As has been widely reported over the last 24hrs UK inflation is still extremely high & and it's widely being blamed on food prices. Staple food prices have been drastically increased, specifically in the last 6 months.
I run a small village shop which after having a boom in trade during COVID is now struggling due to increasing stock costs, it's dramatically eating into the buisness reserves to cover cost increases. While this should only be short term, every week is a struggle to maintain stock levels.
The industry was warned about electricity prices, but those are fixed and manageable. Stock costs vary from day to day, week to week with the cost only increading.
Some items/brands, such as pedigree chum dog food have increased by 100% - just as one example, a tin was price marked (fixed price shown on the tin) last year at 75p, this year they jumped to £1.49 a tin. Price marked pack (PMP) margins have also dropped - many staple items that were over 20% margin are now dropping. I've seen drops of anything between 2% and 6% on pmp packs. So the shop is having to spend more on an item, but retaining a comparable net margin to the previous price.
Heinz, mondelz, Unilever and pretty much all of the big food suppliers have increased their product costs dramatically, Heinz most notably - however my local suppliers for meat, jams/chutney, bread, dairy & fruit and veg etc although they've had in increases due to price fluctuations globally, the cost increase is relatively minimal.
So how do I, as a very small trader combate the increase?
How are you as a consumer dealing with food inflation - changed shopping habits etc?
I've been buying alternatives, for example I can sell a can of organic baked beans (£1.49) now for less than a can of Heinz baked beans (pmp £1.79) , but I get complaints If I don't sell Heinz as a brand.
I thnk it's tough... we have our village shop the same as yours and everything is massively more than the supermarket, enough so that we simply don't use it (sorry).
a tin of beans is 40p more, a Snickers 30p more.... it's just insane, so we just don't go there. I don't know how much of that is enforced pricing or how much is profiteering from the new owners... but even going in for a baguette used to be £1.20 and is now £1.80...60p increase in 2 years.. it does mean we eat less baguettes lol.
Shopping local for veg and meat - local grocer and butcher are cheaper than supermarket. Buying a lit less meat too.
We've been Lidl/Aldi shoppers for a long time and the difference is marked. A comparable shop is 1/3 to 1/2 less at Lidl compared to Sainsburys.
As far as our local shop goes (was a Co-op, now is a McColls) I just don't really go there anymore. The prices just seem ridiculously high.
That consumer demand for branded goods seems to be the problem. Could you promote your shop as an anti-brand outlet and say why (i.e. as above)?
I'm not convinced that big brands, who have competed on price for so long, would suddenly choose to whack their prices up to increase profits, right at a time when energy prices are sky high taking everyone's money and forcing them to price-shop even more.
We've a business who've taken over our old Co-Op and next to it a by weight / sustainable shop next door. It's properly marketed as different, alternative, sustainable, eco - and it's not cheap. But they seem to be doing well.
This in wealthy Dunblane with 9000 people living here.
https://www.greens.co.uk/dunblane
And
I’m not convinced that big brands, who have competed on price for so long, would suddenly choose to whack their prices up to increase profits, right at a time when energy prices are sky high taking everyone’s money and forcing them to price-shop even more.
I have to disagree, it seems blatantly obvious to me that they are doing just that. And the last thing big brands do is compete on price.
Take cat food, huge price increase, recipe changes, shrinkflation of portion sizes. I’ve given up and started buying fresh chicken to feed instead. It’s far cheaper, better for the cat, reduction in packaging waste. Bit more effort of course.
I’m not convinced that big brands, who have competed on price for so long, would suddenly choose to whack their prices up to increase profits, right at a time when energy prices are sky high taking everyone’s money and forcing them to price-shop even more.
Eh?
Brands don't compete on price, Heinz for example don't compete on price, the market the brand specifically as being worth more. There's a mark up on anything they sell just for having their logo on it, whether it's 'better' or not is debatable.
The OP is very much caught in the middle of all that, carry a brand for it's perceived demand, but the brand is effectively cutting his margins on price marked goods by refusing to let him pass that on Vs carrying non-brand items which might affect demand...
