PMPs could be a key growth driver this year as inflation bites and consumer spending stalls.
by Elena Dimama
The impact of inflation on shoppers is being felt across the convenience channel and value for money could place snacks and drinks in price-marked packs (PMPs) in a very strong retail position.
A recent survey by Tayto Group found that 95% of consumers said they were concerned by the cost and availability of groceries; in separate research by Plum Ideas Marketing Communications Agency, 57% of independent retailers said PMP Snacks were more important than ever.
Furthermore, a fifth of shoppers said they would choose a particular convenience store if they knew it stocked PMP products, according to Lumina, while a Mondelez study found that 56% of retailers said they have been selling more PMPs during recent times.
The big picture
For the crisps and snacks category, PMP sharing is the biggest segment, accounting for 51% of crisps, snacks and nuts sales – and is growing by 9%, Kenton Burchell, Trading Director at Bestway Wholesale, tells SLR.
“PMPs give consumers the confidence to know that they are paying the recommended price and so the price is not seen as manipulated,” he notes. “[They] give the consumer the impression that they are getting value for their money.
“At Bestway, we advise our retailers under our category tools to consider PMPs for shoppers in this category to drive shopper satisfaction.”
What would you say to retailers who are concerned about margins?
- Retailers will need to review their margins and their products so they can balance their books.
- Cross merchandise products together with PMPs and other categories for impulse and top-up shopper missions to increase sales.
- Focus on the bestselling lines of PMPs with regular stock to meet customer demand.
- Review the basket spend of shoppers and store inventory to ensure that ‘must stock’ line products are available to customers to help increase sales margins.
Snacks galore
“Convenience shoppers worry that they will pay more for shopping locally and PMPs give them the confidence they are getting good value,” Matt Smith, Marketing Director for Tayto Group tells SLR. “That’s why over half the snacks sales in Scottish convenience stores are PMPs.
“Having surveyed both retailers and consumers, it was clear how important the £1 price point is. In the current climate, consumers are feeling the pinch and independent retailers need to showcase great value for money.
“Instead of raising the headline price of our £1 PMPs, we’ve decided to stick to £1. Our new range is rolling out now and shows how much we believe in Golden Wonder’s great branded value.”
BelVita has also introduced a new price-marked multipack format on its Honey & Nut flavour. “As part of the brand’s aim to attract new shoppers and help add value to the category, the new belVita Honey & Nut PMP taps into the healthier multipack space within the convenience channel and communicates value to price-conscious shoppers,” Susan Nash, Trade Communications Manager at Mondelez International explains.
“Adding a PMP format is certainly set to help retailers benefit from this success even further. BelVita Honey & Nut PMP will be available at a price mark of £1.49, in a convenient multipack format that will help drive sales within both the breakfast and food-to-go occasions.”
PMPs are essential to maximise snacks sales and retailers should have a range that covers key price-points:
- Entry-point: where value for money is essential – especially for pocket-money lunchtime treats
- Impulse: a core range as food-to-go occasions and lunchtime snacks recover
- £1 Sharing: demands a big focus as the largest and fastest growing segment
Meanwhile, sweet manufacturer Swizzels has introduced increases to its range of price-marked packs for the first time in its history. Before introducing the changes, the company partnered with The Fed to conduct research among retailers to gauge their views about the future of PMPs.
“The research proved invaluable and revealed that 74% of independent retailers view PMPs as extremely important to their business, not least because they are a tangible symbol of value to customers,” Mark Walker, Sales Director at Swizzels, explains. “Of the retailers we surveyed, 44% said that the majority of suppliers across all categories had already moved above the £1 PMP. In fact, 75% stated that they saw slightly higher sales or no change, proving that moving above the £1 PMP is a low-risk move.
“We also discovered that 60% of retailers were comfortable stocking a higher priced PMP, provided their margins were protected.”
Walker adds: “We have placed huge value on our relationships with wholesalers and retailers for 95 years, so have thought long and hard about the next steps in the £1 PMP evolution. In order to protect, and in some cases, increase retailers’ and wholesalers’ margins, we have taken the decision to break the £1 hanging bag PMP on sugar confectionery.”
The new range has a PMP of £1.15, which is starting to appear in wholesalers now.
Focusing on its PMP options is also key to Perfetti Van Melle, which has seen sales of its Fruittella £1 PMP Juicy Chews grow by 15.1% in the week ending on 29 January, along with its Fruittella £1 PMP Duo Stix, which was up by 15.4% for the same period.
“Whilst there is sometimes concern about the impact of PMPs on profit margins, the allure of a PMP will help to increase impulse purchases, encourage repeat custom and ultimately drive stock through more quickly,” Mark Roberts, Marketing & Trade Marketing Director at Perfetti Van Melle, says.
Soft drinks gain
PMPs also play a strong role in the soft drinks channel, as consumers navigate the cost-of-living crisis. According to Lumina Intelligence, one-in-three shoppers are more likely to buy soft drinks in a PMP. “Consumers are looking to make their money stretch as far as possible for them and as part of this, we expect to see smaller transactions and smaller pack sizes come into play,” Ben Parker, Retail Commercial Director at Britvic, explains. “However, we also expect to see growth in at-home family dining and at-home socialising, both of which are important occasions for soft drinks.”
Britvic offers Pepsi Max in six-pack PMPs, along with Robinsons at 900ml PMP bottle, for £1.49. For shoppers looking for on-the-go solutions, Robinsons ready to drink is also available in a 500ml bottle with a £1 price mark, helping to drive impulse sales. Furthermore, on a selection of its core PMP lines – including the 500ml formats of Pepsi Max, Lipton Ice Tea and Fruit Shoot – the company will look to increase the price mark in line with inflationary pressures, as well as the POR, to create more shared margin and a “stronger translation to cash margin”. Parker notes: “This is as a result of recognising the importance of listening to retailers, as part of our role as a responsible trade partner, ensuring we reflect the challenges in the market at that moment.”
The soft drinks channel can also bolster sales with the energy drinks offering in PMP format. “Sports & energy is a key sector for price-marked packs, delivering £56.3m in value growth YOY, +9.3%,” Red Bull says. “Within soft drinks, sports & energy contributes to over a fifth of total PMP performance (+21%), and Red Bull delivers more than half (53%) of sports & energy PMP growth, adding £29.5m in value, +17.0% vs YA.”
“Red Bull Energy Drink 250ml is the bestselling PMP SKU in sports & energy, worth £67.8m and drives the highest demand in Red Bull’s portfolio and Energy Drink 355ml and 473ml are the top two fastest growing PMP SKUs in sports and energy, +£8.9m (+24.0%) and +£7.4m (+18.0%) respectively,” the company adds.
- Category merchandising is the key to success for chillers – there are eight macro categories which shoppers use to navigate chillers that retailers should cover: carbs, sports & energy, water, juice drinks & ice tea, kids, health & wellness, dairy & protein and iced coffee.
- Consumers are looking for choice – ensure a wider range of flavours are available across flavoured carbs, cola and juice drinks. Taste and enjoyment is the number one reason to purchase a single-serve soft drink within all segments but is particularly elevated for these three categories.
