Continente’s parent, Sonae, is complaining about excessive promotions and discounting by its retail competition, calling it “an unhealthy trend.”
In Portugal, "4.5 out of 10 products are sold under a promotion," claims Luís Reis, the head corporate person at Sonae, owner of the Continente chain.
Buying only when products are part of a promotion is a key tactic used by many supermarket shoppers, a skill honed through the long years of austerity.
The number of purchases made as part of a promotion is significant, with about 45% of products sold under a price discount scheme.
Reis from Sonae said that the percentage in Portugal is more than double the percentage in Spain.
Despite Continente actively pushing many discount offers via its voucher system for store card holders, Luís Reis says this trend "unhealthy" and is having an effect on the retailers’ accounts.
"Food retail has been under very strong promotional pressure. It is at unreasonable levels. It is a sector that is under unhealthy competitive pressure," claims Reis in a thinly veiled call for other retailers to raise their prices and cut back on sales.
According to Jornal de Negócios, in the first half of 2017, Sonae's food retail business struggled along with a €1.7 billion turnover, a healthy increase of 5.1% over the same period last year. However, its discounts and promotions have hit profit margins.
Between January and March this year, food retail margins declined from 4.8% to 4.6%. This decrease is explained by "promotional intensity."
Asked about the reasons for this growing number of promotions, Reis said "there are some players in the market who have not yet found the right strategy and try out many things", which "introduces less healthy dynamics."
Consumers, on the other hand, are delighted that by clever use of Continente vouchers a 25% saving can be made on a €20 shopping trip with many other categories subject to regular price reductions.
Any company now moaning about margins has failed to understand the concept of competition in a free market economy and calls for competitors to halt promotional activity comes close to breaking the law.
