Barclays: Packaged food companies cut back on promotions after disappointing promotional returns

Investing.com — Barclays’ latest analysis shows that major packaged food companies are cutting back on promotional spending after its aggressive discount strategy in 2025 failed to deliver the expected returns.

This shift comes after profit margins came under pressure throughout 2025, even though the pressure was not mainly from a promotional escalation that was initially feared. Instead, promotions failed to effectively boost sales volume across the broader sector, prompting management to apply a more rigorous review of promotional returns.

Mondelez International acknowledged in early February on its Q4 2025 earnings call that its aggressive promotional strategy in North America did not generate sufficient return on investment. The company increased promotional activity at the start of 2025 due to softness in the cookie category and the loss of market share. It has since reduced promotional activity, which could lead to a decline in volume share, but has improved overall profit and loss performance in North America.

JM Smucker announced at the New York Consumer Analyst Group meeting that it has decided to scale back promotions in its sweet baked snacks division for the remainder of the fiscal year. The company said it needs to stabilize operations and assess which promotional programs can generate acceptable returns.

At the same meeting, Kraft Heinz said it is reallocating spending from initiatives that performed poorly in 2025 to moves with higher return on investment.

The companies are now moving toward a more rigorous, data-driven approach to trade spending, focusing on cutting unprofitable promotions and using analytics and artificial intelligence to improve promotional effectiveness. Barclays noted that this change is largely passive—driven by a deterioration in promotional returns rather than proactive trade optimization.

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