Retail promotion budgets in Germany 2015

For years, the trend in promotions was clear: The store brand is king. In 2015, we could see a change in this rule in German retail for the first time. The budgets for promotions of store brands were cut significantly in 2015 compared to 2014. Major brands did not only catch up, in some places they reversed their roles. We closely watched how German retailers distributed their budgets for promotions.

Major brands are the clear winners

Our surveys of promotion data of German retailers in flyers, print, online sources and TV spots showed a surprising change in promotion budgeting. Retailers like Aldi Süd, Lidl, Penny and Edeka spent more for the promotion of major brands than they did for their own store brands.

Overall promotions gained in significance despite more dire estimations. In 2015, all surveyed retailers spent almost 260 Million € more than they did in 2014. Discounters, department stores, general stores and supermarkets spent 63 Million € less to promote their store brands than in the previous year. Only discount stores increased their expenses  by 14 %. All in all, retailers spent 10 % less for the promotion of store brands. Major brands were promoted with an increase of 16,9% in expenses.

Even department stores, which decreased their overall spending in marketing, still increased the share of financing for major brand promotions. The quality of their promotions can be judged positively. Despite the decrease in expenses, they managed to increase their reach compared to 2014.

Supermarkets didn’t move a lot in general. Rewe, for example, kept their expenses on the previous year’s level.

Discounters follow up with major brands

The introduction of a larger selection of major brands in the stores of the discounter Aldi Süd also led to an increase in spending for major brand promotions. Aldi Süd increased their expenses in comparison to 2014 by about 12 %. In 2014, only 47,3 % of their budget was allocated to major brand promotions. In 2015, it is 52,7 %. Major brands and store brand switched places in terms of promotions.

Greater investments by Aldi Süd, Penny, Lidl and Norma are a clear signal. Discounters want to lose the image of cheapness. In the future, Aldi and Lidl are going to add modernized and more elegantly furnished stores to these efforts. Aldi is already testing modernized stores in Australia. Lidl changed the store design in one store in Berlin. The discounter with the highest increase in spending for major brand promotions might be a surprise to some. Despite the efforts of Aldi Süd and Lidl Penny had the most significant increase of 21% which translates to 16,5 Million € to spend on major brand promotions.

Drug stores don’t follow the trend

Altogether drug stores spent 33 % more for promotions of their store brands and only 16 % more for major brand promotions. This increase in spending is not insignificant but the focus for drug stores is obviously their own store brands.

Expectations and more market research

We expect to see the trend in promotion spending to be mirrored in sales. The growth of advertising reach correlates to the increase in spending. In 2015, we could see reach expansions of major brand promotions by up to 31 %.

In the coming days, we will analyze our results more closely by segment, category and brand. Our results will be published here.