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Andrew Fearne: Senior Lecturer, Food and Industry Management, Wye College, University of London, Wye, Ashford, Kent, UK
Adam Donaldson: Senior Consultant, Druid Systems plc, Staines, Middlesex, UK
Phil Norminton: Consultant, A.C. Nielsen, Headington, Oxford, UK
1. Introduction
Achieving competitive advantage
In recent years promotions have gained importance within UK multiple grocers as a means of achieving competitive advantage. The significant decline in real (i.e. inflation adjusted) levels of consumer expenditure during the early 1990s would certainly have helped to foster the image of promotions as a way of attracting price sensitive consumers. Indeed, the evidence from consumer surveys (see Figure 1) supports the notion that consumers are becoming more aware of promotional activity and more active in seeking out promotional offers.
The key question that arises is whether promotional activity leads to overall category growth or reduced levels of consumer expenditure and more brand switching.
This paper reports the results of a study, commissioned by United Distillers, one of the world's largest manufacturers of gin, vodka, rum and whisky, on the impact of alternative promotions within the UK spirits sector in multiple grocers.
The paper is in six parts. A brief summary of recent research into the effectiveness of alternative promotional activity is presented in section 2, followed by a description of the key characteristics of the UK spirits sector, in section 3. The research methodology is briefly summarised in section 4. In section 5 we present the results of the data analysis and discuss the impact that promotions have had on the sector, before looking at buyer profiles and their reaction to alternative promotional activity. In the final section we draw some conclusions about the role of promotions in the future development of the spirits category as a whole and outline the broader implications for businesses which see promotions as a means of achieving sales growth.
2. Recent evidence of the impact of alternative promotional activity
Growth of own label products
The UK grocery sector is dominated by the top five multiple retailers, of which the top two account for around 40 percent of consumer expenditure on food and drink and the top five account for over three-quarters. This dominant position has perpetuated the growth of own-label products, which in recent years have become...