New Zealanders buy 59 per cent of their groceries on sale, the highest percentage of any developed nation.
Last year, the country's biggest supermarket suppliers took a $45 million hit to sales and reduced their advertising spend by a fifth. But smaller suppliers enjoyed a boost.
The industry has blamed the drop on hard economic times which have forced New Zealanders to watch the budget.
"This shows that supermarkets need to be clearly understanding of what their consumer requirements are as to what products they stock," said Trina Snow, director of the National Association of Retail Grocers of New Zealand.
Nielsen's report, The Year That Was, found the top five supermarket suppliers collectively declined in sales by 2 per cent, or $45 million, and the top 100 supermarket suppliers had no growth.
However, the top 101 to 200 supermarket suppliers grew by 5.5 per cent ($43 million) last year.
The report also found 59 per cent of the groceries bought last year were on special.
Ms Snow said she wasn't sure why New Zealanders bought more groceries on promotion than any other developed nation.
"It's probably just a sign of the economic times, there's less money out there to spend on products that might not necessarily be needed, such as cakes and biscuits and sweet things."
The research company's managing director, Rob Clark, said the trade promotion strategies were creating new consumer behaviours.
"Shoppers now simply wait for one of their repertoire of brands to be on promotion before purchasing a product."
Mr Clark said the real issue for supermarket supplies was that budgets previously aligned for product innovation or advertising were now being given to price promotions.
"The key driver of success for growth categories was innovation, proving that new product development can work and is central to suppliers breaking the cycle of price promotions."
A spokeswoman for Foodstuffs, which owns the New World and Pak'nSave stores, said New Zealand was a deal-oriented society and so the supermarket industry was dominated by specials.
"The pricing policies here offer consumers extraordinary value as the market is highly competitive."
A spokeswoman for Countdown said: "Kiwis are certainly price savvy, and today they're looking for ways to save money and waste less."
Supermarket sales, 2012
*Breakfast cereals: +$14,396,921
*Sports energy drinks: +$13,560,336
*Yoghurt and dairy: +$10,230,059
*Fresh milk and cream: -$24,663,759
*Butter and margarine: -$23,851,770
*Bread: -$17,617, 317
*Block of cheese: -$17,497,021
Source: Nielsen's The Year That Was report.