DSN has partnered with Competitive Promotion Report and IRI to create a new series of exclusive reports that analyzes the impact of trade promotion activity on various front-end merchandising categories — DSN Promo Watch.
In this premiere edition, DSN examines the cough-cold business. Following are key findings from the analysis:
- Average trade spending — defined as all off-invoice allowances and bill backs — is very seasonal in cough-cold, ranging from less than 1% to almost 5.5%;
- Trade spending was highest in cold-allergy-sinus liquids, averaging 5.4% in November 2012. Yet, it is No. 2 in market share, trailing by an average of 51 points;
- There is greater proportional trade spending on liquid products and cough syrup than on tablets and cough drops, yet the latter generate greater retailer margin;
- Increases/decreases in trade spending in tablets have less impact on market share than any other category;
- There is a direct correlation between trade spending and market share in liquids, cough syrup and cough drops. However, only slight increases in cough drop trade spending leads to sharper market share increases;
- Cough syrup had the lowest average retailer margin of any cough-cold category over the past two years at 22.6%, 30.5% and 37.8% in the mass, grocery and drug channels, respectively;
- Cough drops had average market share of less than 10% over the past two years, but the category had the highest margins at 31.0%, 40.9% and 48.3% in mass, grocery and drug, respectively;
- Tablets captured two-thirds of market share with the second-highest margin on the lowest trade spending;
- Cough syrup had the lowest average market share at 7.8% and the second-highest average trade spending at an average of 2.4%;
- Market share increases/decreases perform in inverse relation and lag retailer margin increases/decreases in liquids;
- In tablets, increases/decreases in retailer margin had less impact on market share;
- In cough syrup, significant reductions in average retailer margin most often were followed by increases in market share;
- Margin decreased when trade spending increased in all categories.
- When average margin reached its highest peak over the last two years at 46% in May 2011, unit sales decreased 36% within 3 months);
- Unit sales and spending moved in sync in all four categories;
- When promoted, the average net invoice for liquids, tablets and cough syrup was within a narrow range at $4.78, $4.67 and $4.91, respectively, while the net invoice for cough drops on promotion was $0.75; and
- In June 2013, tablets saw an increase in average list price from $5.10 to $5.29 (+3.6%); however, average retail price increased less than 1% in July from $9.67 to $9.75.
Sources: IRI, a Chicago-based market research firm (@iriworldwide), Cough & Cold, 116 weeks ended May 19, 2013, total U.S. multi-outlet and CPR Detail Report and Retail Price Report, 116 weeks ended May 19, 2013.