TBH I'm going to shop by price but also availability if I'm in our local shop and there's only expensive beans or bacon on offer and we "need it now" I'll suck it up and pay, if there's no real pressing need I'll wait for a supermarket trip...
At the risk of being flippant Branston beans are better than Heinz as well as a lot cheaper.
We went away with friends who eat Branston beans.
After tasting them ,we swapped as has everyone we have given the beans to.
Our balloon gas supplier hasn’t had any since October. We looked at a new source ,put the tank in the basket, went off to serve a customer and in that time it had gone up £80.
One of my colleagues has just challenged a couple of our suppliers - a few items have doubled in cost and yet seem 'outsude' of some of the inflation costs for raw materials. We understand overheads and delivery has gone up.
Example- log rounds for seating area over double last year's cost, and last year they were rather pricey in cost already...
As has been widely reported over the last 24hrs UK inflation is still extremely high & and it’s widely being blamed on food prices.
This is the bit I don't understand as a starting premise.....
ONS says the average UK household uses 10.8% of its spending on food. So if say food prices doubled, and whilst that have gone up a lot they have not doubled, it would only lead to a 10% rise in total household expenditure. The 20% rise we have seen roughly equates to a 2% rise in overall average household costs. Average is doing a lot of heavy lifting there of course as the poorest spend a lot more on food as a proportion of their household income than the wealthy. So whilst its clearly one of the factors that has a clear impact, you can't blame the whole inflation issue on food prices.
I get the impression that Tesco / ASDA / Sainsburys are using this as an opportunity to get folk to switch to their brands long term which presumably have better margins than Heinz. The pricing on Heinz stuff at the moment is commical vs the own brand sitting next to it. E.g. £4.70 for the Heinz sauce vs £1.49 for the own brand. £1.70 for the Heinz soup vs pennies for the own brand next to it.
a tin of beans is 40p more, a Snickers 30p more…. it’s just insane
This is the price you pay for a couple few reasons, smaller shop=bigger overheads, but also it's the price fixed by the wholesaler or brand. Food shops run on very small gross margins, often around 20 to 25%, when buying in small quantities the wholesaler or manufacturer dictates the RRP to the smaller shops. Shops with a symbol group can provide offers base don buying power - shops labeled as Premier, Spar etc.
I'm increasingly having to find product that has a high margin of 30-40% to make up for the 'brands'.
Unfortunately we are too small a shop to sign up for even a basic symbol group, so are completely independent. This has worked to our advantage in the past, I can shop around for product such for example - so we had toilet roll, flour, yeast etc during the pandemic. But also is a disadvantage as you won't see as many(if any) BoGoF offer or 2for3 in the shop.
We try to combat perceived under value with price marked items - choc bars and sweets price marked rather than 'extortionate' but as per my original post even this is becoming untenable.
I’m not convinced that big brands, who have competed on price for so long
This is a misconception - the brands don't compete on price, the shops do. Supermarkets have loss leaders, anything on offer is making a loss or breaking even for them, it's the other stuff in your basket that makes them money. Largely the value of a Brand is the name, not the product and they know this.
Heinz globally makes around 30% net profit, Tesco 2%... The big brands also dictate pricing, Tesco dropping Heinz last year is a good example.
Logs have doubled in price apparently which is just profiteering..... Trees haven't doubled in cost to grow and transport isnt "that" much more expensive.
😠
Interesting - our have gone up a £1 a bag or around 5% a load...
This is the price you pay for a couple few reasons, smaller shop=bigger overheads, but also it’s the price fixed by the wholesaler or brand. Food shops run on very small margins, often around 20 to 25%, when buying in small quantities the wholesaler or manufacturer dictates the RRP to the smaller shops. Shops with a symbol group can provide offers base don buying power – shops labeled as Premier, Spar etc.
I understand the why.... it just makes it sting too much so we don't bother. I'd rather go to Tesco and spend £100 and get a full shop and do without the thing i 'needed' that was only 30p more... but all those 30p's add up.
Things like when you got to the local shop and they have Cravendale milk which is £3.00 or so.... or i can head to Tesco and pay £1.20 for the same amount.
