Rising Supermarket Prices: How Do Brand Managers Overcome The Headache?

The New Year has been far from happy for many brand managers. With Hogmanay hangovers still receding, fresh headaches arrived with press headlines such as: “Prices start to rise as shops feel the impact of fall in sterling[i]”. So, what impact is this going to have on consumer behaviour and how should brands respond?  

One of the many aftershocks of Britain’s future exit from the EU has been a sharp and prolonged fall in the price of sterling. Since the UK imports around half its food, this means that rising food bills will hit the pockets of British consumers. Commentators, including former Sainsbury’s boss Justin King[i],  suggest that supermarket prices overall will increase by five percent over the first half of the year.

Stand-off

Efforts on the part of manufacturers to pass on the rising cost of imported raw materials have already caused several stand-offs between suppliers and supermarkets – most notably the ‘Marmitegate’ controversy in October[ii].

As the Drum reported[iii], Tesco may have won that battle but it’s unlikely to win the war. As a recent press article noted, “the pressure on the multiples to accept – and pass on – further costs to consumers is growing[iv]. And while average wages in the UK are also set to increase this year[v], they will do so at a rate around half that at which supermarket prices are expected to rise.

With less money in their pockets, what impact is this going to have on the in-store behaviour of shoppers, and how should brands respond?

Brands Launching NPDs

With price inflation, shoppers will notice that the cost of their ‘basket’ has gone up, making them more discerning in how they spend and an increased likelihood of reverting to ingrained buying behaviour. They are less likely to be inclined to risk experimenting with new brands or products – putting added pressure on brand’s NPL activities.

With retailers increasingly pushing their own lines at the shelf – and with in-store promotions increasingly becoming a thing of the past – educating consumers on your new product and motivating them to buy your product before they enter the supermarket is particularly important for NPDs. Introductory promotions can overcome the perceived risk of buying a new product, and distributing samples via digital / mobile channels can help reach and motivate consumers to try your product before they reach the store.

Brands Competing With ‘Value’ Ranges

We’ve also seen a steady growth in own-label brands at both ends of the price spectrum[vi] – and the temptation to switch to value ranges will only increase as prices rise.  This will make it harder than ever for brands to retain the loyalty of even diehard brand advocates.

To stop consumers defecting to own-brand labels, communicating the superior quality and ‘brand values’ of your product through above-the-line activity is crucial. Ideally this should be paired with targeted promotions that soften the blow of price increases for loyal buyers, to encourage them to keep buying. These might consist of loyalty rewards or crescendo offers (e.g. £2 off when you buy 3 products over 1 month).

Think Mobile To Start The Customer Journey

If you are responsible for generating – or maintaining – brand loyalty in the face of rising price inflation, then brand discovery apps like Quotient’s Shopmium may be exactly the answer you are looking for. Shopmium engages with adventurous and socially-engaged consumers that are actively seeking out new products and exclusive offers. It might just help you put the happiness back into the New Year.

[i] http://www.telegraph.co.uk/business/2017/01/04/prices-start-rise-shops-feel-impact-fall-sterling/

[ii] http://www.bbc.co.uk/news/business-38074616

[iii] http://www.standard.co.uk/news/uk/prices-set-to-rise-at-all-uk-supermarkets-in-wake-of-marmitegate-a3368296.html

[iv] http://www.thedrum.com/news/2016/10/15/tesco-might-have-won-marmitegate-battle-it-s-certainly-not-won-the-war

[v] http://www.foodmanufacture.co.uk/Manufacturing/Food-inflation-set-to-return-in-2017

[vi] http://www.telegraph.co.uk/business/2017/01/02/wage-growth-set-return-2017/

[vii] http://www.thedrum.com/news/2016/08/23/uk-supermarket-promo-sales-hit-six-year-low-own-brand-focus-endures

Quotient Technology (formerly Coupons.com) is a leading digital promotions and media platform that connects FMCG brands, retailers and consumers. We have recently launched Shopmium in the UK, a mobile-first proposition that enables FMCG brands to win on mobile. Give me a call on +44 (0) 208 865 1999 or send an email to ssankey@quotient.com.

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About the author

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Stuart Sankey

European Sales Director

Passionate about promotions. I have over 15 years’ experience of thinking up, selling in, creating and delivering promotional campaigns and strategies right across the world in multiple industries. Although my focus now is on the FMCG...Read more

+ 44 (0) 20 8 865 1999