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Attitudes towards Pricing and Promotions in Food and Drink - UK - April 2013

“The potential danger entailed by supermarkets purely focusing on price is that consumers could develop a level of apathy towards such pricing strategies. More than a third of consumers agree that ‘Price matching removes the need to think about price when grocery shopping’, indicating that price matching no longer serves to differentiate a supermarket brand in the eyes of a minority of consumers. This highlights the need for the grocers to step up their game in other areas to ensure standout, including reassuring shoppers of their quality credentials as part of the value-for-money proposition, and exploring wider themes in advertising.”

– Amy Price, Senior Food & Drink Analyst

Some questions answered in this report include:

  • What pricing and promotional mechanics appeal most to consumers?
  • Has price matching levelled the competition in the retail market?
  • Can the operators benefit from consumer confusion on pricing and promotions, as implied by the media?
  • Are concerns over waste a deterrent to uptake of promotions?

 

Bargain hunting has become ingrained among Britons, with more than seven in ten saying they like the ‘thrill’ of getting a bargain, demonstrating how brands and retailers have conditioned shoppers to expect promotions when buying food and (non-alcoholic) drink.

Promotions have in many areas begun to in effect discourage purchases outside promotional periods as more than half of consumers only buy certain products/brands when they are on promotion. Arguably, shoppers have come to see the discounted price as the ‘real’ price of the products in these cases.

However, with more than half of consumers agreeing that quality is more important than price, an emphasis on quality cues could add value to the market, even during times of austerity. A sizeable minority are willing to pay more for a product if the extra money went to the producer, pinpointing scope for selected products to raise prices, where they can prove that the cost benefits other operators.

Rising inflation has further heaped pressure on consumer finances since the recession. Food manufacturers and retailers have looked to appeal to customers during times of low consumer confidence and squeezed incomes through deep and more frequent price promotions.

The grocers have responded to consumers’ emphasis on low prices through highlighting their efforts to offer lower prices – arguably appealing to the nearly seven in ten who believe that it is the ‘duty’ of the supermarkets to keep prices as low as possible – as seen in Aldi’s ‘Like Aldi’ advertising campaign, Asda’s Price Lock guarantee across staple products such as bread, milk and eggs or price-matching schemes as seen with Tesco’s Price Promise.

This report focuses on consumer attitudes towards the price of food and non-alcoholic drinks in the UK retail market and the role of promotions, primarily focusing on the supermarket multiples.

The discussion excludes pricing and promotions of takeaway and delivered food bought from foodservice outlets as well as those in other foodservice categories such as restaurants and pubs.

 

Liqueurs - UK - January 2012

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • Market factors
              • Consumer spending remains under pressure
                • Food prices remain high
                  • Growth in lower socio-economic groups means that price will remain a key consideration
                    • Companies, brands and innovation
                      • NPD focuses on economy lines
                        • Figure 1: Trends in economy and premium claims, as a percentage of all UK food and non-alcoholic product launches, 2009-12
                      • Price/brand matching gains momentum
                        • Supermarkets cut expenditure while Aldi increases adspend
                          • The consumer
                            • Multibuys typically used by more than seven in ten
                              • Figure 2: Promotions typically taken advantage of, February 2013
                            • Consumers rate ‘free’ promotions over ‘save’ and multibuys
                              • Figure 3: Preferred promotional deals on selected products, February 2013
                            • Promotions fuel purchasing for majority of consumers
                              • Figure 4: Attitudes towards promotions on food and non-alcoholic drink, February 2013
                            • More than seven in ten love the thrill of a bargain
                              • Figure 5: Attitudes towards the price of food and non-alcoholic drink, February 2013
                            • What we think
                            • Issues in the Market

                                • What pricing and promotional mechanics appeal most to consumers?
                                  • Has price matching levelled the competition in the retail market?
                                    • Can the operators benefit from consumer confusion on pricing and promotions, as implied by the media?
                                      • Are concerns over waste a deterrent to uptake of promotions?
                                      • Trend Application

                                          • Power of One
                                            • Why Buy?
                                              • Generation Next
                                              • Market Drivers