Not what you want to hear as a small shop.... but that's the reality for many.
I tend to agree with weesky. When it comes to a decision between feeding my kids or local business owners kids, mine are always gonna get fed first.
Also I can't remember the last time I bought a Heinz product. Tend to just shop at Aldi/Lidl. Morrison's seems to have gone crazy expensive as well! Local co-op does have some decent deals though, and at least we give something back to the local through our co-op card thingy.
OP - can I ask where your shop is? I know you're Cotswolds/Ciren area (or at least I think I do)
I get complaints If I don’t sell Heinz as a brand.
Complaints that are actually an issue, i.e. reducing sales, or just whinging from a certain type of person I can imagine uses a small village shop? If I go into a small shop for some baked beans, I know I'm pretty much going to get what I'm given and that's fine.
Or, maybe make a 'thing' of how much Heinz is now, and how you've managed to help your punters by finding a better value alternative. Some kind of 'brand-beaters' display/promotion maybe?
As an aside (if you haven’t already), can you join the nice coffee club (*with basic food, croissants, cake etc) very common where I am, small village shop had a crap machine, then nice coffee and 1 table inside, couple outside in summer, about a year later 3 inside, 8 outside under a sunsail. Lots of people meet, coffee, small shop, home. If you have good parking can you do sandwiches - a few places seem to be known to the trade and at the dinnerish get quite a few vans, esp with a preorder facility - in, pickup and coffeee back to work, easy parking seems to be their win
OP – can I ask where your shop is?
Not too far from 417 Flyup.
Yeah, the markup on coffee is outstanding. My BIL used to own a cafe, he told me that the biggest cost in a £2.50 takeaway coffee is the 5p paper cup...
Sorry my reply up there was a bit off.
As others have said either ditch the branded goods or source some cheaper alternatives and show in nice big signs that they are cheaper side by side with the Heinz stuff. See which sells first. Some people will still buy Heinz but I reckon lots will buy the cheaper alternative.
Good luck to you though, it must be hard running a business like yours in these times.
Not too far from 417 Flyup.
Now I'm trying to think which of those villages has a shop. I don't think Cranham does. Or Coberley. Birdlip?
I’ve been buying alternatives, for example I can sell a can of organic baked beans (£1.49) now for less than a can of Heinz baked beans (pmp £1.79) , but I get complaints If I don’t sell Heinz as a brand.
From your previous posts I see your shop as more of a convenience store. If they are stuck for beans on a Saturday afternoon they'll buy the organic ones, rather than drive to the nearest supermarket. They'll have a chunter but they'll be back because of the convenience!
We've all done it - you've gone into the local shop for something urgent. Look at price - go HOW RUDDY MUCH!! But you still go back and shop there because you see it as a tax on your lack of planning!
The important question though is are you making as much profit from the organic beans and the Heinz. No point doing your self out of profit.
And IMO - Heinz Baked Beans are rubbish - Aldi's own are far better! 🙂
From your previous posts I see your shop as more of a convenience store. If they are stuck for beans on a Saturday afternoon they’ll buy the organic ones, rather than drive to the nearest supermarket. They’ll have a chunter but they’ll be back because of the convenience!
I'm mostly in agreement with this, but as a village shop in an area with piss-poor local transport and a reasonable amount of elderly people, I'd imagine he has to balance the needs/wants of the people who don't want to drive to the supermarket with those who can't get to the supermarket, for whom this is their only shop.
I am sure you already know this but for the sake of another opinion.
Our local village* londis is rubbish, hence we don't buy much from there. I expect it to be expensive due to convenience. The thing that stops me is it doesn't stock what I want to buy. It has the usual beans, crap biscuits sweats cheap cider and crap beer. It doesn't have a good baked goods section, nice beer and a pleasant environment. Now this is probably because what sells is crap beer and cheap cider, but it's catch 22, I only drop in if I actually have to not because I want to.
* A bit of a weird village not the usual pretty village.
I’m not convinced that big brands, who have competed on price for so long, would suddenly choose to whack their prices up to increase profits, right at a time when energy prices are sky high taking everyone’s money and forcing them to price-shop even more.
