Margin squeezes on bestselling lines revealed

by Jack Courtez jack.courtez@newtrade.co.uk

A turbulent year for store margins has resulted in dramatic increases and decreases in the profitability of the most important lines and categories for independent shops.

The Retail Success Handbook: What to Stock 2023, released this week, uses sales data from thousands of local shops, recommended prices and wholesale data to determine the bestselling lines and the average profit margin.

Year-on-year analysis by RN of 339 top lines across 13 categories revealed a 1.7% overall fall in percentage margins.

While overall margins on the top 25 lines in some categories rose significantly, such as chocolate blocks rising from 22.3% to 26.2%, others such as confectionery sharing bags moved in the other direction, falling from 29.7% to 24.6%.

Sometimes, the category trends were driven by wholesale pricing on specific suppliers. For

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instance, in the worst-hit category – confectionery sharing bags, the margin on half of Haribo’s products in the top 25 lines fell from 48% to 27.1%. Other times, like in Vodka, the margin squeeze was mirrored across nearly all supplier’s lines.

Anger over poor retailer margins has led store owners to take action.

Nearly 100 retailers are part of a WhatsApp group helping to name, shame and avoid low-margin products.

Group member Serge Notay, owner of Notay Stores in Batley, West Yorkshire, told RN: “For years, stores have operated policies of setting a minimum percentage on tobacco, and it’s now widespread across categories.

“We’re seeing suggested margins of 22% or below, and it’s not sustainable. As my old Costcutter regional manager used to say: ‘You can’t stock everything, you have to be brutal’. It’s time for stores to take this approach by building planograms and deciding ranges on cash margins as well as sales, including increasing facings of high-margin lines and cutting facings of low-margin lines.”

Margin change by category

From the biggest drop to the smallest, the categories with overall margin declines across the top 25 lines were: confectionery sharing bags (29.8% to 24.6%), beer (23.4% to 21.1%), carbonated soft drinks (36.3% to 32.9%), vodka (20.5% to 18.7%), cigarettes (5.6% to 5.4%) and single chocolate bars (26.9% to 26.7%)

The categories with overall margin increases across the top 25 lines were: chocolate blocks (22.3% to 26.2%), energy and sports drinks (36% to 38.8), fruit soft drinks and juices (32% to 34.3%), cider ( 24.7% to 26%) and single sugar confectionery (28.1% to 29.6%).

Margin change by supplier

The suppliers with significant overall margin declines across their lines in the top 25 lists were: Haribo (37.6% to 27.1%),

Halewood Spirits (23.1% to 19.2%), Diageo (21% to 19.2%), Budweiser (23.3% to 21%), Ferrero (22.8% to 20.7%), JTI (5.7% to 5.4%), Mars Wrigley (28.5% to 27%) and Red Bull (35.1% to 33.4%)

The suppliers with significant overall margin increases across their lines in the top 25 lists were Nestlé (24.1% to 29.1%), Heineken (19.7% to 21.5%), EuroShopper (34.3% to 37.1%) and Mondelez (22.3% to 23.1%) l For more advice, order The Retail Success Handbook: What to Stock from your news wholesaler

Suppliers including Coca-Cola Europacific Partners, Imperial, Kellogg’s, Loch Lomond and Suntory Beverage & Food GB&I showed no significant overall change.

Lines on promotion or that did not make the top 25 in either year were excluded from the analysis.

When approached regarding margin issues, suppliers commonly claim wholesale pricing is at the discretion of wholesalers.