Joseph Lee on the pricemarked pack products (PMPs) that can help you boost your profit, and how to ensure that you are not squeezed on the shared margin front
For your retailer customers to give up control over something as important as pricing, the advantages have to be pretty clear.
Fortunately, suppliers say, the evidence is overwhelming that PMPs sell in larger volumes and show greater growth than their plain-packaged equivalents.
As Rich Fisher, category development manager at Red Bull UK, notes, PMPs are delivering 26% more value in soft drinks than plain packs and are driving 6% more growth.
“PMPs provide customer confidence in brands and help to increase basket spend, with 68% of UK shoppers likely to compare prices very carefully and 44% of shoppers more likely to buy a product if a PMP is visible,” he says.
Wholesalers who are not supplying PMPs to their customers could be harming their sales, in fact. Fisher says that 21% of shoppers said they would not buy a soft drink that was not a PMP from a convenience store.
The pricemark advantage has increased in the past 12 months, according to Scott Meredith, UK sales director at Lucozade Ribena Suntory.
“We know that pricemarked soft drinks have a faster rate of sale than their non-PMP equivalents, and this rate of sale has increased in the past year,” he says.
The evidence suggests that PMPs do not just give a boost to their individual category, but to the performance of the whole store.
“We know that 76% of convenience shoppers think PMPs improve a store’s overall price image, showing them they are getting the best value around,” Meredith says. “Providing a visibly low price on products across various categories will certainly encourage shoppers to spend more in-store and increase loyalty.”
They can also help new product launches successfully find their market, by reassuring customers about value and giving them the confidence to try something new.
“PMPs are a particularly effective way to encourage consumers to trial new products, thanks to the perceived value they offer, and research shows that almost half of shoppers claim that they would be more likely to try a new line if it was sold in a PMP,” says Amy Burgess, trade communications manager at Coca-Cola European Partners (CCEP).
Of course, it is not just in soft drinks that the impact of pricemarking has been felt. In confectionery and snacking, the pricemarked bag has helped drive the sharing trend and occasions such as the Big Night In.
According to Walkers, 70% of growth in sharing packs has come from PMPs.
Lauren George, brand and trade PR manager for Mars Chocolate UK & Wrigley UK, says: “PMPs reassure shoppers they are getting the best value for money and provide the perfect chocolate treat for a night in with friends and family. They are also a great way for wholesalers to grow sales and attract the attention of customers.”
Buying PMPs allows retailers to differentiate themselves from the competition: a fifth of shoppers said they would choose a store based on whether it had PMPs, according to Mondelēz International.
Susan Nash, the company’s trade communications controller, says: “For retailers and therefore wholesalers, improved perceived value, speed of sales, convenience and customer trust make stocking PMPs a great option.”
A fair share on margins
Concerns about meeting customer demand for value squeezing the margins on PMPs are shared all along the supply chain. So, how can suppliers, wholesalers and retailers work together to ensure the benefits are shared equally, too?
Adrian Troy, marketing director at AG Barr, acknowledges the concern: “We recognise wholesaler and retailer need for margin, and this has been built into our pricemarking strategy from the beginning,” he says.
“With any strategy, everyone needs to benefit, and Barr works in partnership with wholesalers and retailers to ensure that they make a decent margin. We also highlight the majority of our PMPs on the outer cases to ensure clarity for the retailer.”
One approach is to offer multi-buy pricemarks: so, where margins are reduced for both you and your customers, you can recover profit through greater volume of sales. “When managed properly, PMPs are a proven way for wholesalers to drive incremental category growth,” says Troy.
Procter & Gamble (P&G) is adopting multi-buys with essentials such as Tampax Compak, which has a two-for-£4 deal.
The company is also making sure pricemarking works with the SKUs convenience retailers want to stock, such as its 20-wash liquid detergents and 12-wash 3in1 laundry pods.
“Stocking these will increase revenues by converting more consumers into the biggest and fastest-growing segment of the laundry market,” says Daniel Jalalpour, laundry brand manager at P&G.
The company also says some prices have been reduced after consulting with retailers, with Flash sprays being cut from £2.25 to £1.99. “£2 seems to be the magic number,” says Rav Garcha, at Nisa Broadway in Birmingham.
