Not long ago Pricewatch was sent a neat illustration, in the unlikely shape of a Caesar salad, which highlighted how supermarket pricing works and how sometimes it doesn’t work in our favour.
We were contacted by someone asking why 230g of the popular salad in a hard plastic bowl from Aldi cost €2.79 while 240g was selling in a perhaps more humble bag just a few steps further down the aisle with a price tag of €1.69.
How could it be that a bagged salad that weighed 10g more actually cost €1.10 less?
We couldn’t help but wonder how many people might have picked up the bowl without giving it much thought when they could have saved themselves the cash by buying the bag instead.
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That pricing anomaly prompted us to pay closer attention when we were in our local Tesco a few days later. We discovered bowls of Caesar salad weighing 270g selling for €3.60 while the bags of the stuff a few metres away were “price matched” with Aldi – Tesco boasted – and cost the same €1.69.
On a per-kilogramme price, the bowl of this salad in Tesco cost almost twice as much as the bagged salad. There was also a similarly wild price discrepancy between the two virtually identical products in our local Lidl.
So we contacted the retailers to find out what was going on. The responses were illuminating, although not perhaps in the way the retailers might have hoped.
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Aldi told us that its Caesar salad bowl that sells “in the food-to-go chiller is cheaper than the full-price supermarkets. As a convenient product which our customers enjoy on the go, there’s a higher production cost, hence it retails at a higher price than the salad bag.”
While it might well be cheaper than “the full-price supermarkets”, we were confused by the reference to the “higher production cost”.
Was Aldi – a shop famous for selling jack hammers and blow torches up and down its middle aisles at very competitive prices – really suggesting the cost of putting some salad leaves, croutons, cheese and dressing into a plastic bowl rather than into a plastic bag cost it €1.10 more every single time?
Hardly.
We were also not convinced that all the consumers who bought the salad in the bowl planned to eat it on the go but we can’t prove that one way or the other.
Lidl said “offering the best prices on the market is daily business for [it]”. In a statement Aldi’s main rival wrote that it carried out “weekly price checks on Lidl products versus our competitors to ensure that we continue to deliver on this commitment to our customers. At Lidl, we offer a wide range of fresh salad options to cater to different customer needs and serving options. There are many reasons for price differences on items including packaging, sealing and serving varieties but we are confident that our Meadow Fresh Caesar salad Bowl (230g) and Meadow Fresh Caesar salad (240g) is in line with the cheapest on the market for a like-for-like product.”
It is saying the wild discrepancy in the cost of two almost identical products can be explained by “price differences on items including packaging, sealing and serving varieties” while also suggesting it was “in line with the cheapest on the market”.
Again it seems odd to us that a retailer of its size could really be suggesting that the costs associated with putting the leaves in the bowl could be so much more than the cost of putting them in a bag.
And it could be argued that whether or not it was selling for the same price as in other supermarkets is irrelevant to the question.
Then we heard back from Tesco. It went into a bit more detail.
“Both Tesco Caesar salads are quality products but fundamentally have different recipes,” a spokeswoman said. “Each product recipe has different ingredients – for example the hand-assembled bowl based salad has Little Gem lettuce over Cos lettuce; which is a softer, more premium lettuce leaf,” she continued.
“The breakdown of product weighting is different too – eg dressing (50g v 45g); croutons (20g v 12g) and cheese (15g v 10g). Both products are great tasting salads and give customers choice, whatever their budget.”
Mystery solved? Not really.
Because we then went and priced the components of the Tesco salad as they were outlined by its spokeswoman to see if we could close the gap between the bowl and the bag and go some way to justifying why one cost half the price of the other.
When we added the cost of the higher-priced lettuce to the additional croutons (6 cent), salad dressing (5 cent) and cheese (12 cent), the bowl of salad cost, at the very most, 25 cent more to produce – and we were being generous with our pricing – yet ended up costing €13.33 per kg compared with just €7.04 per kg for the cheaper option.
That got us thinking. If the price we pay for the bowl of salad has little to do with the cost of the ingredients or the cost producing it, how do the retailers decide on the price and how much of that price is down to price matching.
If we assume that all the retailers are making a profit on their bagged salad, which they sell for €1.69, then we must assume they are making an even bigger profit on the bowls of salad they sell for almost twice the price. By our reckoning, they could all significantly slash the price of that one product and still make money selling it.
While it is just one product we can’t help but wonder how many other products are selling at prices that are wildly out of synch with the production and material costs and how much more that is adding to our weekly shopping bill.
It has been clear for a long time that retailers pay close attention to what their competitors charge for products up and down the aisles and then seek to match those prices or charge slightly less.
The cost of groceries is the biggest influence on Irish shoppers with more than half those who took part in a KPMG study in April saying price was the main driver of where they shopped
Last summer we were given an extreme example of how price-matching works. After more than a year of spiralling prices there was some welcome downward pressure with the State’s leading retailers started falling over themselves in the race to lower the price of two staples.
First up it was milk. On a Friday evening at 6pm Lidl announced it was cutting the price of own-brand milk by about 4 per cent. Within six hours Aldi, Tesco and SuperValu had all announced an identical price cut.
Days later it was Tesco’s turn to move. It caught its rivals off guard when it announced it was dropping the price of its 454g packets of own-brand butter by 40 cent to €2.99. Within hours all of its rivals had followed suit.
Rather than pointing to collusion, it highlights a level of competition that is fierce but we can’t help but wonder if one retailer decided to be more aggressive when it comes to pricing now would it force the others to follow suit.
The sort of good news is that while grocery prices in Ireland are not falling at the level we might like, at least they are climbing much more slowly than they were this time last year.
In fact grocery inflation is currently at is lowest level since just after Russia invaded Ukraine in March 2022. The invasion precipitated the cost-of-living crisis that has cost Irish households thousands of euro over the past two years.
The most recent data from retail analysts Kantar Worldpanel put grocery inflation at 2.5 per cent in the 12 weeks to June 9th, a fall of 13 percentage points since this time last year.
As in recent months, the research suggest that while inflation continues to fall consumers in Ireland remain on the hunt for deals with over 25 per cent of the sales – in value terms – covering goods on promotion.
A separate study also highlighted how the cost of groceries is the biggest influence on Irish shoppers with more than half those who took part in a KPMG study in April saying price is the main driver of where they shop.
“Many consumers have adopted a variety of cost-cutting strategies in an effort to combat the rising cost of living,” KPMG’s Next Gen Retail survey said.
One of the strategies we might all do well to employ in the weeks and months ahead is to look more closely at the unit pricing to make sure we are not paying over the odds for the products that make their way into our trolleys.
