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Breaking the Addiction: How Promotions in Food Retail Affect Health

Co-Leader, Retail & Consumer Practice Europe, Oliver Wyman
Co-Leader, Retail & Consumer Practice Europe, Oliver Wyman
Key Takeaway
Consumption of high #sugar products increases 60 percent due to promotions

Reducing the consumption of sugar, salt, and fat is an increasing concern for consumers, governments, and healthcare systems in developed countries. When the role of promotions in diet-related ill health was discussed at our World Economic Forum panel on managing obesity in January 2016, we decided it was time to take a look at a typical promotions programme and see if sugary products really were on promotion more often, and what the increase in consumption patterns really was. Sirko Siemssen and Nick Harrison co-lead the Oliver Wyman Retail Practice in Europe. Here they share highlights of their new report "Breaking the Addiction: Promotions in Food Retail":

Products and categories with above average sugar content are twice as likely to end up in the promotions programme.

  • Consumption of high-sugar products increases 60 percent due to promotions. This is primarily driven by the participation of lower socio-economic groups, who are also the most likely to be affected by diet-related chronic disease
  • Seventy percent of supplier funding is linked to promotions on sweets, confectionery, sodas, and spirits

Promotions can contribute to unhealthy eating patterns when targeted at categories such as sugary drinks and snacks where buying more means consuming more. The reputational risk to retailers is real, providing a strong argument to reduce promotional participation in these categories. Our research also shows that food retail promotions in general can be directly detrimental to a grocer’s business:

  • Sales uplift from promotions have fallen 18% in the past five years
  • A third of promotions do not really drive sales and actually reduce profit before funding from suppliers, destroying value for both retailer and manufacturer

Breaking the Promotions Addiction

For retailers who recognise the damage promotions are causing their business, there are six steps to break the cycle of dependency. Taking these steps will create a competitive advantage of improved value perception, which may prevent sales volume decline and remove costs and complexity from their business:

  1. Seek clarity on the role of promotions
  2. Understand the real impact of promotions
  3. Act on the knowledge your data gives you
  4. Move away from promotions where possible
  5. Work with suppliers to transition funding structures to everyday low cost
  6. Continue to invest in technology and capabilities

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