PMPs and margins

Wholesalers are threatening to move away from price-marked packs (PMP) following concerns that retailers are no longer getting fair margins from the format.

Store owners and wholesalers had previously told RN that they were getting frustrated by suppliers increasing the cost price on PMPs, but not increasing the retail price accordingly. Pricing seen by RN last month showed that the retail margin on a number of soft drink and confectionery lines had fallen by between 5-15%.

The issue has resulted in various wholesalers revaluating the number of PMPs they stock. Eden Farm Hulleys sales director Ben Lawrence told RN that the firm and “seven large wholesalers” were considering moving to more non-PMP formats.

He said: “Costs are going up for retailers and shrinking margins places further pressure on them. The imbalance with PMPs lies in manufacturers not considering the costs to retailers and wholesalers. It’s more suited to the end consumer and manufacturer. Suppliers aren’t matching the cost price on PMP with non-PMP.”

“Retailers need to get at least another 10% from PMPs. We absolutely recognise that PMPs sell better than non-PMP versions and they’re more relevant than they were 10 years ago, but the margin has to be much higher, otherwise there’s a risk of pushing retailers away.

“We’ve spoken to seven big wholesalers who all agreed they are untenable unless there’s more margin. The benefits of moving away from PMP allows retailers to take charge of their additional costs and the opportunity to price their own products enables them to cover this.”

Similarly, McColl’s customer director Rob George expressed similar concerns about PMPs. Speaking separately during the launch of 2022 ACS Local Shop Report on 15 September, he said: “I’m not a fan of PMPs at all. They stop you doing the right thing for the customer in stores. I don’t like something which restricts the need to tailor for your community. If you try a one-size fits all approach across multiple stores, you will do the wrong thing for your community.

“I understand why suppliers and retailers do it and I understand it encourages retailers to keep prices down, but there’s a lack of flexibility.”

However, Parfetts retail director Steve Moore warned that removing PMPs entirely would create the risk alienating customers in an inflationary environment.

He added: “I’ve spoken to one retailer who wants to have more non-PMPs for flexibility. However, the majority want PMPs and it’s something we do focus on heavily. Retailers feel it is very important and if a competitor next door is doing something similar, they take the view that they need to do it as well.”