In the end, it is a matter of choice, claim suppliers. CCEP is among those who offer all their products in pricemarked and plain versions.
“PMPs are provided at a price that offers a fair and competitive margin that helps to increase consumer appeal by offering a great perception of value,” says Burgess. “Ultimately, it is a retailers’ choice as to which products they choose to focus on in-store.”
26%: PMPs are delivering 26% more value in soft drinks than plain packs, Red Bull says
Make the most of PMPs
PMPs are likely to increase volume and drive growth, but retailers are understandably nervous about margin. So, how can you effectively promote them in the depot to ensure that everyone reaps the benefit of bigger sales?
Nowhere is the question of managing stock more crucial than with fresh produce. Therefore, Amy Fisher, shopper marketing controller at Dairy Crest, says that wholesalers getting the right range of PMPs to stock is crucial.
“Stock a core range of bestsellers, remembering that the top 20% of SKUs contribute 80% of category sales,” she says. “With product quality and brand familiarity driving selection for almost half of post-millennial shoppers and two in five older shoppers, stock well-known brands to instil consumer confidence and drive conversion.”
PMPs can be given an extra boost in the fixture by giving them pride of place, with point-of-sale (PoS) material that demonstrates their impact in-store. Barr’s Troy says: “Wholesalers should display PMPs prominently, highlighting margins and drawing attention to top-selling PMPs with PoS.”
Red Bull’s Fisher recommends that you explicitly make the argument that stocking PMPs is good for the bottom line.
“If wholesalers promote the benefits of PMPs to their customers, they will help drive return on sales and consequently help their customers to promote the benefits in their stores,” he says. “Additionally, Red Bull recommends that wholesalers stock PMPs across bestsellers at all times, to demonstrate range and offer retailers choice, while driving cash return on sales.”
After all, the choice is down to retailers about what they stock. But they should be making an informed choice, using all the available knowledge from suppliers and wholesalers about what is likely to perform best in-store.
Top tips: Taylors of Harrogate
1. Stocking pricemarked packs (PMPs) is a great way to give shoppers confidence in the store’s pricing in comparison to larger outlets, so it is important you incorporate PMPs in your range.
2. Always consider stocking popular brands as research has revealed that only 5% of hot beverage shoppers would choose to buy a retailer’s own brand over a more well-known one.
3. The best PMP sizes of tea to have are 40-packs and 80-packs. Our brand, Yorkshire Tea, has recently extended its Decaf range to include a 40-pack PMP alongside its 80-pack size.
4. It is beneficial to have a mixed coffee offering including an instant and a ground variation, such as our bestselling Rich Italian coffee.
5. Give thought to location and demographics. For example, if your customers’ stores are in an affluent area, you may wish to stock a more premium product, such as Yorkshire Gold.
“In the current market, anything that is pricemarked seems to attract customers. Apart from things such as bread and milk, we have most things pricemarked. But now, with the sugar levy, that has gone on the back-burner with suppliers. All the stuff coming in now seems to not be pricemarked.”
Abdul Arain, Al Amin Stores, Cambridge
“Ultimately, we want better margins. We do not mind doing pricemarked, as customers buy with confidence and it saves us pricing them up. But I would like wholesalers to give us a little better margins. I try to do as much as I can: crisps, chocolate, soft drinks. When there is a promotion, I try to stock up.”
Raj Dhillon, Westcombe Park Food & Wine, London
“If you have not got the non-pricemarked pack (PMP), wholesalers offer you a PMP. But that seems to be happening too frequently. It appears that the wholesalers or suppliers are reducing the non-pricemarked product options in order to almost force you to have the PMP. They say, ‘It is the suppliers.’”
Harry Goraya, Nisa Local, Northfleet, Kent
“It is all very well having pricemarks, but if the margins are not there, it is no good for us, even if it is good for the consumer. We are looking for at least 30% and quite a lot of them come under that. With the amount of waste you get with chilled, it is especially important that the margins are there. Sometimes we go for non-pricemarked, but then the sales are not there.”
Kully Sandhu, Nisa Local, Heathfield, Nottingham