Tesco set to axe half-price deals

17 August, 2015

Tesco looks set to drop half-price deals on wine in a bid to drive profits and restore consumer trust in its business.

The retailer confirmed it was reviewing the promotion, which first hit shelves in 1997 and suppliers claim to have been told the mechanic will be phased out from October.

The move follows Sainsbury’s decision last year to drop half-price as a core price lever, a move analysts cite as the reason it lost significant sales, forcing it to reintroduce the deal on an ad hoc basis.

A Tesco spokesman said: “Tesco has not stopped half- price deals. I can confirm these promotions are under review and will communicate further information in the upcoming weeks.”

Suppliers have warned that axing half-price deals would wipe millions of pounds-worth of sales out of the market and could cause colossal financial problems for businesses that have built their model around the mechanic.

One told OLN: “When wine became a 100 million-case market, a third of that was three-for-£10, which effectively disappeared when that promotional vehicle was dropped by retailers. A further 25 million cases were made up of half-price deals, and it looks like the trade is about to give up on the last volumetric driver it has.

“No one is making any money on half price, because economically, it doesn’t work when the tax on a bottle of wine is now £3. Retailers can’t make any money on wine at that level, which is why the category is losing space.

“Half-price only worked below £3.99. As soon as the half-price deal went to £4.01, it stopped working for consumers who are looking for an affordable deal.”

The supplier added companies throughout the supply chain were facing “massive headaches”.

He said: “If Tesco drops it, which we understand is its intention, other retailers will probably do the same.

“The knock-on effects will be huge. Production facilities will no longer be doing as much as they were, which will hit everybody from the suppliers relying on that volume to UK bottling facilities.”

Anotherproducersaid:“It is a brave decision, but I think it’s positive for the industry. It’s about Tesco bringing credibility to the consumer offer so people trust the deals they are receiving and it’s an adage Tesco is taking across its business.

“The cynicism about half- price promotions is what forced customers to go to Aldi and Lidl and has prompted the decision because Tesco wants to be genuine about its offers.”

He added: “From a supplier point of view it will create challenges, because half-price is significant volume and Tesco will need to ensure that a new mechanic delivers the same customer interest because it won’t want to lose all those sales.”

Suppliers said Tesco was still planning its wine promotional strategy and that, like Sainsbury’s, it might still use half-price “now and then”, though the focus would shift to everyday low pricing and softer mechanics, such as a third off or 25% deals around wine festivals.




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