Tuesday, 21 February 2012

Supermarket Basics - Cleaning Up On Profit

You can't buy much more basic - sponge scourers / cleaners.
They clean dishes.

Are own brand basics the new high profit product for the big supermarkets?

I buy these pan scourers because they are cheap, they do the job and the branded versions are about 4 times the price.

Ok the branded ones are a lot thicker and have a groove shape for your fingers, but as these sponges get dirty quickly it's nicer to have the cheap version and dispose of them frequently.

Until recently all the main supermarkets - Tesco, Asda, Sainsburys s
old these in packs of 5 for 12p (The Sainsbury's pack pictured above did contain 5, but I used one before writing this).

The other week I noticed the Sainsbury price had leapt to 19p for 5. Today it is 20p!

On a visit to Tesco I checked their price. It had also shot up t
o 19p. But today they are back down to 14p.

At the weekend I was in Asda, their version is 14p.

The Asda and Tesco versions look identical, with the same white sponge - but the Tesco variety is thicker.

The Sainsbury's variety, with their yellow sponge looks like it might be manufactured by another supplier - or perhaps in the same factory using different materials.

But my point is this: the price in both Tesco and Sainsbury's was 12p. When the price increased it increased in both stores by 7p - that's 58% price increase.

Did the suppliers increase the price due to increased costs, or did Sainsbury's and Tesco both decide that they could simply charge more for this product, and shoppers would go on buying them because:
a. They have to use something to clean pans and dishes
b. These are still much cheaper than the branded competitor.

Three years ago (November 2008) I wrote about the flu
ctuating price of Sainsbury's basics chopped tomatoes - and how Sainsbury's had reported the sales had shot up due to the recession and more people were cooking meals from basic ingredients. I was surprised how much interest there was about my observation - The Daily Mail even contacted me and wrote about it. Back then a tin of basics chopped tomatoes which had previously regularly been 21p took a massive price hike to 30p.

Fast forward 3 years and the price in Tesco and Sa
insbury's has jumped from 34p where it has been for ages to 42p.

But Tesco has been experimenting with a high / low pricing strategy. Some weeks they are 42p some weeks they're 38p. Today Tesco is charging 38p. It doesn't seem like a big deal but it's a 15% increase in margin - and that's very high for supermarkets which operate at margins closer to 4%.

Chop your own tomatoes at Tesco - save 7p

If you're happy to chop your own tomatoes from a tin, you can save 7p a can. The Tesco Value plum (whole) tomatoes are just 31p.

At Sainsbury's you can chop your own peeled tomatoes for 39p ( a more measly saving of just 3p over the ready-chopped version which are 42p).

At Asda the smartprice chopped tomatoes are 33p and the smartprice peeled plum tomatoes are 31p.
Which is the same price as November 2008.

These observations would appear to support Asda's claim that they offer 'everyday low prices' in other words unlike Tesco they don't operate a high / low pricing strategy where the prices fluctuate wildly from week to week. This also explains why so many shelf edge price tickets in Tesco display the wrong price - as I wrote in Tesco Still Stealing from Customers. Tesco staff simply can't keep up with all the price changes, that's why so many shelf edge tickets show a different price to the one you'll be charged at the checkout (start checking this yourself, other people I've told have been amazed how often it happens - come on Trading Standards why not check it out?).

I conclude that under huge pressure to reduce margins on branded goods - Heinz, Kelloggs, McVities, they are clawing back the profits by fiddling with the margins on low value own label and basic brands where they hope shoppers won't notice.

What do you think?

Update 23 Feb

Popped into my local Tesco to discover Chopped Tomatoes are back up to 42p and whole Plum Tomatoes up to 39p (to match Sainsbury's). The pan scourers are displayed at 19p but scan at 14p.

It won't be long before Tesco customers cotton on to this 'yo-yo' pricing madness which has nothing to do with the cost of stuff and everything to do with maximising profit.


Anonymous said...

Am i missing something hwre? What's wrong with supermarkets slightly adjusting prices now and again to maximize profits? Any successful profit-making business adjusts their prices....but people just notice it more with supermarkets because they're shopping in them on a weekly basis. Come on....I wouldn't get my knickers in a twist over a couple of pennies on a pack of pan scourers!!

William Cane said...

Nice Blog,and offer was amazing i love it.Cleaning Sponges Factory