Food Trade Promotions Moving to Every-​Day-​Low-​Price Model

Shoppers are proving stubborn about holding onto their recession-​induced shopping behaviors. frozenThis tendency is making it challenging for CPG manufacturers and retailers to increase profit margins and revenue. These marketers will be adjusting their trade promotion and pricing strategies to improve their outcomes this year.

One problem CPG marketers face is the consumer mindset of always wanting to buy items that are on sale. Shoppers have also cut back significantly on buying impulse items as well as running into the store to pick up a quick meal – two types of events retailers have long counted on to improve profits. At least half of shoppers are also willing to travel to a warehouse or discount store to purchase specific items for a better price.  These factors suggest that marketers are dealing with savvy shoppers who stick to prepared lists.

While marketers have tried to tweak their promotional strategies with respect to discounting, shoppers have figured out quickly that many of the new promotions aren’t as good as they used to be. Shoppers are also waiting until their favorite items go on sale and then they stock up. For example, 60% of carbonated beverages were sold on promotion in the past year. As a result, CPG marketers are getting less lift from their promotions and larger volumes of products are being sold less profitably.  In 2013, CPG manufacturers will shift trade promotion funds to shopper and digital marketing. At least 16% of total CPG marketing is now directed to shoppers.

Analysts say this trend will lead retailers to move in the direction of an Every Day Low Price (EDLP) model.  Retailers will still offer promotions but timing will be key. The results of Acosta’s Trade Promotion — A Shift in the Lift report show that in a 4‑week manager’s special non-​holiday promotion, the second week yields the largest lift for grocers. From now on, these types of promotions will not be focused on price but will instead try to attract new buyers. Going forward, CPG marketers will be paying close attention to which promotions work best and manufacturers are likely to work with retailers to ensure the best outcomes for both parties.

[Source: Trade Promotion – A Shift in the Lift. Acosta. November 2012. Web. 13 Feb. 2013] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.