The grocery industry must focus on innovation and not price promotions, even as the war between retailers intensifies, says the boss of Procter & Gamble.

Speaking at an Institute of Directors' convention in London this week, Gianni Ciserani, the company's top executive in UK and Ireland, said P&G's brands in the laundry, nappies, feminine hygiene and shampoo categories were increasingly competing for market share based on promotional activity.

His comments come as The Grocer unveils new research showing that suppliers fear promotions are accounting for an increasing share of their sales

Ciserani said: "In many ways, lower prices from increased promotions are considered a good thing for consumers."

He added: "The reality is that as we put more money into promotions, we have less money to put into innovation."

The P&G man added: "The long-term risk of sustained promotions is that consumers are forced to accept a trade-off: lower and lower prices at the expense of innovation and ultimately true value.

"The solution is to balance our focus for the short term, from the promotions that reduce customer loyalty, to the long-term value creation, based on superior consumer understanding, which will help drive loyalty."

But P&G is not alone in worrying about this issue.

Research conducted by The Grocer and Billetts Marketing Sciences found that 33% of volume on average is sold on promotion - compared with 25% when we quizzed suppliers on this issue last year.

Billetts questioned suppliers of all sizes accounting for £11bn of grocery sales. And a staggering one-third of respondents reckoned that promotions now accounted for 41% or more of their volumes, with 9% saying they did 60% of their volumes through a deal.

Not surprisingly, two-thirds of those quizzed felt they were spending too much - and almost half expect to do more promotions in the coming year.

David Bridges, CEO of Billetts Marketing Sciences, said: "We are seeing more companies struggling on the promotional front and losing money hand over fist. If you don't have a disciplined approach, then you will be haemorrhaging cash."