The issue of the rising cost of food in comparison to other items has to be salient for anyone who shops regularly in Britain. Ordinary commodities like apples, eggs and milk seem to have soared in price in the last three months. When I read this piece by John Henley in The Guardian, he actually puts some real figures down showing the amounts which these items have risen by. Scary. Particularly if you’re living on a tight budget. Me, I’ve been shopping in Lidl for years now.
There comes a point when you can no longer afford to ignore it. You may, if you are lucky, have found it hard to get worked up about the fact that the average loaf of sliced bread now costs £1.15, compared with less than £1 last year. You may have shrugged on learning that a pint of semi-skimmed milk will currently set you back approximately 20% more than it did in May 2007. But you would have to be really very relaxed – or very flush – indeed not to be moved by the realisation that when a dozen medium free-range eggs are also up 47%, salted butter 62%, Basmati rice 60%, cheddar 25%, pork 7% and beef nearly 5%, you are paying an awful lot more for your groceries than you were a year ago.
According to the Office of National Statistics, food prices have climbed 6.6% over the past 12 months (and April’s hike equalled the fastest increase recorded since the consumer price index was invented 11 years ago). The big supermarkets, which constantly juggle prices across the whole of their range, dispute this figure. But a survey of 24 staple products this week by the myconsumer.co.uk website, which compares prices at Tesco, Asda, Sainsbury’s and online supermarket Ocado, found that the average family is now spending around 20% more on its weekly food shopping than it was 12 months ago – equivalent, based on a trolley filled with £100 of groceries, to rather more than £1,000 a year.
As a result, it seems, we are beginning to change the way we shop. The evidence? Cheaper retailers such as frozen-food chain Iceland and German-owned Aldi have seen their sales soar as shoppers who would usually grace the aisles of upmarket alternatives such as Waitrose or Marks & Spencer poke their noses round the doors of the long-disdained, deep discounters. Canny consumers who have been loyal to particular brands for longer than they can remember have suddenly started switching, in search of better bargains. And sales of organic products, which only a short time ago were seen as the bright new future of food retailing, have slowed dramatically.
“I’m seeing a real change,” says Paul Foley, managing director of Aldi UK. “I’m seeing people in my stores who I would never have seen a few years ago. To be fair, it has been a growing trend over the past three years or so, but it’s true that over the past few months it has accelerated. I think rising utilities bills, fuel bills, mortgages and now food bills have jolted people into considering trying somewhere new. And that’s a big deal, you know: most people can’t remember how long they’ve been going to the same supermarket, often on the same day and at the same time. They’re almost on autopilot.”
Aldi says its shopper numbers have increased by 25% over the past three months compared with a year ago, while the number of ABC1 customers passing through its doors is up a startling 17%. Fully half the discounter’s shoppers now belong to those higher socio-economic groups, Foley says. “Part of that shift is down to the fact that we’ve changed, too,” he says. “Compared with five years ago, we offer many more upmarket ranges; we’ve won national awards for food quality; our fresh-food section has been hugely expanded. I think the people coming to Aldi now are discovering that shopping at a discounter these days isn’t quite the desperate, eastern European experience they thought it was. I think it’s quite shocked some of them.”
The bottom line for deep discounters such as Aldi, though, will always be the price of the goods in their shoppers’ trolleys: its current Super Six promotion – “Is this the best-priced fruit and veg in Britain?” – offers, for a barely credible 59p each, six oranges, six kiwis, 250g of baby plum tomatoes, or three gem lettuces. According to Foley, a full weekly shop that would cost an average family £100 at Sainsbury’s costs around £70 at Aldi. “If you only shop for the absolute basics, say a £10 basket, the difference will be smaller,” he says. “You need to shop across the full range to get maximum benefit – the price differential on milk, for example, will only be about 4% or 5%. On cosmetics, it can easily reach 50%.”
Research published this week by market information group TNS Worldpanel showed discounters such as Aldi and Iceland, and relatively cheap alternatives such as Morrisons, have fared substantially better than their more upmarket competitors over the past three months, booking sales growth of 17%, 12% and 9% respectively. “Obviously, everyone has a measure that will allow them to say, ‘We’re cheaper than someone else,'” observes Iceland’s marketing director, Nick Canning. “We’ve actually been outperforming the market for the past five or six years, but it’s certainly true that right now, the great British public have a lot less money in their pockets. They’re being a great deal more careful.”
Even the very big boys, it seems, are noticing the squeeze. Tesco this week introduced almost 1,000 new promotions and special offers “in a bid to help hard-up consumers make ends meet”. As household costs continue to increase, the company said in a statement, “Britain’s favourite supermarket will have more products on promotion than it has ever had at any one time. From bread to bathroom cleaner and with savings including half price, extra free and buy one, get one free, there will be an offer to help every customer.” Chief executive Sir Terry Leahy boasted in the supermarket’s annual review that Tesco currently has “more than 9,000 products on promotion – the highest number of offers at any one time in our history”.
Stretched budgets are not tempting everyone to ditching their regular retailer, however. “The automatic assumption is that as soon as prices go up, people switch supermarket,” says Johnny Stern, managing director of the mysupermarket.co.uk price comparison site. “That is happening to some extent, certainly. But in fact most people are actually quite loyal to their supermarket, especially to its own brands, and what they are doing more often is not swapping their whole basket, but swapping products within that basket. The cost of their basics – eggs, milk, pasta, tea, orange juice, fruit, meat and so on – may have leapt by 19% over the past year, but the cost of their basket has gone up by quite a bit less. They’re doing some quite clever product switching.”
According to Stern, smart consumers are not just alternating between, say, Heineken, Carlsberg and Becks beer, Haagen-Dazs and Ben & Jerry’s ice cream, or Evian and Volvic mineral water, but between different packaging options offered by the same brand. “They may switch to a different product if it’s really markedly cheaper,” he says. “The simple option, obviously, is to move to an own-brand. But often, they’ll save by buying their usual brand differently – a 12-pack rather than a six-pack, larger bottles, what have you. Consumers are suddenly much less product- and packaging-loyal than they have been.”
As if to confirm the picture of a nation of altogether more cost-conscious consumers, last year’s 30% growth in the sales of more expensive organic foodstuffs has slumped to just 10%. And while we now seem to be buying rather more products than we once did from the supermarkets’ premium quality ranges such as Tesco’s Finest, Sainsbury’s Taste the Difference and Morrison’s The Best, this is absolutely not because we’re feeling flush enough to pay the mark-up – but because we’re not feeling flush enough to eat out in restaurants. Truly, times are hard.