                                                • Key points
                                                  • Consumer spending remains under pressure
                                                    • Figure 6: Consumer expenditure at constant 2012 prices, 2007-17
                                                  • Appealing to a price-sensitive consumer
                                                    • Figure 7: Agreement with shopping-related lifestyle statements, 2008-12
                                                  • Food prices remain high
                                                    • Figure 8: Change in UK food prices, 2011-12
                                                  • Environmental factors are understood by the majority of consumers
                                                    • Demographic changes will impact the market
                                                      • The rise in lower socio-economic groups means that price will remain a key consideration
                                                        • Growth in smaller households presents opportunities for specific targeting
                                                          • Increasing numbers of over-65s pose opportunity
                                                          • Who’s Innovating?

                                                            • Key points
                                                              • A rise in economy claims reflects consumers’ financial situation
                                                                • Figure 9: Trends in economy and premium claims as a percentage of all UK food and non-alcoholic product launches, 2009-12
                                                              • Own-label NPD shifts focus to economy
                                                                • Figure 10: Trends in premium and economy claims as a proportion of total new product launches in the food market, own-label vs branded, 2009-12
                                                              • Price/brand matching gains momentum
                                                                • Coupons and vouchers remain popular…
                                                                  • On-pack competitions
                                                                    • Round pound promotions remain popular
                                                                    • Companies and Products

                                                                      • Overview
                                                                        • Figure 11: Sales of in-home food, by retailer, incl. VAT, 2007-12
                                                                      • Asda
                                                                        • Co-operative Group
                                                                          • Morrisons
                                                                            • Sainsbury’s
                                                                              • Tesco
                                                                                • Waitrose
                                                                                  • Discounters
                                                                                    • Aldi
                                                                                      • Lidl
                                                                                      • Brand Communication and Promotion

                                                                                        • Key points
                                                                                          • Supermarkets cut advertising spend
                                                                                            • Figure 12: Main media advertising expenditure on the UK food and non-alcoholic drinks market, 2009-12
                                                                                          • Aldi raises expenditure while Tesco cuts
                                                                                            • Figure 13: Main media advertising expenditure on the UK food and non-alcoholic drinks market, by selected supermarkets, 2009-12
                                                                                        • Consumer – Shopping Habits

                                                                                          • Key points
                                                                                            • More than eight in ten buy brands and own-label products
                                                                                                • Figure 14: Types of branded and own-label food and non-alcoholic drink bought, February 2013
                                                                                              • Own-label’s tiered price system offers consumers choice
                                                                                                  • Figure 15: Types of own-label food and non-alcoholic drink bought, by age, socio-economic group and household income, February 2013
                                                                                                • Brands attract affluent shoppers, remaining the benchmark for own-label products
                                                                                                  • Expected changes to shopping habits
                                                                                                    • Value and standard purchases are expected to grow
                                                                                                        • Figure 16: Expected changes in purchase patterns of branded and own-label food and non-alcoholic drink in the next 12 months, February 2013
                                                                                                    • Consumer – Usage of Promotions and Special Offers

                                                                                                      • Key points
                                                                                                        • Multibuys appeal to more than seven in ten
                                                                                                            • Figure 17: Promotions* typically taken advantage of, February 2013
                                                                                                          • Usage of vouchers remains limited
                                                                                                            • Smaller households opt for money-off deals, larger for multibuys
                                                                                                              • Figure 18: Consumers taking advantage of ‘multibuys’ and ‘money off’ promotions, by household size, February 2013
                                                                                                            • Affluent consumers prefer ‘all-inclusive’ deals
                                                                                                              • Figure 19: Consumers taking advantage of ‘all-inclusive meal deals’, by socio-economic group and annual household income, February 2013
                                                                                                          • Consumer – Attitudes Towards Promotional Deals

                                                                                                            • Key points
                                                                                                              • Consumers rate ‘extra free’ promotions over ‘save’ and multibuys
                                                                                                                  • Figure 20: Preferred promotional deals on selected products, February 2013
                                                                                                                • Multibuys generate limited interest
                                                                                                                • Consumer – Attitudes Towards Promotions and Special Offers

