Some people are completely wedded to these brand names, the psychological grip they have is amazing.
As someone has already alluded to, it's not just in food though, cycling brands aren't exactly immune/innocent either.
Unfortunately to OP I think COVID created a very different business model to what you will have going forward.
We live fairly remote, a village shop 2 miles away and Sainsbury home delivery.
I very rarely use the village shop, maybe for the odd chocolate bar and drink. Very occasionally we will be making some food and realise we dont have something in the cupboard and will go to the local shop 1. On the expectation it will be expensive 2. They probably wont have what we need.
Local shops also individually price items. When we are doing a 'big shop' online or in a store you tend to ignore the prices until you get to paying and then go WTF ! in a local shop you might only buy one or two things so you concentrate on price and brand.
Could you stock a cheap brand and premium brand of same product as a test for a while and see what sells?
Winners for me are local shops that have good quality 'home made' pies/samosas, bread etc. I would imagine there is more margin in that than a tin of Heinz baked beans?
I do know that farmers are not getting inflated income for the raw products they provide, they are just getting squeezed further by the buyers. So someone is making money out of all of this.
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).
I agree that your figures are wrong 😏
I also agree with the widely held view that supermarkets are guilty of "greedflation" and simply increase their profit margin during a cost of living crisis so that the only losers are the consumers.
Dog food is mental as well, we were paying less than £60 for 2x 12kg bags 2 years ago, now we're up at £80 and the price goes up every time we re-order.
I do 90% of my shopping at Lidl, and even their prices are shooting up now (relatively speaking).
Two bags in Aldi cost me £60 the other night, I remember I could have filled the trolley for that not so long ago.
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.
Nope, the symbol brands seem to be partnering up with the supermarkets for "own brand" supplies. McColl's down the hill from me have Morrisons stuff hiding under the old Safeway branding, Nisa has Tesco IIRC and I'm sure the others have their own suppliers.
We're going off-track somewhat analysing percentage profits for supermarkets! (yes I know this is STW)! 🙂
The OP really just needs to do what's best for him and his business.
Heinz is the safe option - everyone knows it and as a convenience buy people know they are safe with it. If sales of beans drops off a cliff if they substitue Heinz for an unknown brand then that's no good to anyone.
For those customers who depend on your shop why not offer a discount card (5% or 10%). It's pretty cheap to get some sturdy business cards printed. That way you can rip-off those who come in twice a year, and barely nod at you, but support those who buy on a regular basis.
increase their profit margin during a cost of living crisis so that the only losers are the consumers.
Fluctuating between 6.2 and 7.3, you'd have to dig a little deeper to actually prove that that change was statistically significant.
There's plenty of actual sticks to beat the big 4 supermarkets with, like their ability to dictate a price to farmers* rather than allow an actual competitive market to exist (or offer terms that would meet the fairtrade criteria) without having to make them up. Although arguably the supermarkets putting farms out of business does benefit the consumer so it depends who's side you're on.
*case in point, eggs this last winter. Farmers could have probably met demand with barn eggs, but supermarkets wouldn't pay what they cost to produce so a lot of farms just scaled back production and we were left with empty shelves.
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.
There was a quote in the Sunday Times last week from the CEO of one of the big brand owners and that was exactly their strategy. The whole point of owning a big name brand is you have more price insensitivity eg people want 'Heinz' baked beans and will pay a premium for having the logo on the tin. Their strategy was to use the current inflation spike to full advantage and maximise profits.
Paid £4 for some Heinz ketchup as Aldi had run out of bramwells.
Saw 48 Weetabix for £7 the other day.
I'll stick to Aldi/Lidl anyway. Prefer less choice. Makes my life easier.
If you simply must have brands, try Home Bargains. Usually far cheaper than Tesco/Morrisons but choice is often limited.
It's undeniable that some things are better from the brands; Crunchy Nut Clusters are a case in point; Kelloggs are at least twice the price of the Aldi/Lidl equivalent but more than twice as nice, and Heinz ketchup is nicer than any other I've tried making the savings a false economy as it's far more likely to get binned before it runs out.
Kelloggs are at least twice the price of the Aldi/Lidl equivalent but more than twice as nice
Conversly, Lidl cornflakes have zero added sugar (unlike Kellogs!) which is a massive win for me.
There’s plenty of actual sticks to beat the big 4 supermarkets with, like their ability to dictate a price to farmers* rather than allow an actual competitive market to exist (or offer terms that would meet the fairtrade criteria) without having to make them up.
It hardly 'making things up' FFS.
All your figures were wrong and you falsely claimed that profit margins haven't been increased, try reading stuff written by people that have looked into the issue. "Greedflation" as it is called, is very real.
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.
Higher profits margins are the result of “tacit collusion” by large companies, adding to the prices of hundreds of goods and services that were already under pressure after the Covid-19 pandemic and Russia’s invasion of Ukraine, the report said.
