Bernard; Supermarkets are a cost plus margin business. If the price of a product or range of products decreases due to supply increases; the retail margin is applied to the lower price. Retail prices hence decrease. The supermarket industry does not and cannot hold up the price of a product to improve its profit margins. We are not Canute!!🥴
Bernard; Supermarkets are a cost plus margin business. If the price of a product or range of products decreases due to supply increases; the retail margin is applied to the lower price. Retail prices hence decrease. The supermarket industry does not and cannot hold up the price of a product to improve its profit margins. We are not Canute!!🥴
Sure but I’m guessing the margins in NZ are bigger than the UK for example where there is so much more competition . One example (of many) from where I live : a box of cherry tomatoes bought from the same producer, local veg shop $4.99, Pak n Save $9. Yet who would be getting the best wholesale price?
Sally; The supermarket buyers are ordering from the bigger producers contracting for a minimum quantity daily and paying the wholesale market rate(frequently plus a quality margin) That producer sells his excess daily production on the wholesale market at the going rate for excess production. This is frequently much lower leading to your local greengrocer having super deals at retail. When there is a wholesale shortage the supermarket buyers take precedence and have stock at a high price. The greengrocers have little stock . Excess stock may be donated to the food parcel suppliers.
As per their name, it is essential that supermarkets have the complete range of stock to offer their customers. The fresh vegetable suppliers that claim they are offered little for their excess production are offering product to supermarkets that already have supply contracts with other vegetable producers. Naturally when offered excess the only factor taken into account is price.
Had to read this twice to get it, but I do see what you're saying. I did think the Foodstuffs model meant they more consistently bought of local suppliers rather than just 'bigger producers' - but perhaps that just means local produce vs from each producer. The cherry tom's were not a one off though (just one I could remember the price for), it's across the board, all the time, on everything. A rare day that the store is out of stock on anything, but appreciate he is not supplying the populations the supermarkets are.
You avoided the margin question though - I've only got google to go on and ex-Unilever experience (ASDA years, but pre the German retailers entry) but average UK margins are around 3% . Media reports NZ supermarkets at significantly higher rates no?
Bernard; Supermarkets are a cost plus margin business. If the price of a product or range of products decreases due to supply increases; the retail margin is applied to the lower price. Retail prices hence decrease. The supermarket industry does not and cannot hold up the price of a product to improve its profit margins. We are not Canute!!🥴
Sure but I’m guessing the margins in NZ are bigger than the UK for example where there is so much more competition . One example (of many) from where I live : a box of cherry tomatoes bought from the same producer, local veg shop $4.99, Pak n Save $9. Yet who would be getting the best wholesale price?
Sally; The supermarket buyers are ordering from the bigger producers contracting for a minimum quantity daily and paying the wholesale market rate(frequently plus a quality margin) That producer sells his excess daily production on the wholesale market at the going rate for excess production. This is frequently much lower leading to your local greengrocer having super deals at retail. When there is a wholesale shortage the supermarket buyers take precedence and have stock at a high price. The greengrocers have little stock . Excess stock may be donated to the food parcel suppliers.
As per their name, it is essential that supermarkets have the complete range of stock to offer their customers. The fresh vegetable suppliers that claim they are offered little for their excess production are offering product to supermarkets that already have supply contracts with other vegetable producers. Naturally when offered excess the only factor taken into account is price.
Had to read this twice to get it, but I do see what you're saying. I did think the Foodstuffs model meant they more consistently bought of local suppliers rather than just 'bigger producers' - but perhaps that just means local produce vs from each producer. The cherry tom's were not a one off though (just one I could remember the price for), it's across the board, all the time, on everything. A rare day that the store is out of stock on anything, but appreciate he is not supplying the populations the supermarkets are.
You avoided the margin question though - I've only got google to go on and ex-Unilever experience (ASDA years, but pre the German retailers entry) but average UK margins are around 3% . Media reports NZ supermarkets at significantly higher rates no?
Interesting. Thanks for this, it leads to better understanding on how the model works.
Great Murray. Let’s see if prices drop, as they are currently in the US. And let’s see if our internationally priced food also drops…