Grocers warn on level of promotions

The record level of grocery promotions cannot rise higher than its current level, Morrisons chief executive Dalton Philips warned this week, as the grocers move into the key Christmas trading period.

Speaking to Retail Week at the IGD Convention on Tuesday, Philips said: “Promotions are running at about 40% at the moment and I don’t see that it can get any higher. Maybe we’re going to see deeper cuts [in prices] so promotions will get deeper as opposed to broader.”

Tesco commercial director Richard Brasher, who takes up a new role as UK chief executive next March, said all the grocers have been “using promotions to chase trade” and “we would prefer more stability”. He added: “I hope the industry becomes less promotional.”

This week Nielsen said that grocers sold a record amount of goods on promotion in the four weeks to October 2, after bringing forward deals on Christmas-related products. It said 37% of all grocery sales by value were on promotion in the period.

Nielsen senior manager, retailer services Mike Watkins said: “We saw unprecedented high levels of promotions in our stores last November as the Christmas sales push peaked at just over 36% but this month’s figures top even that, eight weeks earlier than last year’s seasonal peak.”

The findings echo Sainsbury’s chief executive Justin King’s comments last week, when he estimated that the level of promotions across the industry was at a record high, between 35% and 38%.

Philips was cautious about the Christmas outlook, but confident Morrisons had lined up “a very good Christmas campaign”.

He said: “People say the British are going to go out and have a great Christmas irrespective [of public spending cuts and the VAT rise] but I’m not so sure. I think they’re going to save.”

He said: “We’re more exposed to the north than some of our competitors and that might be a challenge with the cuts. Already our average customer now has close to £100 less in their pockets [a month] than they did a year ago.”

But he is adamant Morrisons is “still growing like-for-likes ahead of the broader grocery market” and added: “We’ve won Christmas four years in a row [in market share] and we intend to win it for a fifth”.

Brasher was slightly more optimistic for Christmas, saying “food shopping is an area where people can treat themselves without breaking the bank”.

But he added: “I don’t think there’ll be a lot of frivolity at Christmas. I don’t think people will be buying quirky things as a joke. I think they will be quite sensible with their money.”

The Co-operative is to drop the Somerfield brand from its advertising in the next few weeks as the grocer continues with its integration. Speaking at the IGD Convention on Tuesday, Tim Hurrell, managing director, food retail for the Co-operative Group said the integration was on track and last week it completed its programme of converting all Somerfield’s own-brand lines to the Co-op brand.