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Insight of the Day: Promotional boosts fail to lift volume sales in Europe

Here's a summary of the article, highlighting the key issues in the European FMCG market:

The State of the Market

  • Consumer spending is under pressure, leading to a decline in volume sales (-1.2%) for fast-moving consumer goods (FMCG).

  • Both retailers and brands have increased promotions to boost sales, but gains are marginal (+0.7% for the first three months of 2024)

  • Promotional strategies are losing efficiency for driving volume growth.

  • Despite the price gap narrowing, private label products continue to gain market share, capturing 64% of total FMCG sales.

Retailer Response

  • Retailers have boosted private label promotions across all channels (especially discounters) to encourage sales.

  • Promotions are most prevalent in hypermarkets and supermarkets.

  • Still, the price difference between national brands and private labels is diminishing, impacting the attractiveness of private label options.

Key Takeaways

  • Simply increasing promotions isn't enough: Retailers and brands need fresh strategies to drive sustainable volume growth.

  • Focus should shift to innovation, customer engagement, and brand experience for long-term success.

  • Private label penetration is highest in categories like baby food and household care, where brand image is less dominant.

Here's a breakdown of the marketing implications based on the trends outlined in the article:

Challenges for Marketers:

  • Price Sensitivity: Consumers are highly focused on value due to inflation. Marketers must balance promotions with strategies that convey worth beyond just price.

  • Promotional Saturation: The over-reliance on promotions is making them less effective. Marketers need to differentiate their offerings and messaging to cut through the noise.

  • Private Label Growth: National brands face strong competition from private labels, requiring them to emphasize their unique selling points and justify any price premium.

Opportunities to Explore:

  • Innovation: New products, experiences, and formats can excite consumers and drive sales, especially if they address current needs and frustrations.

  • Value Beyond Price: Emphasize quality, convenience, brand values, and personalized experiences to justify pricing and build brand loyalty.

  • Targeted Promotions: Use data-driven insights to create tailored offers and promotions, ensuring they reach receptive consumers effectively.

  • Brand Storytelling: Invest in narratives that connect with consumers emotionally and highlight a brand's distinct value proposition.

  • Channel Focus: Optimize marketing for diverse channels and prioritize those where private label competition is lower or where consumers seek brand differentiation (Ex: Alcohol, Confectionery, Drinks).

Key Takeaways for Marketers:

  1. Re-Think Promotions: Find more creative and targeted ways to offer value rather than solely relying on discounts.

  2. Emphasize Brand Value: Communicate the unique benefits and emotional appeal of your brand to stand out from private labels.

  3. Innovate Constantly: New offerings and experiences can break through the clutter and create excitement.

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