TCC Global








TCC Global

The Future Promotional Landscape

Even before the pandemic, UK grocers were moderating their promotional intensity, preferring to focus on fewer, more impactful promotions and rebasing their pricing in core categories, with some price-matching discounters.

Seb Hill, Managing Director UK&I

Even before the pandemic, UK grocers were moderating their promotional intensity, preferring to focus on fewer, more impactful promotions and rebasing their pricing in core categories, with some price-matching discounters. With ongoing pressure on costs (payroll), this desire for more simplicity will persist. That said, promotions are still important for retailers, shoppers and brands alike: but is it time to rethink our approach to them?


The UK grocery market is distinctive in many ways: It has a relatively high level of concentration, with four major players accounting for the vast majority of the market; it has incredibly high private label participation; it is one of the leading markets in terms of share taken up by online; and, in the 1990s, it achieved something of a world record in terms of promotional participation.

In the mid-1990s, the share of the market that was bought on deal by British shoppers reached 40% in value terms and 50% in volume, way ahead of comparable markets in Europe and North America. There were a number of reasons for this situation. Unlike other countries like Germany, Poland and Spain, for example, the UK market was not dominated by low price or discount retailers. Instead, it was dominated by four or five big supermarkets who enjoyed the many benefits available to them through increasing the number of promotions taking place in their stores.

Back in the days before codes of conduct and stricter vigilance on supermarket practises, there were virtually limitless ways in which supermarkets could extract money from their suppliers. Simply put, it had become easier for supermarkets to make money when they were buying rather than when they were selling.

From this peak in the mid-1990s, however, promotional intensity began to decelerate in the UK. On the supplier side, this was due to a recognition that many promotions were not delivering anything like the appropriate return on investment. Suppliers also began to realise that many promotions simply gave them short term uplifts in sales, just renting market share rather than building long-term growth through endeavours such as innovation and marketing. Shoppers had been trained to shop on deal and would switch brands at the drop of a hat rather than demonstrating any allegiance or loyalty to brands in most categories.

From the retailer side, there was an acknowledgment that the inefficiencies and turbulence in terms of supply chain and replenishment that promotions caused were no longer being fully compensated for by the financial rewards on offer. There was also a desire to minimise food waste; a problem that was not helped in the slightest by retailers offering volume promotions such as buy-one-get-one-free (BOGOF) or three-for-two on fresh and perishable items. Despite this broad deceleration in promotions, by 2020, the UK still led the world in terms of the amount of groceries being sold on promotion.

The COVID Impact

The COVID pandemic exerted a number of profound impacts on the grocery market in the UK. Beyond the initial panic buying disruption, there was also shifts such as discounters losing market share for the first time in living memory, bigger hypermarkets and superstores seeing a resurgence in popularity, huge increases in market share for online retail and an almost overnight cessation of plenty of promotional activity.

With the whole grocery industry struggling to keep pace with demand, the scaling back of promotions made total sense. Manufacturers were switching production away from their full assortment towards focusing capacity on their bestselling items to make sure there was availability instore. Similarly, retailers were looking to devote their manpower to filling shelves and manning checkouts rather than dealing with promotional changeovers and maintaining off-shelf displays that would create physical clutter at a time when retailers were seeking to get shoppers in and out of the store as quickly and efficiently as possible.

In the back half of 2020, however, as things settled down to some extent, promotions began to reappear on a more significant level, and soon began to regain their 2019 levels by the end of the year. As we progress through 2021 and look ahead to the following year, which includes some very dramatic changes to the selling of high fat, salt and sugar (HFSS) foods, we thought it might be useful to assess what might be in store for promotional landscape in the UK grocery market?

What lies ahead?

Although promotional intensity has declined, there is still a very important role for this type of activity in the market. Brands are still happy to invest to position their products at prime locations around the store, such as checkouts, gondola-ends and at the store entrance. They are equally happy to invest in promotions such as price-cuts and volume promotions which offer larger packs or three-for-two etc.

On the flipside, retailers still benefit from the incremental sales made on the back of these promotions and the marketing opportunities that these deals can provide. This is despite the logistical challenges that that a promotional stance can create, such as replacing promotional ends every two to three weeks or changing thousands of price labels on a weekly basis.

HFSS is looming

The forthcoming regulations for HFSS (high in saturated fat, salt or sugar) products that come into place in England next year represent one of the most seismic changes to supermarket operations since the invention of the barcode.

One aspect of the new HFSS regulations relates to the locations of where these products are allowed to be displayed. In an attempt to minimise consumption of HFSS to create a better health outcome for the English public, the government is saying that these types of foods/drinks cannot be displayed near the entrance of stores, at checkouts or on gondola ends throughout the store.

This has massive implications for suppliers. Some chocolate manufacturers, for example, rely on off-shelf displays for up to 40% of their sales, while soft drink manufacturers can generate 30% sales uplift by having their products placed on gondola ends.

With their physical presence limited to their own aisles, and with the regulations stating they cannot offer volume promotions, there will obviously be lots of work to do by the suppliers in order to generate demand in-aisle rather than across the store.

