A brand new sales gambit

FOOD groups and consumer goods outfits will use promotions to tempt shoppers back from own-brand labels and rebuild their volumes over the next 12 months, Tesco chief executive Ken Murphy predicts.

He said that having raised their prices to protect their margins and cope with their own increasing costs, falling inflation means that food and consumer products manufacturers have the ability to invest in discounts and promotions to recover the ground they lost.

“Clearly, over the last two years we have seen quite a bit of a spike in own-brand penetration as customers traded down to cope with the cost of living.

“Inevitably suppliers, particularly the brands, are coming back into the market to look to recover some of that lost volume,” Murphy said.

“So, the volume on deals has crept up as a percentage of total sales over the last 12 months.

“My prediction is that we will see that persist for another 12 months. I think there’s an inevitability about that because I think the suppliers will have the margin to do so, and they’ll have the appetite to recover the volume.”

According to data from market research group Kantar, supermarket own-labels started opening up a gap between themselves and their branded competitors in February 2022. That gap peaked in March last year, when own labels were growing sales at 15.7 per cent, twice as fast as brands.

As the squeeze on incomes eased, the gap between brands and own labels lessened, to the point where the former pulled ahead for the first time in nearly two years in January. Own labels bounced back in February, but brands’ growth overtook them again in March. In April, both grew at 3.7 per cent.

Kantar head of retail and consumer insight Fraser Mckevitt said he expects to see brands post stronger growth this year than own labels, due in part to their use of promotions.