Promotional Pricing Strategy: Why FMCG Suppliers Need Proof, Not Just Discounts
Promotional pricing strategy in Australian grocery is no longer just a sales lever. After the Federal Court found Coles made misleading “Down Down” discount representations, FMCG suppliers need to treat every promotion as a margin, evidence and compliance decision, not just a volume opportunity.
Key Takeaways:
Retailers will expect cleaner evidence that discounts are genuine, commercially justified and easy for shoppers to understand.
Suppliers need a clear base-price history, cost-change rationale and funding trail before agreeing to deep promotions.
The Food and Grocery Code now applies to all grocery supply agreements, raising the importance of documented range, pricing and promotional terms.
A strong promotion should protect shopper trust, retailer margin and supplier profitability at the same time.
The brands that win will build a “Promotion Integrity File” before the buyer asks for it.
Why promotional pricing strategy now matters more
For years, too many suppliers treated supermarket promotions as a necessary tax on growth. Fund the catalogue. Hit the display window. Take the volume. Hope the scan-back does not destroy the P&L.
That approach is now too loose.
In May 2026, the ACCC said the Federal Court found Coles made false or misleading representations about “Down Down” discounts across proceedings linked to 245 common products. The Court found misleading representations in 13 of the 14 tickets considered in the liability hearing.
This does not mean suppliers should stop promoting. It means the promotion has to stand up under scrutiny.
At the same time, the broader pricing environment is still sensitive. ABS data released on 27 May 2026 showed annual CPI rose 4.2% to April 2026, while food and non-alcoholic beverages rose 2.8%. Meat and seafood rose 5.0%, with beef and veal up 11.9% and lamb and goat up 14.6%.
That creates a difficult buyer-room reality. Consumers are watching price. Regulators are watching claims. Retailers are watching trust. Suppliers are watching margin.
This is where retail market entry and negotiation strategy needs to move beyond “what discount can we afford?” and into “what value claim can we prove?”
What has changed for FMCG supplier promotions?
The change is not that discounts are risky. The change is that weak discount architecture is risky.
The ACCC’s Coles case focused on whether shoppers were being presented with genuine value. According to the ACCC, Coles had temporarily increased prices before placing products on promotion at prices still higher than, or the same as, the earlier selling price.
For suppliers, this creates three practical questions:
1. What is the real base price?
A promotion only makes commercial sense if everyone understands the true base. That means the everyday price, the previous shelf price, the timing of any cost increase and the period for which the higher price has been in market.
If your wholesale cost has changed, document why. Commodity input, freight, FX, packaging, labour, minimum order quantity and manufacturing cost should all be clear before the buyer conversation.
2. Who is funding the discount?
Supplier-funded discounts are normal, but they should not be vague. The Food and Grocery Code states that a large grocery business cannot require a supplier to fund part or all of a promotion unless the supplier has agreed in the grocery supply agreement and the funding is reasonable in all the circumstances. It also requires reasonable written notice before the promotion is held.
That matters because sloppy funding language can create arguments later. It can also hide the true cost of growth.
3. What is the shopper being told?
The shopper sees the shelf ticket. The supplier feels the scan-back. The retailer carries the consumer law risk. That means everyone in the chain has an interest in making sure the value message is clean.
A supplier who can show price history, promotion depth, unit economics and volume rationale becomes easier to trust.
The Promotion Integrity File
MVRA’s practical framework for this shift is the Promotion Integrity File.
A Promotion Integrity File is a simple working pack that proves a promotion is commercially justified, properly funded and capable of being explained to a retailer, regulator or internal finance team.
It should include:
Base price history for the SKU
Wholesale cost changes and timing
Recommended retail price logic
Promotion depth and expected sell-through
Supplier funding, scan-back or rebate mechanics
Gross margin impact at base and promoted price
Evidence that the shopper value claim is fair
Post-promotion review showing volume, margin and repeat purchase impact
If you are preparing for Coles, Woolworths, Chemist Warehouse, Priceline or Officeworks, this file should sit beside your range review deck, not behind it. It is also a useful addition to MVRA’s Retail Readiness Checklist, because promotion funding is one of the fastest ways a growing brand can turn revenue into low-quality volume.
