Lack of consumer spending power is forcing retailers to maintain high levels of promotional activity against their own preferences, according to Marnie Millard, md of soft drinks firm Nichols.
Vimto is one of Nichols' core brands
Announcing half-year results to June 30 last month, Nichols said it had scaled back carbonated drinks promotions in the past six months to boost profits, a strategy that retailers had supported.
"All of the retailers would prefer to come off the promotional junky route, but consumers have become very cautious. I think purchase spend has changed for ever, but all are challenged with driving top line growth."
'Not sustainable'
70–80% of carbonated drinks were currently sold on promotion, she said. "This is not sustainable in terms of encouraging consumer loyalty [to brands]."
Millard said dilutable soft drinks were not being as aggressively promoted as carbonates and Nichols' presence in the former market was helping to offset price cuts in the latter. "Our dilutables business continues to outperform the market."
Consequently, holding back carbonated promotions had worked, but she told FoodManufacture.co.uk Nichols might have to reverse the strategy in the coming months to realign itself with the rest of the market. "We may well step up promotional activity."
Energy drinks
New product development would help Nichols rise above heavy promotions, with the company focusing on driving sales of energy drinks such as Extreme Sport and Extreme Energy, which it launched in June, said Millard. "That's a very important one for us. The energy sector is very strong."
Another area of great interest for Nichols was the 'no added sugar' sector, she said. "We have been working very hard on expanding no added sugar distribution, bringing new customers into the market."
Nichols has also declared intentions to expand on-trade and foodservice sales and target export markets, with group finance director Tim Croston telling FoodManufacture.co.uk: "We are always looking at new markets around the world. We are looking at four or five new markets and also to grow our business in the US."
Nichols owns brands such as Vimto and Panda.
