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Cutting Out a Tradition

Consumers: Grocery manufacturers are looking for cheaper ways to get savings to customers than stuffing newspapers and magazines with coupons.

June 18, 1996|MARTHA M. HAMILTON | THE WASHINGTON POST

Save those grocery coupons. They might become collectors' items.

Though some consumers love coupons--and the thrill of getting a "bargain" every time they go food shopping--those who pay to put them in consumers' hands have grown weary of the expense and nuisance. Grocery manufacturers are looking for less expensive ways to buy market share. Retailers grouse about handling coupons and consumers are using fewer of them than in the past.

Two major cereal manufacturers have attempted to reduce couponing by lowering prices. Cereals are the top item for which grocery coupons are distributed, sort of the raison bran d'etre behind the industry.

And in February, in the biggest departure from couponing to date, consumer products giant Procter & Gamble Co. announced it would drop coupons completely in three markets in New York and reduce its coupon distribution in the rest of the nation.

P & G distributes about 3 billion coupons a year nationally, so the outcome of its New York experiment is being watched closely, both by the grocery industry and by the New York attorney general, who has launched an investigation to ensure that manufacturers aren't colluding in those markets to get rid of coupons.

The problem with couponing, according to P & G and other grocery manufacturers, is basically too much buck for the bang. Of the 300 billion coupons distributed each year, less than 2% are redeemed.

But coupons have their advocates--and they are customers, whom manufacturers and grocers can't afford to alienate. About 30% of all shoppers use coupons, at least sometimes, for savings that average 68 cents a coupon.

That's a powerful habit. And companies that are beneficiaries of the nearly $7-billion-a-year industry that produces, distributes and processes coupons hope the habit won't be broken.

"There's been so much rhetoric about coupon elimination, but couponing actually turned 100 years old last year," said Lynn Liddle, vice president of Valassis Communications Inc., one of the companies that produces the free-standing inserts of coupons tucked inside most Sunday newspapers.

"One company says it's not going to do any more coupons, and there will be a lot of talk about that, but then company B will see it as an opportunity to steal market share" by issuing more coupons, she said.

Companies like Valassis that produce the inserts, the clearinghouses that count the coupons and reimburse retailers and the magazines and newspapers that receive substantial revenue from carrying the coupons, could all be losers if the practice of couponing declines.

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Grocery Manufacturers Assn. Senior Vice President Patrick Kiernan disagrees with Liddle. In recent years, Kiernan said, couponing has shifted from its most efficient use--attracting consumers to try a new or redesigned product--to its least efficient--throwing coupons into markets for a quick boost in market share.

That's why the current push to reduce reliance on coupons is different from the cyclical ups and downs in the past, he said.

Giant Food Inc., a leading grocery chain in the Washington, D.C., area, has been a longtime advocate of reducing the use of couponing. "Instead of coupons, wouldn't it be better to use the promotional dollars to lower prices to all consumers?" the Landover-based company asked in a booklet published in 1980, when Giant was trying to persuade fellow marketers to campaign for reduced coupon use.

"Finally," was Giant spokesman Barry Scher's reaction to recent efforts by manufacturers to cut back the number of coupons issued and to target them more carefully.

Manufacturers and grocers also are experimenting with new ways of distributing coupons that they hope will be more efficient. One method is to print out coupons at the checkout counter for items that a customer's purchases suggest might appeal to him or her.

"If you buy a six-pack of cola, you might get a coupon for a bag of chips because they're in the same category," Scher said.

Another approach is to mail consumers a pack of coupons tailored to the consumer's demographic profile. Free-standing inserts of coupons in newspapers account for more than 80% of current distribution of coupons, however.

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