18 August 2018 | Online since 2003


1 July 2014

Price war boosts free range sales with promotions


New figures released by the British Retail Consortium show that food sales declined in the three months to May - a symptom of the price war launched by leading supermarkets.

But Barry Jackson of Egg UK says that the egg market is holding up much better than he and other traders had expected. “When I look at my graph, I predicted that by the end of May and the begin-ning of June we would see a lower market, but it is nowhere near where I said it would be - and it’s not just me; other traders are saying the same,” said Barry. “Central Egg just put prices up this morning.”


On food sales generally big retailers in the UK have been losing market share to emerging discounters Aldi and Lidl as price-conscious customers have looked around for better value. Big names like Tesco and Morrisons have responded by cutting prices to win back consumers. And Roger Gent, chairman of the British Free Range Egg Producers’ Association (BFREPA) warned in last month’s Ranger that the price war should not be fought at the expense of egg producers, as Tesco openly promoted the fact that it was slashing the price of its free range eggs from £1.38 to £1.00 for a box of six. It boasted that it was cutting the cost of a traditional British breakfast.

May’s BRC-KPMG retail sales monitor shows that food sales were down by 0.2 per cent in an av-erage three-month comparison with the same period last year. It is the first such fall since the rec-ords began in 2008 and David McCorquodale, head of retail at KPMG, said it reflected price war competition in the grocery sector. "While non-food retailers are seeing steady sales growth, the grocers appear locked in a race to the bottom, imposing price cut after price cut to maintain their sales volumes. This price war is hindering the retail sector's overall recovery, which without the effects of these cuts would have seen like for like sales growth outpace inflation over the last quarter.”


Other retail sectors were recording signs of growth, he said. ”With Easter distortions now behind us, the non-food sector is showing encouraging signs of growth with total sales growing by more than four per cent over the last quarter. Clothing and footwear led the charge, although furniture and flooring sales are also encouragingly higher than inflation for the quarter. Consumer confidence can still be fickle, but the response to targeted campaigns has been positive. Retailers are investing in their businesses and planning for further growth at home and abroad.”

But price-cutting was having an adverse effect on margins in the grocery sector. "The main barrier to recovery is now the grocers' battle over price. The deflationary effect of these prolonged discounting campaigns, whilst good for consumers, is feeding through to the grocers' margins and share values. The constant price matching brings into question the long term value of the grocers' brands and positioning, but in the short term is providing the UK consumer with plenty of options."

Helen Dickinson, director general of the British Retail Consortium, said, “There is a very clear pat-tern in food sales emerging where customers continue to be discerning in search of value. Super-markets are providing great quality food in a very competitive market and this shows in the three-month average food growth, which turned negative for the first time since our records began in 2008 (excluding Easter distortions). Let's hope this rebalancing will eventually be rewarding for retailers.”

In another illustration of how the price war is affecting the grocery market, one other report released by the British Retail Consortium recently - the BRC-Nielsen shop price index for May - showed that food inflation was running at historically low levels. The report said that food inflation re-mained unchanged at 0.7 per cent from April - the lowest ever recorded.

Helen Dickinson said, “Food inflation remaining at its lowest level since our records began is great news for hard-pressed households as the summer approaches, and confirms that retailers are re-sponding to current conditions by matching attractive offers with those products most in demand at this time of the year.”

Mike Watkins, head of retailer and business insight at Nielsen, said, "Food inflation is still low, many supermarkets are price cutting and non-food prices remain deflationary, so the high street continues to generate little inflationary pressure. Little in the way of immediate seasonal or weather related price increases is anticipated so the outlook for the next three months is for relatively stable shop price inflation. Helped by the increases in consumer confidence since the start of the year, this should encourage shoppers to spend more freely over the summer months.”

In the egg sector, big increases in chick placings are starting to filter through into to the layer flock. “With 35 million birds there is a lot more egg around,” said Barry Jackson. “We are coming to the time of year when demand for eggs is traditionally softer in the summer months and we have had a few warm spells of weather. Yet no-one can understand why the market is as good as it is. I am not saying it’s brilliant but it is much better than I expected. Everyone I know is scratching their head to explain it and I can only think that it is down to extra sales.

“Packers would probably tell you that sales are pretty good at the moment. The market is pretty firm. Central Eggs dropped the price but then put it up again, and they were right to do so.” The market was much tighter than anyone had foreseen, he said.

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