Supermarket promotions ‘lose suppliers money’

Most supermarket price promotions lose suppliers money

It’s official: supermarket product promotions lose money for the manufacturers that make them, according to a three-year study from Nielsen covering  212M promotions across 5M fast-moving consumer goods (FMCG).

Nearly 60% of promotions made a net loss, while food and non-alcoholic drink promotions fared the worst and the situation is getting worse, claimed the market research firm.

Worldwide, an estimated £314bn ($500bn) is spent on trade promotions, with FMCG manufacturers investing up to 20% of their revenue on such promotions.

But over the past three years the average loss associated with promotions in major western supermarkets has grown worse, discovered the researchers.

Worst promotional returms

After analysing 200 categories in the UK, the researchers established the worst promotional returns were on fresh fillings and pâtés last year. The best promotional returns were on skin cosmetics, toilet paper and, most efficient of all, dishwasher detergent, which made money 78% of the time.

Nielsen leader for sales effectiveness in Europe Paul Walker said: “Most FMCG players acknowledge the ineffectiveness of trade promotions, but until now, their efficacy has largely been a matter of guesswork.

“That’s no longer the case. For the first time, Nielsen has worldwide data to show how effective their promotional spend is. By looking at the retail sales of each category, we can gauge the potential for improved performance before the investment is made. There are opportunities across the store.”

Worst promotional returns
  • Fresh fillings
  • Pâtés 

The proportion of UK trade promotions making a loss, at 58%, was slightly better than the global average – but still worse than in Spain, Germany, Canada and Italy, and level with France.

The loss rate in the US was even higher at 71%.

Pinpoint opportunities to improve

Nielsen claimed it could distinguish accurately between profitable promotions and those performing poorly to help manufacturers pinpoint opportunities to improve. “Understanding what is and isn’t working is allowing us to help our manufacturer clients become more strategic, less tactical and ultimately get more from their trade investments,” said Walker.

This is the first time the returns on trade promotions have been quantified on such a substantial scale. Nielsen analysed the performance of nearly 212M promotion events between 2012 and 2014 for 5M products, across multiple channels from seven countries – US, UK, Germany, France, Italy, Spain and Canada.

The research covered retail sales totalling more than £0.94tr ($1.5tr).

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