Supermarkets put too much effort into promotions that switch consumer focus between categories rather than increase consumption, according to one senior retail director.
Speaking at the Sainsbury’s Farming Conference last week, food commercial director Paul Mills-Hicks said that the mindset of the customer is dominated by promotions, to the detriment of other more valuable lines. “Promotions are a bad thing, they don’t increase consumption,” he said.
“I would challenge all the supermarkets that we put too much effort into promotions that don’t increase sales, they just switch concentration betweencategories.”
The news comes after FPJ reported last week that growers have criticised lower everyday prices on non-branded dessert apples, including Sainsbury’s £1 bags of Gala, Braeburn and Cox, which are creating “much lower” returns to growers than previous seasons.
“Order quantities are a big frustration – if we’re allowing promotions to determine volumes, all we do is spike demand. That in turn drives inefficiencies in the value chain,” added Mills-Hicks.
And he said that “promotional noise” dilutes the effect of premium lines such as Fairtrade and British produce, which generate better returns.
“Where we should be getting credit for quality, customers are getting distracted by promotions. If we don’t get credit for these lines – through higher sales – it’s not worth it in the long term and it essentially becomes charity,” he said.
Mills-Hicks was responding to a question from the floor about how Sainsbury’s will drive cost from the supply chain. He was joined in the first session by the retailer’s brand director Judith Batchelar and chief executive Mike Coupe, who gave a business update to the audience of around 650 farmers, growers and suppliers.
Coupe said that in today’s market, 68 per cent of grocery shopping is done in out-of-town superstores, nine per cent is done with the discounters, 24 per cent is in convenience stores and five per cent is online.
He predicted that by 2022, the percentage of shopping done in superstores will have dropped to 58 per cent, but added: “The death of the superstore is largely exaggerated. Most people still do most of their shopping in large out-of-town stores.”
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