FMCG prices pick up as shift away from promotions starts to pay off

The attempts of FMCG brands including Unilever and Procter & Gamble to arrest price deflation shifting marketing focus away from promotions and towards brand value is showing signs of paying off, says a study. However, data shows this could be having an impact on volume sales.

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Price inflation in the UK was up 2.3 per cent in the quarter, the highest level across the five biggest European markets, according to figures from Nielsen. However this was partially offset by a 1.1 per cent decline in volume sales, with the UK the only one of the five biggest European markets to experience a drop.

P&G has frequently spoken about reducing its reliance on “unsustainable” value giveaways which became popular during the economic downturn. It instead wants to focus on innovation to build up its brands, which include Gillette, Ariel and Pampers.

Overall, FMCG sales are growing at their slowest rate for five years in the UK, rising 1.2 per cent year on year in the second quarter, below the 3.8 per cent growth seen across the rest of Europe. The research firm says the numbers indicate that consumer spending in the UK remains weak despite an improvement in the economic outlook.

Despite the poor UK performance, Nielsen claims FMCG sales across Europe are “looking rosier”, with growth at its highest level in more than two years. This was boosted by a increase in sales volume, in part due to Easter falling in the second quarter this year.

However, price inflation across Europe is at its lowest level since the first quarter of 2011.

Jean-Jacques Vandenheede, Nielsen’s European director of retail insights, says: “These sales figures are impressive, boosted by Easter – when spend typically increases. And while we estimate this calendar anomaly accounted for about 1% of extra volume sales, a ‘normalised’ view is that overall sales value is still up around a healthy 2.8% – which is more positive than it has been recently.”

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