What most brands get wrong about supermarket discounting
Most brands assume a deeper discount improves the buyer conversation. Sometimes it does. Often it creates a different problem.
A 40% off promotion can drive trial, but if the supplier has not modelled trade spend, promotional leakage, forward buying, baseline sales erosion and post-promo decline, the sales result can look strong while the P&L gets weaker.
This is the tension we often see when brands move from DTC into major retail. The DTC founder is used to controlling price, margin, customer data and timing. Major retail introduces catalogue mechanics, promotional calendars, retailer margin expectations and category-level comparison. For more on that transition, see DTC to Major Retail: How to Know When Your Brand is Ready to Scale.
The buyer is not just asking, “Will this sell?” They are asking:
Will the promotion grow the category?
Will it shift incremental units or just subsidise existing shoppers?
Will it damage price trust?
Will the brand still be viable after the promotional window?
Will the supplier still support the account in six months?
This is why promotional pricing strategy belongs in the core pitch. It should connect directly to your retail buyer pitch, not sit as a late negotiation concession.
How suppliers should prepare before the next range review
Before the next range review or pricing negotiation, suppliers should do four things.
Build the base-price timeline
Map the last 12 months of wholesale cost, RRP, shelf price, promotional price and planned price changes. If the SKU is new, model the first 12 months forward.
Separate cost recovery from promotional theatre
A price increase should be defended on cost logic. A promotion should be defended on shopper value and category growth. When those two get blurred, trust drops.
The new supermarket price gouging regime from 1 July 2026 raises the stakes further. Treasury states that breaches by Coles and Woolworths can attract maximum penalties of the greater of $10 million, three times the benefit obtained, or 10% of turnover during the preceding 12 months.
Know your walk-away point
Some promotions are not worth winning. If the scan-back, case deal, rebate, display fee and everyday margin leave no contribution, the promotion is not a growth plan. It is a cash drain with a sales report attached.
Review the retailer agreement
The Food and Grocery Code now applies to all grocery supply agreements, regardless of whether the agreement was entered into before, on or after 1 April 2025. If the promotional obligations, notice periods or funding mechanics are unclear, fix them before the promotional calendar is locked.
For international brands, this is especially important. Australian retail is not just a new geography. It is a different commercial system. See Entering the Australian Retail Market: A Guide for International Brands for the broader market-entry context.
FAQ
Q: What is promotional pricing strategy in FMCG?
A: Promotional pricing strategy is the way a supplier plans discounts, funding, margin impact and shopper value across a retail calendar. In grocery, it needs to balance volume, category growth, retailer margin and supplier profitability.
Q: Should FMCG suppliers still fund supermarket promotions?
A: Yes, but only when the promotion has a clear commercial role. Trial, recruitment, seasonal volume and competitive defence can all justify funding. The mistake is agreeing to deep discounts without modelling the full trade spend impact.
Q: What evidence should suppliers keep for supermarket discounts?
A: Suppliers should keep base-price history, cost-change rationale, promotional funding terms, margin modelling, forecast volume and post-promotion results. This creates a clear Promotion Integrity File.
Q: How does the Food and Grocery Code affect promotions?
A: The Code includes rules on supplier payments, promotion funding, price increases and grocery supply agreements. Suppliers should ensure all promotional funding is agreed, reasonable and documented.
Q: Can promotional pricing damage a brand?
A: Yes. If a brand promotes too deeply or too often, shoppers can learn to wait for discounts, retailers can question the base price and the supplier can lose margin discipline. A strong promotional plan protects price trust as well as sales.
Promotional pricing is moving from a trading tactic to a trust test. If your brand is preparing for a major retailer, MVRA can help you pressure-test your price architecture, trade spend and buyer negotiation plan. Book a Strategy Call.
About the Author: Mil Spasov is Managing Partner at MV Retail Advisory, bringing senior commercial and retail leadership experience across major Australian retailers and consumer categories. Learn more about MVRA founder experience.
