Cost of Living Crisis: Are the Major Supermarket Chains Playing Fair on Budget Ranges ?

 

In the past few weeks the UK supermarket  ‘majors’ have finally started to take stock of consumer responses to the cost of living crisis. ASDA were one of the first to act on their budget ranges earlier this summer, largely in response to their ‘shaming’ by campaigner Jack Munro, whose efforts earlier this year  effectively exposed their policy of only offering their full ‘Smartprice’ range in their biggest superstores.

ASDA, I suspect fearing a social media ‘storm’ in response to Jack's revelations, quickly extended most of their ranges to their medium-sized stores at the time, and (so far) seem to have maintained reasonable stock levels on most of these items. Other majors are now following their lead with scale-ups of their own budget ranges, increasing both availability and restocking levels to cater for projected demand for lower priced items. The latest twist in this tale is that ASDA have now started limiting their budget ranges to 3 items per person. 

This, they say,  is to 'allow as many people as possible to benefit from their low prices'. Again, the agenda is really to prevent hoarding in the face of their virtually continuous and substantial price hikes on these budget ranges,  and to minimise uptake – I’ll come on to the reasons behind this later.

Although all this emphasis on price-cutting might seem philanthropic, and will doubtless be hailed as such in the media, the move in favour of budget ranges is really just hard commercial strategy on the part of the majors. They will have realised that consumers will be particularly hard-pressed financially over the coming winter, and know they face loss of market share if they fail to change their offerings accordingly. So-called ‘brand snobbery’ is now very much a thing of the past in the face of necessity, and the only way forward for the supermarkets is to move  towards budget-priced ranges, at least until a new food price steady state is reached, salaries catch up,  and the inflation rate starts to come down again, which hopefully it will start to do in the course of 2023.

However, close observers of the food retail industry will already have realised that there is an issue of fairness with the pricing strategy for these 'basics' ranges. 

If you look carefully at the price increases across the board on food items over recent weeks, it becomes obvious that all is not well, and the supermarkets may well have a hidden agenda. Price rises on most budget ranges have been so rapid over the last few weeks that someone visiting their local supermarket once a week for their regular shops will likely have noticed price rises on virtually every occasion. 

In absolute terms these frequent increases tend to be small, amounting to 2p or 3p on an item costing around 30p. This probably won't be noticeable between weekly shops on even a reasonably small total bill of £40 or £50, and will be negligible on typical bills above £100. Looked at in percentage terms though, this amounts to a whopping 10% per price-hike and the overall increase since the start of the price surge this Spring may actually amount to more than 100% on some budget items. This hasn’t been the case for higher priced items, with much lower percentage increases, although there have been notable exceptions for genuinely ‘high scarcity’ items such as cooking oil.

We could therefore be forgiven for asking the question – why are the supermarkets introducing these excessively high percentage rises on their budget ranges ‘by stealth‘ in this way ?

They will no doubt claim that since these products are effectively loss leaders for them, they cannot avoid raising prices disproportionately if they are still to make a profit overall in the current highly competitive environment.

However, I believe what’s really going on is a concerted effort to wean consumers off these  ranges by steadily reducing the differential between the budget ranges and their in-house unbranded products. By doing this, they hope ultimately to force consumers back to own-branded- and then ultimately on to the more expensive branded ranges, thereby allowing the supermarkets to maintain improved profit margins in what is likely to remain a highly competitive market.

Look out for changes in stocking levels, too, as another weapon in their armoury. In the past, some of the budget ranges introduced were stocked at such low levels that they ran out within hours of a new delivery. Although this has to some extent been addressed recently, due largely to the intervention of our consumer champions, I would anticipate some stores may well quietly start to  'soft-pedal' on restocking these items to minimise their losses, while still being able to claim parity of offerings by quoting price-matching statistics against their competitors. 

Yet another 'trick' to look out for locally is changes to the store's down-pricing policy. Most stores have in the past adopted a strategy of reducing the price of limited-lifetime perishable items radically towards the end of each day to ensure stocks are all sold-off before they reach their sell-by date. This is both environmentally friendly in reducing food waste, and saves the store money by avoiding landfill charges. 

I have noticed changes in some of our local stores (notably ASDA) recently, such that the range of items that can be price-reduced by the assistants, and the extent of the reductions, have both been limited by alterations to computerised store price  management systems. 

This appears to have coincided with the removal of 'Best Before' dates which was trumpeted as a means of reducing unnecessary food waste.  Far from achieving this laudable objective, this has resulted in more items being left on the shelf unsold,  and is a real body-blow to those really struggling with their grocery bills who may have come to depend on end-of-day reductions to survive. They will no doubt be unhappy about having to look elsewhere for their bargains.... 

Last, but certainly not least, is the issue of the environment - every ton of unused food, in addition to costing the supermarket ca £200 disposal charge,  will contribute yet more to our UK landfill or incinerator burden. Speaking to some of the local store assistants themselves, it's apparent that they are as disgusted as the rest of us with the sharp increase in food left unsold at the end of each day as a result of this policy change.

The majors really need to think again about the plight of the less well off consumer if they to retain their 'loyal' customer base....we're all in for a tough time this winter, and it's no coincidence that ALDI, one of the principal discounters, have just displaced Morrisons as the 4th largest player. LIDL are also waiting in the wings and the remaining 'big three' might do well to look to their laurels if they wish to avoid the shopping public voting with their feet when the food 'winter' really sets in.

We also need our consumer champions to take a hard look at these issues – preferably before things get really difficult this winter…..

Viv

Update 8.10.22: Regular mid-evening visits to my local ASDA store over the past 2 weeks have confirmed that the changes made to the global online pricing system I described above have resulted in a significant amount of additional food waste. This is because items which would have sold easily at the end of each day at the low prices used previously are no longer selling and remain on the shelves at closing time. Since legislation forbids sale or donation of food items after their sell-by date, these items must be disposed of, usually to landfill...I have complained to ASDA customer services, but so far, predictably perhaps, no result.

One for Jack Munro to look at, I suspect.... 

Update 30.10.22: Some further digging locally has enabled me to get to the bottom of this problem. According to shop staff at my local ASDA branch, the block on manual price reduction is due to a fault in the stock system and has been repeatedly reported as an issue by staff since the problem surfaced in early September. 

A chance attempt at manual reduction earlier in the day by one of the staff before 7pm revealed that the system does allow manual reduction at that time, and a follow-up check showed that the blockage actually cuts in at 7pm and remains in force until close of play at 10pm throughout the week.  On Sundays, when the store closes at 4pm, manual reduction has never been an issue, which tends to confirm where the problem lies. This situation is clearly absurd from a marketing point of view - since staff would not normally perform final reductions on items this early in the day, the software fault has resulted in 'blocked' prices and the consequent accumulation of food waste for landfill I described above. Since the  problem is system-wide i.e. applies to all ASDA stores in UK, I shudder to think how much food is being wasted every week across the country while the software remains faulty..... 

ASDA I.T. Dept. have had more than 2 months to fix this.....please get your 'skates on' and solve it before the winter price 'gloom' really sets in, and even more people have to resort to food banks to make ends meet.

Version Date: 30.10.22