Large corporations have fuelled inflation with price increases that go beyond rising costs of raw materials and wages, pushing shopping bills to record highs, according to an analysis of hundreds of company accounts.
Highlighting a trend dubbed “greedflation”, the research indicates that supermarkets, food manufacturers and shipping companies are among hundreds of major firms who have improved their profits and protected shareholder dividends, giving an extra lift to prices, while the cost of living crisis has meant workers face the biggest fall in living standards in a century.
I do 90% of my shopping at Lidl, and even their prices are shooting up now (relatively speaking).
a tin of beans is 40p more, a Snickers 30p more…. it’s just insane
Doesn't seem unreasonable for a local shop, I'd expect more like 2x or 3x the price.
My local shop sells off-brand stuff now, and I'm sure I recognise some of the names from budget supermarkets.
I worked in the food industry for many years and have been watching the current round of price increases. For many years prior to Covid, food ingredient prices had been pretty static (more or less). And the UK pays the least in W Europe for food.
Covid has been a huge opportunity for the supermarkets and the big grocery companies to realign their profitability. People have to eat - and boy, you can blame anything on Covid. Energy prices have obviously gone up - and is a factor come into play in both manufacturing and distribution.
But Tesco, Sainsbury , Unilever, Heinz etc are completely milking it.
It will be interesting to see Tesco's figures when they come out ( but they also made a killing during Covid). It is certainly a good time to be a supermarket - as nobody asks questions.
But they are going to start buying less ...
I really feel for you and other small shops. I don't know what the solution is, you are a service that will be sorely missed if you have to give it up.
Our village shop is a Tesco Express, so prices are higher but not subject to the pressure of proper independent stores, and it gets a lot if trade from surrounding villages - we have the doctors, chemist, takeaways etc to draw people in. (But no pub, currently)
The post office that my mum goes to every week (which is part of a symbol group like Nisa, Premier etc) now seems to stock a lot of Tesco brnads for things like orange juice, butter, even milk. I suspect that the owner is buying from the supermarkets when they are cheap, or when normal supplies fail, and just adding a bit of profit on top.
It is certainly a good time to be a supermarket – as nobody asks questions.
Not nobody, trade unions have been on the case for a while:
"Despite the rise in wholesale prices, Tesco, Sainsbury’s and Asda still managed to increase their profits by an astonishing 97% in 2021. At the same time the 8 top UK food manufacturers made profits of £22.9 billion. Profiteering is happening right along the food supply chain and workers are paying the price.
“It’s more evidence that the British public are hostage to greedflation . It’s time our elected leaders and policy makers woke up to corporate greed and challenged it head on.”
Unfortunately the political party whose election campaigns they pay for don't seem to be on the case.
the shop is having to spend more on an item, but retaining a comparable net margin to the previous price.
Assuming people are still buying the same number of tins of beans/dog food then you're still making the same profit, it's just more money tied up in stock?
Hypothetically if the price of something crashed (hypothetical post Brexit deregulation of farming leading to an oversupply for example) would you just shrug and accept that you would have to reduce your margin in absolute terms because the price had dropped? Or would you maintain the same absolute margin because that's what it costs to buy and re-sell that product?
I’ve been buying alternatives, for example I can sell a can of organic baked beans (£1.49) now for less than a can of Heinz baked beans (pmp £1.79) , but I get complaints If I don’t sell Heinz as a brand.
That's interesting. That suggests that the input costs (fertilizer, sugar, all the bad stuff) to creating Heinz baked beans have increased to beyond the higher labour costs of creating an organic product.
Either that, or Heinz are rinsing their customers. Either way - don't buy Heinz. Buy organic, better for the environment, your health and your wallet 🙂
We hardly buy any big brands. A no brainer. Even if the taste isn't identical it is usually just slightly different, not worse. Only examples are Baxters Baby Beetroot. And Liddle detergent wasn't dissolving in the tray. Went back to Daz, issue solved.
