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2012 a Brutal Year for Larger Supermarket Suppliers

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Auckland: 8 April 2013

  • 59% of groceries purchased on promotion
  • Top supermarket suppliers declined in sales by $45 million
  • Top supermarket suppliers cut advertising spend by 21%

It was a tough year for larger supermarket suppliers in 2012 with 59% of groceries purchased on promotion, the highest percentage in the developed world, shows the latest report from Nielsen, a global information and measurement company. The report recaps developments from 2012 and provides insights into the consumer, retail and media trends shaping the New Zealand marketplace.

Rob Clark, Managing Director, Nielsen said, ‘After a period of rapid growth in 2011 driven by commodity pricing and GST increases, the supermarket sector struggled to grow in 2012. For companies with weak innovation pipelines, aggressive trade promotion is the easiest way to try and grow market share, however overall, this fails to grow a category.’ Clark continues, ‘These trade promotion strategies are creating new consumer behaviours. Shoppers now simply wait for one of their repertoire of brands to be on promotion before purchasing a product.’

Nielsen’s report, The Year That Was: How understanding consumers in 2012 will help you plan for tomorrow, identifies that the top five supermarket suppliers collectively declined in sales by 2% or $45 million and the top 100 supermarket suppliers had no growth (see Chart 1). In addition, the top five supermarket suppliers reduced their advertising spend by 21% compared to the previous year. However, the top 101 to 200 supermarket suppliers grew by 5.5 percent ($43 million) in 2012.

Clark observes, ‘The real issue for supermarket suppliers is that budgets previously assigned to product innovation or advertising are now being channelled into price promotions’.

Nielsen’s Executive Director, Advanced Analytics Consulting, Vicki Riggans explains further, ‘Price discounting is not an investment in this market, or indeed any market, but a cost of doing business. Accordingly, suppliers need to ensure trade promotions are constantly optimised. If product baseline shares (sales in absence of promotions) are less than their market share they are vulnerable to pricing pressure. Therefore baseline driving activities such as new product development and product repositioning are needed to stimulate brand health.’

The grocery category with the largest decline in 2012 was fresh milk and cream with $25 million less in retail sales. The supermarket categories with the most growth were confectionary ($23 million) followed by breakfast cereals, including liquid breakfast products ($14 million), and energy drinks ($14 million). (see Chart 2).

Rob Clark concludes, ‘The key driver of success for growth categories was innovation, proving that new product development can work and is central to suppliers breaking the cycle of price promotions.’

Tapping into its unique data sets and incorporating commentary from expert analysts the report provides in-depth insight into the key consumer, media and retail trends across the New Zealand market for 2012. The report details major developments in consumer behaviour, technology and media consumption, market dynamics, grocery and liquor trends.

About Nielsen

Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and related properties. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, visit www.nielsen.com.