This Christmas, produce prices were discounted to new lows in the supermarkets. In retailer after retailer, carrots became so cheap that the Co-op, in the week before Christmas, chose to just give them away. So cheap you’d feel like a bit of a Scrooge not to leave Rudolph a kilo or two on Christmas Eve, rather than the usual solitary carrot.
But all the festive cheer of a cheaper Christmas for consumers due to this discounting is likely to come with a real price for the industry in the New Year. These low prices will almost certainly have led to market deflation in the produce sector during its peak sales season and have done little, if anything, to grow overall volumes. This reduced market value will weaken the supply chain and ultimately consumers will lose out, as the industry struggles to attract the finance to invest for the future.
What is happening in the produce sector is a world away from what happens in strong successful food categories. These have clear pricing strategies with the goal of driving overall category growth to the benefit of the retailer and their suppliers.
Promotional pricing certainly plays a part in encouraging consumers to make incremental purchases and increase the amount they buy on each purchase occasion. However, the price discounting of produce this Christmas has nothing to do with a strategy to develop the category by encouraging consumers to use more produce. Christmas is the one time of year when plates are overflowing with produce. Instead, it is all about retailers protecting their market share at any cost.
The real cost here isn’t just the short-term cost of funding these discounts. These prices make investing in efficiency and innovation nearly impossible for those in the supply chain. At these prices, there is little hope of making any return. Investing in environmental projects is also likely to be put on hold, as the market signals are that price is all that matters and anything that doesn’t immediately reduce cost isn’t affordable.
These low prices also send the wrong message to consumers as they undermine everything they’ve been told about the cost of food waste. Produce is so cheap there is no financial disincentive to purchasing too much and throwing away what you don’t use. It just relies on moral concerns that it isn’t right to waste good food.
There is no getting away from the old saying that you get what you pay for, and if we continue to see British produce sold at giveaway prices then I worry that we’ll see an impoverished industry which, in these uncertain times, is something we can’t afford.
