As pressure on consumer wallets continues, keeping the lid on volume growth, European retailers have joined national brands by increasing the share of promotions for more private labels. This is the key finding of Circana’s Demand Signals Category Monitor, covering sales of more than 175 fast moving consumer goods (FMCG) categories and 2,000 product segments across the six largest markets in Europe (for the 12 months to end of February 2024 compared to the previous 12 month period).
According to Circana data, total FMCG volume sales declined -1.2%.
Strategies to boost volume sales by brands and retailers included increased promotional intensity by +15% compared to the same period in 2023. This slowed sales decline to -0.3% from -1.4% in the previous month and meant that for the first three months of 2024, volume sales grew marginally, by +0.7%. Nonetheless, this was still an overall decline for the full 12 month period Circana analysed.
21% of FMCG goods are now sold on promotion. Despite this, trade efficiency dropped, illustrating that promotions do not always generate volume uplift.
As private label pricing moved closer to national brands – after an extended period of raising prices by retailers and increased promotional intensity by brands – it is still higher than in 2022, suggesting that relative affordability is crucial to maintaining private label sales.
Retailers have responded with increased promotions across every channel as they too sought to boost weaker than expected volume growth. This was particularly pronounced in the discounters, where volume sold on promotion was up by as much as 68%. Private label promotions increased by 36% in hypermarkets and 25% in supermarkets.
Even with the increase in promotions by retailers, the price gap between private labels and national brands remains narrow, meaning that the savings afforded to shoppers for switching to private labels is reducing.
“Reflecting on the response to growing volume losses back in 2023, we can see that it was the national brands that fired the promotional starting gun all along,” commented Ananda Roy, senior vice president of strategic growth insights EMEA, Circana. “As a result, strategy-obsessed and consumer-focused retailers followed. However, as both manufacturers and retailers rush to shore up volumes by reducing prices and increasing promotions, the intended effect is likely to be dampened by high absolute prices, low innovation, competitive response and growing private label penetration.
“Over-saturating shelves with deep deals only risks increasing subsidisation. Volume uplift from promotions tends to be short-lived and put simply, ‘more of the same’ is not a solid volume growth strategy. True volume growth is unlike to return until the end of this year, especially if it is based on more of the same. Manufacturers and retailers must look to organic growth through shopper activation, brand experience and one of marketing’s most dynamic levers, innovation.”
Despite higher prices, shoppers continue to favour private labels – volume sales grew to 64% in total FMCG in the year to date, up two %age points compared to 2023.
The +3.6% volume growth compares favourably to the volume growth sales decline seen by national brands that lost -3.9%.
Other highlights include:
- The UK was the only market to post both volume and unit sales decline as growing Private Labels sales did not offset volume losses in national brands. The Netherlands joined Spain, Germany & France in growing volume in YTD compared with a year ago; responding to lower inflation.
- National brands carried more promoted volume across channels where their promotional volume share in the discounters was as high as 40%, 34% in hypermarkets, 32% in supermarkets and 28% in convenience channels.
- Private label penetration is low in alcohol, confectionary and drinks categories where image, equity and NPD have propelled brands forward. Baby food and household care categories were revealed as those most vulnerable with private label unit share growth of +3.2 and +percentage points respectively. Champagne, frozen poultry and meat substitutes were the top promoted segments with c50% promoted volume. Top five segments that drove unit sales decline were chocolates (-52Mn), juices (-39Mn), chilled/fresh desserts (-30Mn), pet food (-26Mn) and ambient desserts (-26Mn). With chocolate among the top segments for value growth, significant unit sales decline suggests downtrading to lower priced or private label options.
- Among edible categories, unit sales decline slowed to -0.3% in the year to Feb’24 from -1.4% in Jan ’24; while in non-edibles, unit sales grew +0.5% driven by growth in Household & Personal Care and smaller packs to boost sales in discretionary segments.
- Value sales in the year to Feb’24 grew +2.7%, up 100 basis points in 1 month, as volume prices rose +1.9% in the corresponding period. Absolute prices remain high impacting sales.
- The top 5 segments for value growth were Chocolates (+€185Mn), Laundry Detergents & Aids (+€156Mn), Chilled/Fresh Meat (+€143Mn), Cooking Oil (+€135Mn) and Chilled/Fresh Vegetables (+€114Mn).
