Fewer deals but brands not budging on price, says IRI
The IRI’s new Big Question report on the grocery price war revealed it has saved UK shoppers £9.3bn over three years.
Despite rising inflation and widespread predictions of soaring supermarket prices, the price war with discounters continues to keep the everyday base prices of grocery products sold in the mainstream supermarkets lower than at the beginning of 2014.
This is the finding of a new study released by IRI, a provider of data and predictive analytics for fast-moving consumer goods (FMCG) manufacturers and retailers.
The study, IRI Big Question: The grocery price war and outlook for 2017, is based on analysis of actual sales of food and drink products in the UK’s major supermarkets.
It reveals that while average prices have risen – by 1% in the last year – the increase is almost entirely due to a decreased use of trade promotions. There were 12% fewer promotions in 2016 as multi-buys (such as three for the price of two deals) disappeared from many shelves and the level of discount offered by promotions reduced.
Manufacturers and retailers have opted, where possible, to reduce the promotional savings that shoppers can benefit from, instead of increasing everyday base prices.
Although manufacturers and retailers have had to contend with increased costs, the survey found the base prices of branded grocery items (that is the price excluding any promotional discounts) remained lower than they were three years ago.
Martin Wood, head of strategic insight, retail at IRI UK and co-author of the report, said: “With fewer deals on grocery items, the cost of the shopping basket is more expensive, but only by 1.2%. Importantly, the increase kicked off at the very end of last year and is not yet due to retailers increasing everyday prices.
“The grocery industry has not only reduced the number of deals that they run throughout the year, but also cut back the deepest levels of discount that used to be given. There were over half a million fewer multi-buy opportunities for shoppers in 2016 compared with 2015, reducing particularly during the last six months of the year.”
Despite this small rise in the average price of food and drink, shoppers have continued to be the winners, he said, saving £9.3bn over the past three years from price cuts, which is equivalent to £2.90 per household for every week during that period.
“Manufacturers are caught up in the retailer price war, but this hasn’t stopped retailers from increasing the price of their own-label ranges,” added Wood.
IRI expects the number of promotions to continue to reduce and to be more price-off than multi-buy. Pressure on margins will also lead to more ‘shrinkflation’ on the size of products and other initiatives to reduce operational costs.
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