It is not simply business back to usual post pandemic as you claim. Costs have risen massively, transport, energy, food production, etc, since pre pandemic but supermarkets have been maintaining their eye watering profits by increasing their profit margins and hammering their customers.
And greedflation is a European-wide issue btw.
Unless you think that the European Central Bank is 'making stuff up' too?
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.
It's not the cost to 'grow' but the TCO that counts, plus what someone else is prepared to pay that dictates the cost of logs. Also need to take into account demand, as this too increases costs where suppliers/retailers now need to be less price competitive to make their 'numbers'.
Saw 48 Weetabix for £7 the other day.
£7/kg for Weetabix!
I pay less than that for my lah-di-dah organic date and walnut muesli from the local deli!
O.P - have you got room in your shop for some locals to sell their wares/crafts/art etc. E.g. I used to sell my cushions, handbags, tea towels and other crafts to a cafe. The owner took a percentage and therefore didn't have any stock to buy (this came to a halt when she later wanted 25% mark up, that meant I was making the goods at a loss).
The situation with buying wood is interesting. This is a product where a supplier is stitching up the retailer and consumer. The dowelling rods I buy for work were £2.00 each 18 months ago, then up to £3.00, now £3.20, If I'm using several on a job that's a massive mark up which has to be passed onto my customer.
At the moment I am 'taking' per hour less than the minimum wage for running a tiny business, it's just insane and certain business people cannot keep sucking up the price increases. We're being taken advantage of.
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%.
Tesco's profit margin is a nebulous thing - because they throw a whole lot of other stuff in there. Losses on projects, depreciation on assets, building land re / de valuation.
A senior buyer I knew there told me real food profits are nearer 30%. Which is more than the food companies make.
The there is the costs to the suppliers of position on shelves, late delivery "fines", lost profitability if a product is recalled, suppliers paying for Tesco staff to attend the annual bash, and also having fund all the raffle prizes.
BTW, pet food and pet treats are a real cash cow. Pet owners will pay anything for Fido.
Assuming your consumers will pay more, go for the artisan approach. Buy from local producers and focus on the added value of your products. You'll never compete with Tesco on price/volume but can get apples from a local orchard each week and make a profit. It's a lot more effort on your part but would insulate you from corporate activity.
All your figures were wrong
We've posted basically the same figures except you're posting TESCO plc, I'm posting Tesco UK (Turnover about £65billion, profits about £2.4billion).
The argument is whether an increase in profit of 1% is "greedflation", or regression to the mean after COVID.
Is the TUC correct that TESCO's profit was up almost 100% in 2021, yes.
Is that because TESCO's 2020 profit was a bit over half it's normal amount, also yes.
Did TESCO make 1% more profit in 2022 than 2021, also yes (ish).
Was that against a background of food price inflation being ~20% whilst raw materials and energy costs went through the roof, also yes.
Chap near me just sells short dated foodstuffs at c half supermkt prices, mostly branded but I bought 500ml Heinz ketchup for 1.50, he s really busy no idea if he s making money.
Our village shop does ok as has a post office, I just get weekend papers.
So even the IMF, an organisation historically notorious for demanding that workers tightening their belts and pay the price for economic mismanagement, with scant regards for the human cost, is on the greedflation case now.
The International Monetary Fund said last week it was “unconvinced” by evidence of a wage-price spiral where excessive worker pay demands result in a “baked-in” inflation, which the Bank of England says it is keeping a close watch on.
The IMF’s chief economist Pierre-Olivier Gourinchas went on to note companies profit margins were remaining strong during the crisis.
He said companies were doing rather better out of the cost of living crisis than workers were. The flipside of steeply rising prices but only modestly higher wages was that profit margins had “surged”, he added.
A senior buyer I knew there told me real food profits are nearer 30%. Which is more than the food companies make.
Depends how that is defined.
The net profit on a can of beans ie difference between what you buy it for and sell it for, doesn't mean a lot on it's own as it hasn't accounted for the cost of running the supermarket you have to have to sell it in the first place.
Gross margin will be much much lower and it may have a few write offs in there, but fundamentally, it will be dominated by the gross margin on selling stuff as that's the bulk of what Tesco does....
We work with a number of the big supermarkets including the discounters, we provide services not products. The vibe we're getting is they are all cutting internal costs like mad and things are pretty tight and there's been quite a lot of redundancies. Sorry that doesn't fit the conspiracy theories of big corporate greed but that's what I'm seeing from the inside.
Supermarkets are extremely competitive with low margins, if one starts to profiteer the others will happily cut their legs out from under them. Brands are also vulnerable, it's a fine line between premium aspirational prices and being too expensive.
