Good Values can be Good Value
Good Values can be Good Value
Shoppers will be spending an extra £60 to buy the same items this December as last year, and all the leading retailers are now engaged in furious competition to claim the lowest price Christmas dinner. But while the short term battleground is focused on prices, there is a risk that some retailers may be risking the longer term loyalty of their shoppers, if that is the only differentiator.
It may seem scant consolation but Kantar’s latest food survey shows that UK grocery inflation fell in November for the first time in 21 months – admittedly only down 0.1% and still at a very high level of 14.6%. Over the last year own label sales have grown 11.7%, while the cheapest foods are up 46.3%. We cannot say for certain that one small decline means inflation has yet reached its peak, but the balance of economic forecasts seem to suggest that the picture may look very different in 6-12 months’ time, with inflation perhaps into the low single digits. It doesn’t necessarily mean that just because inflation is more under control we would then be on a path of meaningful economic growth. But things may just feel better.
How should retailers react?
Clearly the discounters are in a strong position today in terms of messaging. Their entire proposition rests on having the lowest prices and their shoppers can be confident they will find good standard products and almost certainly spend less than they would elsewhere – even if their choice may be more limited.
Meanwhile the remaining players in the grocery market – which, let’s not forget, account for 80%+ of total food and drink spend – are determined to show a focus on value. That’s not only retailers like Asda and Morrisons whose offer is targeted at budget conscious shoppers, but also those towards the other end of the price scale.
Since launching its ‘Remarksable Value’ campaign, premium food retailer Marks & Spencer has reported that one in every four items per basket are items from this new value range. Its closest competitor in the market for the affluent shopper is Waitrose, whose recent performance has been less than stellar. Despite the inflationary environment its sales actually fell 3.1% in the last quarter, although Kantar data in the 12 weeks to 2 October show that it is losing less sales to Aldi than any of the other leading multiples.
Pitching premium products to retailers
At Green Seed UK’s recent pitch meeting with Waitrose for a new super-premium, organic food brand client, the question we were asked, before even managing to flip to the first slide in the deck, was ‘What are you going to do to help us with the cost of living crisis?’ The fact that we won a listing for 4 skus was not because we had a lowest priced branded option for their category (the opposite in fact), but that we were able to articulate the real value of the range and a pricing rationale which both retailer and consumer can understand.
Retailers can also claim to offer good value for higher priced items if they replace other more expensive areas of spend for the shopper. Consumers cutting back on eating out – perhaps also trying to wean themselves off a financially ruinous pandemic-fuelled takeaway habit! – are being attracted to ‘dine in’ for less with interesting menu meal deals, for example.
‘Good values can be good value’ is the theme from Waitrose’s advertising campaign this autumn. It speaks to their ethical credentials, integrity of sourcing and fair payments to farmers. While all retailers do indeed need to show what they are doing for shoppers in a cost of living crisis, they also need to remain true to their own values to retain the long term loyalty of their shoppers, to maintain or grow their position in the market.
Best wishes of the season!