Suppliers face short notice price wars

Processors will face last minute retail price wars as the worsening economic climate forces major supermarkets into a promotions offensive, according to grocery think tank IGD.

Presenting research at IGD’s Availability and Demand Planning 2008 conference in London, Stewart Samuel, senior business analyst, said: “We’ll see a lot of tactical activity and suppliers won’t have long lead times to get more accurate order forecasts.”

Despite pressure from high commodity prices to push up prices in store, Samuel said: “This year, it will be more important than ever for retailers to demonstrate a commitment to price.”The ability to offer low prices will be crucial as the US credit crunch continues to be echoed in the UK and consumers’ pockets will be hit from all sides.

Commenting on Samuel’s warning, one major supplier said: “People talk about price wars every year, but this year there are going to be some big ones.”

Samuel said promotions would increasingly focus on cutting prices, rather than other offers such as buy-one-get-one-frees. According to TNS data, Iceland, Morrison and Somerfield showed the highest promotional activity in the week ending January 27, he said.

At the other end of the spectrum, a focus on premium would continue to be the second biggest trend in the market, said Samuel. Retailers would continue to grow their own-label premium offerings, as well as expanding in areas such as organics. Health and wellbeing and convenience were the top two trends driving the premium market, he said.

In view of the two-fold challenge of price cutting and premium stategies, Samuel suggested that retailers and suppliers might have to invent a new approach that integrated the two.