If the price is right

If the price is right

How to balance pricing and promotion to reach value-conscious Kiwis.

Times remain tough in New Zealand with 97 per cent of Kiwis concerned about the soaring cost-of-living.[1]With over half saying that they are giving up their favourite brands to save money (52 per cent)[2],the squeeze on household budgets is prompting consumers to seek alternative ways to feed their families for less. Three-quarters of shoppers say they now shop on promotion (73 per cent) but well over two in five say fewer of the items they want are on sale (44 per cent).[3]

Around half of New Zealanders are choosing where to shop for groceries based on price alone (55 per cent), shopping around at more retailers to get the best deal (50 per cent) and shopping online for groceries to make sure they stick to a budget (50 per cent)[4] as they trade down, cut back on items and seek budget-friendly options. We have seen a move away from fresh soups, sauces, pasta and grain breads to canned soup, bottled sauces, shelf stable pasta and white breads. And despite the huge growth of fresh coffee during the pandemic, this has recently slowed with a resurgence of instant. For essentials, people are seeking cheaper options with private label reaping the benefits as 63 per cent of shoppers buy more.[5]

But it isn’t an even playing field as the pendulum swings from price to premium. In more discretionary categories, premium products are growing, such as snack foods and in the freezer. Shoppers will still balance saving time and money too, which is fast driving the popularity of ready-to-cook and ready-to-heat at the right price point. This disruptive environment provides many opportunities to interrupt the routine of those shoppers willing to move away from their regular purchases.

Kiwis are also placing a huge importance on promotion.Since 2019, there has been a significant reduction in the points of promotion (-15 per cent); however, the amount sold on promotion has increased by +12 per cent.[6] However, there are big differences between departments in terms of the amount of product sold on promotion. When we look at those with higher value sales on promotion, they tend to be more treat and discretionary areas of the supermarket such as alcohol, beauty and other beverages.

The overall sentiment is one of adaptation and finding ways to manage expenses. For example, to manage personal care, Kiwis are spending more on new products that enable them to get their groove on at home, such as self-tanning, footcare, hair colourants and facial products.

To win in this adaptive environment, retailers must ensure there are suitable entry level price points so that the brand appears on the first page of price point searches. That might mean changing price pack architecture or implementing loyalty and rewards programs.

This is an excerpt from the outlook report Breaking New Ground. Download the full version here

[1] Circana Cost of Living Survey, Wave 4 October 2023, n=1,000

[2] Circana Cost of Living Survey Series October n = 1,000

[3] Circana MarketEdge Grocery MAT 10/09/23

[4] Circana, Cost of Living Survey, Wave 4 October 2023 n = 1,000

[5] Circana Cost of Living Survey Series October n = 1,000

[6] Source: Circana MarketEdge Grocery MAT 10/09/23

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