the greatest value decline
-:,B7.,
The discounters including &idl
have (een investing in a(ove the
line advertising to promote their
lower prices and the fact they
now stoc" national (rands, and
this has fuelled some of the price
competition, The difficult trading
environment has meant many
smaller retailers have continued
to (e ta"en over (y larger rivals,
#anufacturers continue to play
their part (y reluctantly reducing
their prices or launching lower
Cuality products to protect their
own margins as (est they can,
etailers have had to (e cleverer
when devising promotions, There
have (een more tailored
activities where one retailer
heavily discounts a commodity
product, such as mil", for a
couple of days a wee", Among
the categories aggressively
promoted in this way have (een
laundry=detergents, shampoo
and pasta,
The on*going promotion of
national (rands has meant
private la(el sales have sta(ilised
in 'reece,
Re"ai* price /ar% an a..re%%i+e pro!o"ion% i!pac"e price% /i"# #ou%e#o*
an per%ona* care %u--erin. par"icu*ar*& ,a*&1 Ye" i%coun"in. an ea*%
#e*pe +o*u!e %a*e% increa%e +er& %*i.#"*& ,& 01281
Average Price Increases (y $ategory F 'reece
Near*on*year 7 change in average
)ood Average *5,57
Non*)ood Average *B,87
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
21
The +,S, economy slipped
(ac"wards (y 5,87 in the first
Cuarter of @85B, according to the
+,S, $ommerce 0epartment,
following the coldest winter in @8
years which hit consumer and
(usiness spending,
The set(ac" illustrated how the
+,S, recovery remains as delicate
as Europe1s, especially as
consumer expenditure accounts
for more than two*thirds of all
economic activity,
+,S, shoppers are very
technically savvy and are
entering stores armed with
mo(ile apps and offers on their
mo(ile devices, Some stores are
allowing customers to pay for
their groceries using the internet
currency %itcoins,
Net consumers still demand
excellent in*store customer
service or they will switch
retailer,
4alue sales were up 5,;7 with
the chilled and fresh, and
am(ient food categories driving
growth as food sales -5,:7.
accelerated faster than non*food
-5,87., Price rises were possi(le
in (oth sectors with the non*food
average up @,87 and food (y
5,B7, Among the categories
seeing a(ove average price rises
were pet food=care, chilled and
fresh food, and confectionery,
When com(ined, food and non*
food volume sales were flat, up
8,@7, with food performing
(etter, In non*food, retailers
attempted to (uc" a fall in unit
sales with an increase in
promotions, particularly in
household and personal care,
while the num(er of deals on
food remained flat, The
exceptions here were fro>en food
and non*alcoholic drin"s,
Wal*#art remains the largest
retailer followed (y /roger $o (ut
convenience stores, dollar stores
and pharmacy chains such as
Walgreen are ta"ing a greater
mar"et share of grocery sales,
There is strong competition
(uilding in the +nited States to
offer same*day home delivery
and the (ig internet players are
getting involved, Ama>on)resh is
now availa(le in Seattle, &os
Angeles and San )rancisco, while
Price ri%e% /ere po%%i,*e in ,o"# %ec"or%1 A!on. "#e ca"e.orie% a,o+e
a+era.e price ri%e% /ere pe" careE c#i**e an -re%# -ooE con-ec"ioner& an
a*co#o*ic rin:%1
Uni"% on pro!o"ion #a% increa%e ,& 0118 in "#e Uni"e S"a"e% urin. "#e
*a"e%" &ear1
Trends in the +nited States
Average Price Increases (y $ategory F +nited States
Near*on*year 7 change in average
+nits on Promotion (y $ategory F +nited States
$ategory la(el a(ove each (ar shows latest year 7 volume on deal
)ood Average I5,B7
Non*)ood Average I@,87
PRICE AND PROMOTION IN WESTERN ECONOMIES SPECIAL REPORT
Trends in the +nited States
22
'oogle is wor"ing with pharmacy
chain Walgreens to deliver food
orders the same day, etailers in
Europe will (e watching closely to
see how cost*effective this
service is and whether it really
does provide retailers with a
competitive advantage,
Not everyone has suffered during
the recession, +,S families that
have maintained their level of
disposa(le income have ta"en
advantage of pricing and
promotions to trade up in many
categories,