Promo sapiens – Newspaper Kommersant No. 209 (7410) dated 11/11/2022

The decrease in purchasing activity is forcing retail chains and suppliers of products and consumer goods to attract traffic more actively. According to NielsenIQ, by the end of September, market participants’ investments in promo exceeded last year’s level by almost 15%, and lost income from the sale of discounted goods reached 86 billion rubles. Until the end of 2022, the share of promo sales in stores can reach a historical high, experts predict.

Lost income of retail chains and suppliers from the sale of food products with discounts offline in September reached 76 billion rubles, which was a record since the beginning of this year, follows from NielsenIQ data. According to analysts’ estimates, year-on-year investments by market participants in promos in the food group increased by 12%. In non-food categories, the shortfall in income of chains and suppliers in September also reached the maximum for the year of 10 billion rubles, and investments in promo increased by 1% y-o-y.

Offline promo investment resumes growth, NielsenIQ points out. As a result, after a decline in March-April, the share of discounted food products in money terms reached 61%, the highest since September 2020. In non-food categories, the figure is estimated at 54%, the highest level since March 2021. According to analysts, 41% of consumers are looking for goods at reduced prices to save money. For 89%, the price is the main selection criterion, and 75% make a purchase decision taking into account the discount. Alexey Popovichev, Executive Director of Rusbrand, recalls that prices for many products increased this spring due to the growth of foreign exchange rates, and then, after the change in the situation, the price tags were adjusted due to discounts.

According to NielsenIQ data, according to the results of the first three quarters compared to the same period in 2021, investment in promotions in the segments of baking ingredients, confectionery, instant food (except noodles) and meat segments grew the most. In the non-food group, plasters, condoms, razors and blades, and children’s products were the leaders in terms of investment growth in promotions.

The largest networks in their reports for the third quarter noted the negative impact of the increase in the share of promotions on sales. Lenta’s gross profit for this period decreased by 5%, to 26.5 billion rubles. year by year. Gross margin of X5 Group (Pyaterochka, Perekrestok, Chizhik) decreased to 24.3% in the third quarter from 26.2% a year earlier. This is the result of promo expansion, Veles Capital analysts believe.

Magnit told Kommersant that the share of promo in the network in the third quarter grew compared to the previous quarter and the same period in 2021, but is “significantly lower” than the figures given by NielsenIQ. “The company has increased its investment in promos to support customers,” says a Magnit representative. X5 said that they maintain the necessary level of investment in discounts, and the current share of promo for the group is comfortable. In addition, Pyaterochka is actively developing the “low prices every day” principle, X5 added. Metro said that in addition to the promotions, they reduced the prices of 12,000 items on a permanent basis by an average of 30%.

Deputy Chairman of the Board of “Rusprodsoyuz” Dmitry Leonov says that, despite the decline in profitability, lack of working capital and other problems of suppliers, it is rather difficult to refuse deep discounts in a situation of decreasing purchasing power. According to him, clear planning and recording of marketing campaigns are very important for suppliers in such conditions, which is “extremely rare” today.

Mikhail Burmistrov, General Director of Infoline-Analytics, notes that the promotional race of the largest networks is also spurred on by the development of online sales, where the share of goods with discounts is traditionally higher. In October-November, the promo share in the FMCG market could break the all-time high, he predicts. Dmitry Leonov adds that discounts based on the remaining shelf life of the goods can reduce dependence on promotions, which will allow you to work without delay write-offs.

Anatoly Kostyrev