Sorry that doesn’t fit the conspiracy theories of big corporate greed but that’s what I’m seeing from the inside.
So are you claiming that the European Central Bank and IMF on part of "the conspiracy theories", or are you claiming it isn't true that big supermarket profits have been unaffected by the cost of living crises?
Edit:
we provide services not products. The vibe we’re getting is they are all cutting internal costs like mad and things are pretty tight and there’s been quite a lot of redundancies.
Am I right in assuming that you probably supply subcontracted labour to the big supermarkets and that they are currently pleading poverty because things are so tight?
The IMF comment above refers to how they are deliberately exploiting the situation to suppress wages and increase their profits.
Am I right in assuming that you probably supply subcontracted labour to the big supermarkets and that they are currently pleading poverty because things are so tight?
Nope complete opposite actually, we also work with many other sectors including the public sector.
are you claiming it isn’t true that big supermarket profits have been unaffected by the cost of living crises?
Nope, never said that either. I'm happy to accept their profits up to the end of last year were constant as a percentage of turnover. However margins have been tight in the supermarket sector and their investors will demand the margins be maintained. The supermarkets are struggling to maintain the realtively modest percentage margins and are having to cut jobs and investment plans to try and maintain them. They are not raking it in like people like to think they are. They are also private business. If you want food distribution to be not for profit you could try and nationalise it but based on historical evidence governments distributing food hasn't worked so well.
The supermarket system is far from ideal but what's the alternative.
They are also private business. If you want food distribution to be not for profit you could try and nationalise it but based on historical evidence governments distributing food hasn’t worked so well.
The supermarket system is far from ideal but what’s the alternative.
LOL! That is one hellva leap! We have gone from 'greedflation is unacceptable' to 'well what's the alternative?' 😂
Here's some more conspiracy theories for you, this time from Investors Chronicle
https://www.investorschronicle.co.uk/news/2023/04/14/greedflation-is-only-making-things-worse/
Note :
Food and beverage inflation rose to 18 per cent last month in the UK. Supply conditions have been tough, but analysts at Pantheon Macroeconomics said that it would be a stretch to link these big increases to the impact of poor European harvests: “instead, supermarkets appear to have widened their margins”.
Yet, according to Pantheon, people are curtailing their consumption of goods that have risen most quickly in price, while discounters Lidl and Aldi have seen their market share soar. They add that “shoppers are not brand loyal but will flock to where prices are lowest”. For the same reason, quarterly results from the likes of consumer goods companies continue to be closely scrutinised for signs of shoppers trading down. Firms that are engaging in ‘greedflation’ could yet find that it backfires.
Just like unbridled greed eventually caught up with the big banks (but what's the alternative?) it might eventually catch up with the big supermarkets.
Been at 417 today so not had a chance to catch up on the thread yet...
OP – can I ask where your shop is? I know you’re Cotswolds/Ciren area (or at least I think I do)
Miserden - small estate owned village between Cirencester/Stroud/Cheltenham. Was recently in the news for fox hunting on the estate land - but that's a whole other thread ..
The post office that my mum goes to every week now seems to stock a lot of Tesco brands
If it's a Premier it's getting stock from Booker, which is owned by Tesco - they've removed what was the budget happy shopper brand and replaced it with Jack's, part of the Tesco brand. I only ever sell this in the shop if I absolutely have to and can't find the product elsewhere.
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've only one elderly customer in the village who doesn't shop either in person at a supermarket or gets online delivery.
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?
This is difficult to tell, primarily due to COVID the last few years were a boom for the shop and ment we could significantly reinvest in the shop, it went back to being a propper village shop up until the end of last year when 'cost of living' started being in the press. Sales have dropped but I'm selling the same as 2019 though & yes it's more money tied up in stock which is my issue.
My electric bill has doubled but that is small fry in comparison to the stock bill. I have around a 6month turn around on general grocery. So for example I sell an item bought for .80p with a rrp of 99p margin of around 20% making approx 20p, I go to replace the case of the item 6months later but find that I'm having to buy it for £1 and now sell at £1.20 do in effect I've made no money in that size months on it and still have to cover all overheads.
Our village shop does ok as has a post office, I just get weekend papers.
P
Tbh the post office pay is a joke - it's commission based so with the way royal mail is, falling rapidly.
Weekend papers unfortunately again is a falling market. If I could remove magazines from sale without removing newspapers, I would (sorry STW), mags have been a falling category for well over a decade, but we are forced to have them as part of our supply of newspapers (can't have one without the other).
Someone asked earlier in the thread about coffee and cake - yep, have both and seating. Coffee is a good earner, but the machine costs alot (like new small car amount) so takes a year or two (or three or four) to get any money out of it - but our coffee profits now pay for our new shop van.