                                                                                                                  • Key points
                                                                                                                    • Promotions fuel purchasing for majority of consumers
                                                                                                                        • Figure 21: Attitudes towards promotions in food and non-alcoholic drink, by gender, February 2013
                                                                                                                        • Figure 22: Agreement with the statements: ‘I buy certain products/brands only when they are on promotion’ and ‘I switch brands based on what is on promotion’, by age, February 2013
                                                                                                                      • Promotions allow for experimentation
                                                                                                                        • Little consumer confusion on the best deals
                                                                                                                          • Concerns about waste and storage space limit uptake of multibuy promotions
                                                                                                                            • Figure 23: Attitudes towards promotions in food and non-alcoholic drink, by household size, February 2013
                                                                                                                          • Waste is of particular concern to women in smaller households
                                                                                                                              • Figure 24: Pricing and promotions in food and drink – CHAID – Tree output, April 2013
                                                                                                                              • Figure 25: Pricing and promotions in food and drink – CHAID – Table output, April 2013
                                                                                                                          • Consumer – Attitudes Towards Pricing

                                                                                                                            • Key points
                                                                                                                              • More than seven in ten love the thrill of a bargain
                                                                                                                                  • Figure 26: Attitudes towards the price of food and non-alcoholic drink, February 2013
                                                                                                                                • Majority are willing to shop around
                                                                                                                                  • Women are more engaged than men on price
                                                                                                                                    • Figure 27: Net difference* on agreement with statements on the price of food and non-alcoholic drink, by gender, February 2013
                                                                                                                                  • Improvements to pricing information should find favour among majority
                                                                                                                                    • Supermarkets are seen to play an important role in keeping prices low
                                                                                                                                      • Quality still plays a role, especially among affluent consumers
                                                                                                                                          • Figure 28: Agreement with the statements: ‘Quality is more important than price’ and ‘I tend to buy what I want regardless of the price’, by socio-economic group and annual household income, February 2013
                                                                                                                                        • The under-35s pay little attention to food and drink prices
                                                                                                                                          • Figure 29: Agreement with the statements: ‘Price matching removes the need to think about price when grocery shopping’ and ‘I do not pay much attention to food and drink prices’, by age, February 2013
                                                                                                                                      • Appendix – Market Drivers

                                                                                                                                          • Figure 30: GDP, PDI, consumer expenditure and savings, at constant 2012 prices, 2007-17
                                                                                                                                          • Figure 31: Agreement with shopping-related lifestyle statements, by demographics, 2012*
                                                                                                                                          • Figure 32: Forecast adult population trends, by socio-economic group, 2007-17
                                                                                                                                          • Figure 33: Forecast adult population trends, by lifestage, 2007-17
                                                                                                                                          • Figure 34: UK households, by size, 2007-17
                                                                                                                                          • Figure 35: Trends in the age structure of the UK population, 2007-17
                                                                                                                                      • Appendix – Brand Communication and Promotion

                                                                                                                                          • Figure 36: Main media advertising expenditure on the UK food market, by selected supermarkets, 2009-12
                                                                                                                                          • Figure 37: Main media advertising expenditure on the UK non-alcoholic drinks market, by selected supermarkets, 2009-12
                                                                                                                                          • Figure 38: Supermarkets’ advertising expenditure in the UK food and non-alcoholic drinks market, by media type, 2009-12
                                                                                                                                      • Appendix – Consumer – Shopping Habits

                                                                                                                                          • Figure 39: Types of branded and own-label food and non-alcoholic drink bought, by demographics, February 2013
                                                                                                                                          • Figure 40: Expected changes in purchase patterns of branded and own-label food and drink in the next 12 months, February 2013
                                                                                                                                          • Figure 41: Expected changes in purchase patterns of branded food and drink in the next 12 months, by demographics, February 2013
                                                                                                                                          • Figure 42: Expected changes in purchase patterns of standard own-label food and drink in the next 12 months, by demographics, February 2013
                                                                                                                                          • Figure 43: Expected changes in purchase patterns of premium own-label food and drink in the next 12 months, by demographics, February 2013
                                                                                                                                          • Figure 44: Expected changes in purchase patterns of value own-label food and drink in the next 12 months, by demographics, February 2013
                                                                                                                                      • Appendix – Consumer – Usage of Promotions and Special Offers

