A series of dramatic turbulence hitting the supermarket sector in the last 12 months is causing unprecedented changes in the domestic market and its operation.
A consolidation trend, currently underway, in the supermarket sector is forcing large multinational groups which control the Greek market of consumer products to change their commercial strategy in order to boost their negotiating position -and not only that- towards supermarkets.
At the core of this new strategy lies the support of their brand products, through raising advertising spending and changing their offer policy adopted in the last 15 years.
In 2017, almost all multinational groups intend to raise their ad spending -which has been limited substantially in the last two years- with the aim to boost their products and to face pressure expected from large supermarket chains asking them to raise their offer price.
Market sources said that developments in the supermarket sector in the last 12 months -the purchase of Veropoulos by Metro SA and an anticipated purchase of Marinopoulos by Sklavenitis- will continue. They said that the biggest player in the market today was seeking ways to react to these developments and to establish its leading position in the market. The sources stressed that a consolidation in the sector was expected to put more pressure on suppliers.
Multinational group officials seemed to have realized that the era of uncontrolled offers is starting to wane. “We cannot compete private label products, we must do something else,” a top executive in a multinational company said, acknowledging that the this policy has damaged the image of brand products.
Multinational groups are seeking different ways to deal with this problem, either by integrating part of the offer costs to the final price of a product -which will be reduced (excluding food categories)- with the remaining part of the cost to be spend on advertisement. At the same time, imports will not be made from western or northern Europe, but from eastern Europe where multinationals have strong production activity in brand products but of a previous generation of products, therefore cheaper.
Other multinationals intend to propose to supermarket chains to produce premium brand product categories exclusively to each one. These products will not have an entry cost in the supermarket chain, they will carry low offers and will be exclusive to each chain. This program is aimed to support brand products, while at the same time promote supermarket chains and reducing offer costs.
Greek consumers are increasingly tend to visit three or even four different supermarkets to compare prices before deciding to buy a product. This is a commercial practice widely used in other North European countries.
Multinational groups are currently drafting their 2017 budgets. Their executives expect the Greek market to shrink slightly in the first half of next year, at 2-3 pct, and to recovery later in the second half of 2017 if tourism trends improved further.