Assuming your consumers will pay more, go for the artisan approach. Buy from local producers and focus on the added value of your products
We do both - local product and artisan foods. Only a really really small shop though. Artisan stuff is great for a local draw of people but a slow sell. There's an artisan shop not far from us called Jolly nice - know locally as jolly nice price as it's f'in expensive. £3 aubergines anyone?
Winners for me are local shops that have good quality ‘home made’ pies/samosas, bread etc. I would imagine there is more margin in that than a tin of Heinz baked beans?
We have home made pies, but they are generally a loss leader as the one pie you don't sell (and end up eating for tea) is the one that actually had any profit In it. Bread is the same - we have local bakery bread and have to sellout every 2days to retain profits.
Here's my view on supermarkets and going back to my op.
Tesco - the original discount food shop, typically has a very low profit margin ~2% & small fry in global food terms.
Aldi and Lidl - mis branded by the media as 'discount' supermarkets, as don't actually provide any discount as don't sell the same brands as anyone else it's just (sometimes) cheaper food.
Much of what the press have been talking about has been complete BS as it's the multinational food companies who actually dictate pricing, not the supermarket or shops.
.Depends how that is defined.
The net profit on a can of beans ie difference between what you buy it for and sell it for, doesn’t mean a lot on it’s own as it hasn’t accounted for the cost of running the supermarket you have to have to sell it in the first place.
Gross margin will be much much lower and it may have a few write offs in there, but fundamentally, it will be dominated by the gross margin on selling stuff as that’s the bulk of what Tesco does….
Thanks for the mansplaining
After 35 years in sales and marketing I do know different between net and gross margins - and margins and profits. And I also know all about the accountancy tricks so that businesses report as little as possible / pay as little tax etc.
Tesco is a huge business - covering grocery, white goods, electrical, property, petrol, land management, insurance etc.
The grocery business makes more than 8% as a business. How Tesco allocate this is the over all business is kind of the game that all companies play.
As you seem to have the Tesco details annual report , if you could send it to me, so I can have a better look?
Aldi and Lidl – mis branded by the media as ‘discount’ supermarkets, as don’t actually provide any discount as don’t sell the same brands as anyone else it’s just (sometimes) cheaper food.
I wouldn't say they're misbranded as opposed to lost their way in the UK. They used to be really cheap because they had cheap stores and nothing in the way of style. Say what you like but both are a long way from the stark white of Tesco now, probably to appeal to small minded folk who would rather pay a premium for a nice "experience" (it's shopping, get over it).
Cost is subjective as well, they are usually cheaper but with equivalent or better quality.
mrmoofo - don't disagree with anything in your post but would add...substantial 'hidden' revenues from volume/retro rebates and the chunky payments by brand owners to ensure optimal positioning of their products on store shelves.
There are lots of other revenue generators which stores deploy.
None of those revenue generators are ever used to benefit the customer.
The headline margin is meaningless.
I've worked for two of the major retailers - not as a trader/buyer but with enough insight to understand some, but not all, of the numbers which are being massaged.
Let's take your 8% and assume it applies to a customer spending an average of £100/wk over a 40 year shopping lifespan; that's (upto) £16.5k of profit at risk if/when that customer moves on.
That is a huge motivator in customer loyalty programmes; they should be re-named/branded aa customer retention schemes.
Supermarkets - necessary evil but never to be trusted.
What they know about us - based on just our shopping basket and 'loyalty' cards - should scare us but...it doesn't appear to.
Liddle detergent wasn’t dissolving in the tray. Went back to Daz, issue solved
been using Aldi color and Aldi biological for whites for years now. AOK. They’ve changed formulation recently and have smaller packages with the same effect. 🤷🏻♂️ what the ‘padding’ was but less volume, less mass, and the same effect work for me.
Found it amusing when a child came home from uni and said ‘I thought Tesco was cheap. I was wrong. It is really expensive compared to Aldi, Lidl, and specialist stores’.
Edit
Supermarket stuff I go to Aldi for. Artisanal stuff I go to my local French bakery, specialist cheese shop, and other specialist stores for.
Necessary brands I go to a supermarket or cash and carry for.
Aldi and Lidl – mis branded by the media as ‘discount’ supermarkets, as don’t actually provide any discount as don’t sell the same brands as anyone else it’s just (sometimes) cheaper food.
Not sure it’s the media, perhaps clever marketing by them both, which in turn has been latched on to by not just the media.
Ive never looked at Lidl it Aldi as being cheaper as their quantity always tends to be less than the competitors per unit. Some stuff is nice and slightly cheaper, but not much.
B&M is way cheaper than most supermarkets for food stuffs. M&S is more expensive than other supermarkets for food, but the quality is better. All the others are in the middle trying to kid people they are ‘cheap’
Booths is an odd one, some stuff high quality/high price. Others bits cheap ie they often have good deals on booze…maybe they just know their customers