                                                                                                                                          • Figure 45: Most popular promotions typically taken advantage of, by demographics, February 2013
                                                                                                                                          • Figure 46: Next most popular promotions typically taken advantage of, by demographics, February 2013
                                                                                                                                      • Appendix – Consumer – Attitudes Towards Promotional Deals

                                                                                                                                          • Figure 47: Preferred promotional deals on fruit, by demographics, February 2013
                                                                                                                                          • Figure 48: Preferred promotional deals on tea/coffee, by demographics, February 2013
                                                                                                                                          • Figure 49: Preferred promotional deals on bread/baked goods, by demographics, February 2013
                                                                                                                                          • Figure 50: Preferred promotional deals on cereals, by demographics, February 2013
                                                                                                                                          • Figure 51: Preferred promotional deals on cheese, by demographics, February 2013
                                                                                                                                      • Appendix – Consumer – Attitudes Towards Promotions and Special Offers

                                                                                                                                          • Figure 52: Most popular attitudes towards promotions in food and non-alcoholic drink, by demographics, February 2013
                                                                                                                                          • Figure 53: Next most popular attitudes towards promotions in food and non-alcoholic drink, by demographics, February 2013
                                                                                                                                      • Appendix – Consumer – Attitudes Towards Pricing

                                                                                                                                          • Figure 54: Agreement with the statements: ‘I like the thrill of getting a bargain’ and ‘Visiting more than one store is a good way to get the lowest prices’, by demographics, February 2013
                                                                                                                                          • Figure 55: Agreement with the statements: ‘Supermarkets have a duty to keep prices as low as possible’ and ‘Price rises are inevitable because of environmental factors’, by demographics, February 2013
                                                                                                                                          • Figure 56: Agreement with the statements: ‘I prefer low prices across the store to getting specific products on promotion’ and ‘It is hard to compare prices per unit with prices per kg when shopping in-store’, by demographics, February 2013
                                                                                                                                          • Figure 57: Agreement with the statements: ‘Quality is more important than price’ and ‘I would be willing to pay more for a product if the extra money went to the farmer/producer’, by demographics, February 2013
                                                                                                                                          • Figure 58: Agreement with the statements: ‘Price matching removes the need to think about price when grocery shopping’ and ‘I would rather pack sizes were reduced than prices raised’, by demographics, February 2013
                                                                                                                                          • Figure 59: Agreement with the statements: ‘I tend to buy what I want regardless of the price’ and ‘I do not pay much attention to food and drink prices’, by demographics, February 2013

                                                                                                                                      Companies Covered

                                                                                                                                      • Advertising Standards Authority
                                                                                                                                      • Aldi Stores Ltd (UK & Ireland)
                                                                                                                                      • Asda Group Ltd
                                                                                                                                      • Blockbuster Entertainment Ltd (UK)
                                                                                                                                      • Co-operative Group
                                                                                                                                      • Facebook, Inc.
                                                                                                                                      • HMV Retail Ltd
                                                                                                                                      • J. Sainsbury
                                                                                                                                      • John Lewis Partnership
                                                                                                                                      • Lidl (UK)
                                                                                                                                      • Morrisons M Local
                                                                                                                                      • Nectar
                                                                                                                                      • Ocado
                                                                                                                                      • Office of Fair Trading
                                                                                                                                      • Somerfield
                                                                                                                                      • Tesco Plc
                                                                                                                                      • Waitrose
                                                                                                                                      • Walmart Stores (USA)
                                                                                                                                      • Warburtons
                                                                                                                                      • Wm Morrison Supermarkets

                                                                                                                                      Attitudes towards Pricing and Promotions in Food and Drink - UK - April 2013

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