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Confectionery promotions on the decline as discounts risk becoming ‘self-destroying’, says IRI

By Oliver Nieburg contact

- Last updated on GMT

Volumes of confectionery sold on promotion as high as 40-70% in some Western markets, finds IRI. ©iStock/vvvita
Volumes of confectionery sold on promotion as high as 40-70% in some Western markets, finds IRI. ©iStock/vvvita
Volumes of confectionery sold on promotion have fallen in the past year in Western markets, according to market analysts IRI.

The level of price reduction in confectionery has also dropped in many major markets such as the US and UK.

The findings form part of IRI’s latest report ‘Price and Promotion in Western Economies’,​ which analyzed deals and offers for food and non-food categories in ten developed countries as well as the entire Europe region.

Confectionery prices up 2.4% in Western markets

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The average volume price of confectionery in Western economies analyzed by IRI rose 2.4% for the 52 weeks up to November 7, 2016. Confectionery had the biggest increase in prices of all categories analyzed. The average increase for all food was 0.6%.  “Many confectionery products have been repackaged into smaller sizes which often brings a higher price per kilo,”​ said IRI’s report.

Deals reaching saturation point?

Tim Eales, director of strategic insight at IRI, told ConfectioneryNews that offers on confectionery had become so commonplace that discounting was struggling to inspire brand loyalty.

He said the original intention of promotions was to bring in new shoppers to your brand and to treat regular buyers.

"But, once you get to the levels of 50, 60, 70, 80% on some categories on deal, all of that goes completely out the window. What you're doing is training people to jump from one brand to another depending on what's the cheapest. This is where it's becoming a self-destroying thing."

In Europe, 33.2% of confectionery volumes were sold on promotion for the 52 weeks ending November 5, 2016, a 1% decline on the prior year.

UK confectionery promotions dropped 2% over the period with 61.9% of volumes being sold on promotion.

US confectionery promotions also declined 0.3% with 41% of volumes sold on promotion for the latest period.

Volumes of confectionery sold on promotion: Selected markets

[% Volume on Deal]

52 weeks up to Nov, 5, 2016

versus last year

Europe

34.2%

-1%

UK

63.9%

-2%

Germany

31.5%

-0.9%

US

41.3%

-0.3%

Australia

66.1%

+1.5%

Source: IRI

Redirect funds to NPD, says IRI

Eales said manufacturers often have to pay to secure promotion slots at retailers and said funds may be better spent on NPD and brand building.

"We keep hearing from the manufacturers that the amount of trade promotion they are doing and the amount of money it's costing them is getting a bit out of hand. And it's beginning to effect what they can spend in advertising and new product development.

Confectionery value sales growth outpaces other categories

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Value sales growth in confectionery has outpaced all other food and non-food categories in the Western economics analyzed by IRI for the 52 weeks up to November 7, 2016. Confectionery sales were up 2% for the nine countries combined compared to 0.6% on average for all food. The Netherlands, Spain and Germany were driving growth in confectionery sales in Western markets, but New Zealand was the fastest growing confectionery market analyzed.

"The companies won't keep going if they don't launch enough new products to keep the wheel turning."

"It’s not very healthy to train your public to continuously expect offers to the point where you can do all your shopping on promotion."

Level of price reduction shrinks

The weighted price reduction for confectionery on promotion in the US has gone from 12.6% last year to 12.3% this year.

The level of discount in UK chocolate confectionery and sugar confectionery has also dropped. Around 68% of UK chocolate volumes were sold on promotion for the latest period with the price reduction declining from 31.6% to 30.4%.

This goes against the UK trend in all food and non-food categories, where the weighted price reduction has increased from 26.7% to 27.5%, but the volumes sold of promotion are falling.

Eales said confectionery may have bucked the trend due to the current sentiment around sugar.

"Maybe it's not seen as being quite as good to make these discounts overly generous when you're selling something like that [high in sugar]," ​he said.

For its Western economies report, IRI analyzed the following markets as well as the entire Europe region : France, Netherlands, Italy, Spain, UK, Germany, Greece, USA, Australia and New Zealand.

Related topics: Markets, Chocolate, Candy, Gum

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