Promotions hit 50pc record as Co-op sees little market respite

The group, which is the fifth biggest grocer in the UK, said promotions now account for 50 per cent of sales, a new record, as shoppers try to find ways to make their cash go further.

Chief executive Peter Marks said: “I’ve never seen promotions at 50 per cent, it’s unheard of territory. It really describes the market place. We are normally 40 per cent promotions. The 50 per cent figure tells you a big story about how customers are behaving.”

He added that people are looking for value and ways to maximise the amount they can spend on groceries in a very competitive environment.

“Consumers have a budget they are used to spending on food and are thinking: ‘That’s the amount I’m prepared to spend’. It’s going to be tough for the next two years.”

The Co-op does not expect a recovery in consumer spending until next year.

“We had hoped to see signs of economic recovery by the start of 2011, but the downturn is clearly biting deeper than we had expected,” said Mr Marks.

“We now anticipate challenging trading conditions through to the end of this year and into 2012.”

The company, whose businesses span food stores, financial products, pharmacies and funeral services, said profits for the year to January 1 jumped 48 per cent to £545.7m boosted by the acquisition of the Britannia Building Society and Somerfield stores.

The Co-op, which pays out a dividend to members depending on how much they spend, said the dividend to customers rose 55 per cent to £77.4m.

Food sales climbed 4.8 per cent to £7.2bn, but like-for-like sales fell 2.5 per cent.