We use our corner shop but only for papers, morning rolls, and the odd thing we have run out of
Strangely, our local shop is one of a pair of shops side by side which are both corner shops selling almost identical stuff. It has always been that way. Seems logical to only have one especially as there is a Tesco, Waitrose, Lidl, Asda, M andA food, and Aldi within 2 miles.
Not nobody, trade unions have been on the case for a while:
“Despite the rise in wholesale prices, Tesco, Sainsbury’s and Asda still managed to increase their profits by an astonishing 97% in 2021. At the same time the 8 top UK food manufacturers made profits of £22.9 billion. Profiteering is happening right along the food supply chain and workers are paying the price.
“It’s more evidence that the British public are hostage to greedflation . It’s time our elected leaders and policy makers woke up to corporate greed and challenged it head on.”
I wonder why profits might be higher than they were in 2020.........
Tesco profits:
2019/20 £2.2B
2020/21 £1.3B
2021/22 £2.2B
2022/23 £2.4-£2.6 (final figures not released yet)
Looks like business as usual apart from a crap year when we were all at home shopping online. And bearing in mind their turnover is ~£65Billion, the profit margin is ~3%.
More on the "greedflation"
Aussie study finding 69% of inflation felt by consumers is due to excess profits of large corporations.
https://www.wsws.org/en/articles/2023/02/25/xnvj-f25.html
Looks like business as usual apart.....
"Despite the rise in wholesale prices"
Despite huge increases in transport costs, energy prices, grain prices, poor weather, etc etc Tesco's profits remain totally unaffected - all the costs are passed on to the consumers, they simply increase their profit margin.
Hence the term "greedflation".
And on the BBC News today the real life consequences:
London
Tower Hamlets: Calpol most shoplifted item in borough
https://www.bbc.co.uk/news/uk-england-london-65316305
"Desperation has led to an increase in theft. Shoplifting of essential items and medicine has increased. Theft of essential products for babies is also on the rise."
Always good to get knowledgeable info on these threads from people in the business.
I'm not sure baked beans are a good example though as there's basically one brand that everyone wants, because historically all other brands were terrible. Catfood though, there are two brands of dry food - Purina and IAMs - and one would assume price would be a factor in people's choices there? Or bread - there are about 5 brands in our bakery section.
Maybe it's a case of them both being owned by the same Megacorp so they can collaborate on prices? Or perhaps shoppers have become less price-sensitive over the years and more sensitive to other things, and no-one noticed until inflation kicked off?
Despite huge increases in transport costs, energy prices, grain prices, poor weather, etc etc Tesco’s profits remain totally unaffected – all the costs are passed on to the consumers, they simply
increasemaintained their profit margin.
Their profit margin is ~3%
It's 3% of 27% of the entire grocery market in the UK, but it's still only 3%.
Tesco's gross profit margin decreased in 2021 (6.2%, -5.8%) and increased in 2019 (6.2%, +31.5%), 2020 (6.6%, +6.2%), 2022 (6.9%, +10.9%), and 2023 (7.3%, +5.6%).
Looking back at the last 5 years, Tesco's gross profit margin peaked in February 2023 at 7.3%.
Some people are completely wedded to these brand names, the psychological grip they have is amazing. I was chatting to a guy at work about this kind of stuff and he mentioned they tried lidl once and couldn’t bare the inferior quality rip off products. Went straight back to buying the usual brands. No money worries for him and just wasn’t interested in trying different products again. Each to their own, I much prefer the Lidl and Aldi model.
Our local strawberry farm is selling early season fruit that I think requires extra heating at this time of year. Has gone up a bit, but not by the huge amounts in supermarkets.
ernielynch
Full Member
Tesco’s gross profit margin decreased in 2021
So you agree (or at least agree that statistics can be made to show whatever you want if you like if you look at them through a tight enough vignette).
Looking back at the last 5 years, Tesco’s gross profit margin peaked in February 2023 at 7.3%.
I'm going to hazard a guess that coming off the back of a period with the highest inflation for a generation they may be reaping the short term benefits of stabilizing wholesale/commodity prices. In the same way rising prices in their supply chain would have reduced their profits 12 months ago.