For the retailers too, there will be a commercial impact as well as the more pressing physical question of what types of products and brands will occupy gondola-ends, checkouts and store entrances.

Value promotions will remain key

One promotional activity that is as old as the hills is that of value promotions: offering simple price cuts like ‘50p off’ or discounts like ‘33% off’. These types of deal have proven to be incredibly successful throughout modern grocery retailing, creating quite a positive shopper reaction and therefore sales uplifts for both retailers and manufacturers. It seems a given that these types of deal will be commonplace across the UK supermarket sector as they typically deliver strong results for shoppers, retailers and suppliers alike.

Volume promotions to decline

Volume promotions such as offering 20% extra free or BOGOF have also been commonplace in the last 20 years, but many observers within the industry would suggest that these are much less effective than other promotional mechanics. Many shoppers simply do not want to invest their disposable income in stockpiling. Also, for smaller households or people who live alone, these types of promotions are often inappropriate as they lack either the consumption capacity or storage capacity to exploit them.

It has become increasingly noticeable that many retailers have dialled back on these types of promotions in fresh and perishables in order to minimise food waste as well as to avoid penalising smaller households who cannot participate in them, although they are still commonplace in many other categories across the store. With vast swathes of HFSS brands unable to take part in these promotions in 2022, though, their importance is set to decline further.

Bulk bonanza?

An avenue that has been comprehensively explored by Tesco thanks to its relationship with sister company Booker, but also by Sainsbury's, is that of using bulk promotions. This sees them offering pack sizes that are normally only found in wholesale channels to the general public, with significantly lower unit prices than would typically be found in the more typical retail pack sizes and formats. Again, these start types of promotion are not suitable for all shoppers or consumers, given the physical constraints they may have in terms of storage, but from a value perspective, they are quite a decent proposition.

Loyalty cards

One promotional mechanic which is commonplace in many markets around the world but has only recently taken off in the UK is that of loyalty card-based promotions. Although the likes of Waitrose and Sainsbury's have dallied with 

this mechanic in times gone by, it is only Tesco that has fully realised the potential of placing most promotions within the confines of its loyalty card.

This means that promotions such as price cuts, discounts and multibuys (with only a few exceptions around the store), are only available to Clubcard holders. From Tesco's perspective, this has seen a huge increase in Clubcard users as well as an impressive recruitment surge for Clubcard app users in its stores.

The participation of Clubcard in transactions has dramatically accelerated in its large stores, which enables Tesco to better benefit from the scheme in terms of data and insights. From a supplier point of view, participating in promotions in Tesco Clubcard Prices will potentially have seen better results as Clubcard holders have been demonstrably enthusiastic to exploit any promotions open exclusively to them as Clubcard holders. Will we more supermarkets attempt to replicate Tesco’s success?

Loyalty programmes on the up?

Participating in loyalty programmes is something we have seen more of from FMCG suppliers in other markets outside of the UK and Ireland, although there have been signs of this appearing in recent trading card loyalty campaigns from the likes of Sainsbury's.

These types of campaigns offer instant rewards such as trading cards or collectables for children or longer-term incentives whereby shoppers can collect stickers or stamps to exchange for free or discounted household goods or soft toys for example.

tcc has seen in many markets around the world that suppliers can generate huge uplift in sales and market share by participating in these schemes, for example by offering extra points or stamps when one of their brands is purchased. We are confident that this type of promotional mechanic will become more popular in the UK, as it might be of particular interest to suppliers who are looking to circumnavigate the impending restrictions on HFSS promotions.

Exclusivity becoming more popular

Another option that we are seeing more of in the market is the provision of incremental sales and differentiation to retailers by suppliers offering them exclusivity on new products for a limited period of time. We have seen this in areas such as confectionery and savoury snacks and we feel that it can be an opportunity for mutual benefit for both retailer and supplier, as well as perhaps providing more reasons to visit from a shopper perspective.

Charity partnerships

A final and arguably more noble, way to generate greater visibility and sales in store is by collaborating with retail partners in their charitable endeavours. For example, within Sainsbury's Comic Relief campaign and Asda’s Tickled Pink breast cancer activities, suppliers have opportunity to participate in a charitable campaign in which the purchase of their brands can generate additional donations to the charity concerned. Again, benefits all round for brand, retailer and shopper as well as generating much needed funds for good causes.


It is clear that promotional intensity will never again see the levels of the mid-1990s, but it is equally important to acknowledge that promotional activities remain a key part of retailers’ and suppliers’ broader marketing objectives. Such promotions generate interest instore, generate commercial income and are a key way in which retailers can compete with each other in terms of value perceptions.

Other factors, such as sustainability and community are becoming more important, so we would expect to see these themes advancing more prominently when it comes to promotional endeavours in the future.

Here at tcc we excel at helping retailers and their FMCG partners generate high returns on investment through instore promotional and loyalty campaigns that can have sustainability or community objectives embedded within them. If you would like to explore how loyalty and reward campaigns could bolster your sales, please get in touch.


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