Saturday, 15 November 2008

Sainsbury's Basics Chopped Tomatoes = Huge Profits

Sainsbury's Basics Chopped Tomatoes
Sales leap = Price Soars

As food prices have skyrocketed we've all begun experimenting with the supermarket budget labels. The supermarkets have reassured us they're on our side, their budget brands offer excellent value and quality. But buyer beware - you can't trust the supermarkets, because now they've converted us they're already ripping us off.

Until September Sainsbury's charged 21p for a tin of 'Basics' chopped tomatoes. I know it was 21p becuause in October the Richmond store still displayed a shelf label showing 21p but scanned them at 30p. I kept my receipt because the store manager refunded the mis-price after checking himself. In fact the computer was right, the shelf was wrong - the price had dramatically increased to 30p - a staggering 43% increase.

October 2008 was the month The Telegraph ran a report in which Sainsbury's boa
sted Basics Chopped Tomatoes was now their best selling line - shifting 2 million tins a month as shoppers turned to store cupboard staples to cook their own credit crunch chilli. No wonder Sainsbury's was full of glee - A 9p price hike on a tin of tomatoes multiplied by 2m units equals an extra £180,000 a month profit.

This week, in the teeth of recession, Sainsbury's reported a rise in first half year profits. Sales of the Basics range have increased by 30%. This week the price of chopped tomatoes has increased another 10% to 33p. Or to put it another way, if monthly sales are still 2m cans the extra profit (over the old 21p price) is £240,000. Yes £240,000 That's just short of quarter a million pounds extra profit - on a single item. Just one item in over 40,000 lines of inventory.

Sainsbury's aren't the only Supermarket who've comforted the cash strapped customer but are now taking them for a ride. Tesco has rebranded as Britain's Biggest Discounter. In the summer I discovered Tesco Value Roasted Salted Peanuts were very good value at 20p (200g). Recently the price jumped to 30p and by this week the price has climbed to 32p - a 60% increase over the price in June.

Tonight I checked the price of budget brand chopped tomatoes on the price checking site
MySupermarket . Suddenly, for the first time the big 3 (Tesco, Sainsbury's, Asda) are all charging 33p a can for a tin of chopped tomatoes.

What's going on? Do all the supermarkets share the same chopped tomatoes supplier? Has the supplier upped the price? Or, as the Competition Commission has failed to prove despite several inquiries (3 in the last 8 years) are the supermarkets mirroring each other's prices in a cartel?
Earlier this year The Office of Fair Trading raided supermarkets for evidence of collusion on prices. In September the OFT said they believed prices are being shared between supermarkets via their suppliers. If the case is proven (as it was in 2002 with sportswear retailers and England shirts) the supermarkets face fines running into millions - which will quickly consume the chopped tomatoes profits. Watch this space.

Sainsbury's shouts about helping stricken shoppers feed their families for a fiver. Meanwhile it lines its own pockets to the tune of a quarter of a million pounds every month, on chopped tomatoes alone.


Anonymous said...

Sainburys is also doing this with its white sliced loaf in the Basics range - approx 3 weeks ago this was 30p, last week 40p and this week 45p!

The Chief Executive said...

Another case of 'think of a number'...

As long as Sainsbury's Basics are still comparatively cheap they appear to keep upping the price until customers stop buying...

Anonymous said...

Your life must be so fantastic that all you have to do is worry about the price of basic tomatoes......

The Chief Executive said...

Anonymous - I'm sorry you haven't enjoyed reading about my Adventures in Consumerland.

I often use small specific examples to illustrate bigger points about our relationship with big business. In this case that Sainsbury's claimed it was helping shoppers downsize their grocery bill - while systematically hiking the prices of these 'basic' lines.

I'm only too aware that sometimes my posts may appear trivial at first sight - but that is far from my intention.

Anonymous said...

I for one applaude this article as I too have noticed the rather large increases. Its not just happening with basic food either, a friend of mine works for sainsburys and gave me some sneeky info - products that are selling due to 'market flcutuation' i.e. basics good, milk, beans, bread and others get a hike to cover possible future profit losses.

One of these stuck out like a sore thumb, Beanfeast, though not a veggie myself I do like this product and in the space of a week it went up by 33% but the best thing is it only went up on one flavor as it is the most popular.

If this isn't a sign that supermarkets abuse the consumer I dont know what is.

I wont stop buying basics items or stop buying from sainsburys but I wish it were time people woke up and see they are being used.

Anonymous said...

Now we have tomatoes at 33p a tin, they have leaped to 38p per tin in Sainsbury and round the corner in Asda still at 33p per tin. Looking on the web site they are 38p another 15%. Yikes they must be making the tins with gold!

Anonymous said...

Tesco is now 42p a tin, up from 33p, then 38p in the last 2 weeks. Has the Italian tomato harvest failed?

The Chief Executive said...

After last week's first 'profit warning' Tesco have to rebuild their profits somehow. Looks like they've turned to chopped tomatoes. How long before Tesco drop the disastrous 'Price Drop' advertising campaign?