Suppliers respond to wholesalers’ shared margin request on PMPs

Suppliers are responding to wholesalers’ requirements for an acceptable shared margin on price-marked packs, according to research from commissioned by the FWD and carried out by TWC.

The survey of five wholesalers and 150 independent/fascia retailers found that in just 4% of cases the margin on 24 selected price-marked packs has fallen in the year to July 2022, and in fact on almost a quarter (23%) of the PMPs the margin had risen to compensate for the increased costs of doing business.

The survey also revealed that 80% of independent retailers are stocking PMPs in most major categories in their stores, and 85% think that PMPs demonstrate good value for money. More than half said that PMPs allow them to compete on price with other stores, suggesting that a well-placed price mark can match the appeal of the ClubCard discount of nearby rivals such as Tesco Express.

80% of the retailers surveyed said their customers would still buy PMPs if the price increased, indicating that the reassurance of the price mark is more important than the price itself. However there was a difference of opinion on how to pass on the price increase, with 49% saying they would prefer the pack size to be reduced to keep the price point, and 45% saying their customers would be prepared to pay more for the same pack.

Consumers were less divided on this, with the largest proportion of those asked (42% of respondents) saying they would prefer to retain the same pack size and take a price increase. Just 23% wanted a pack size reduction to maintain the same price point.

Tom Fender, development director at TWC, said: “The key challenge the sector faces is to balance being competitive with being sustainable, and there needs to be sufficient margin to achieve this without pushing the price too high.

“The solution is for wholesalers, retailers and suppliers to work together on driving effective deep-cut promotions on high volume or KVI lines to drive footfall and trial, and ensure that our channel competes against the strong promotions Tesco is running via ClubCard.

“What we are finding is that independent retailers believe that the price mark is the promotional tool to do that.”