Coca Cola Climbs on Shrinkflation Bandwagon

AB Inbev manufacturer of Coca Cola and other well-known cool drink brands has introduced reduced size containers at the same price as the previous packaging to howls of rage from consumers and industry watchers.

In a recent snap online poll undertaken by the consumer website Retail Price Watch www.retailpricewatch.co.za more than 90% of consumers surveyed felt that the latest shrinkflation to hit our stores was a rip-off.

Pepsi/Kingsley/Twissa here we come!!!

The anger seems to be centered around two things: Firstly the claim by Roger Gauntlett general manager of Coca Cola South Africa that the new size was “intended to reduce consumers’ sugar intake” (the new 440ml bottle apparently contains the equivalent of 11 teaspoons of sugar instead of 13). This claim has been trashed on social media:

Roger Gauntlett is one of those business people who think his customers are stupid….

Where’s the sugar in Sprite Zero?

Secondly the new packaging which will replace the old completely in stores from November comes at the same price – a 14% hike.

Viccy Baker of Retail Price Watch says that Coca Cola’s treatment of its customers is just one more example of large FM CG manufacturers – “Big Food” – riding roughshod over consumers simply because they can.

“Coca Cola’s dominance in the marketplace is well-established. It has kept the price of its products artificially low for years, not out of consideration for its customers but in order to squeeze out smaller competitors, a remarkably successful strategy. It obviously hoped by decreasing the size and maintaining the price, to slip under consumers’ radar in the run up to the holiday season.”

Baker believes that consumers should vote with their wallets.

“Stop buying Coca Cola for your children. A diluted fruit juice concentrate contains 2-3 teaspoons sugar as opposed to the 11 spoons in a 440ml Coke, and costs far less.

“Or make Coca Cola a weekend treat for the whole family, instead of an everyday drink.”

“Reduced sales are the only way that Coca Cola will pay any attention to consumers.”

Ends

Consumers Teach Clover a Lesson

 

18 September 2017

In its financial statements to end June 2017 released on Friday 12 September, Clover Industries Ltd a major listed dairy producer, reports operating profit down 44.3% to R314.5m with headline earnings down by 65.9% to R121.6m.

Viccy Baker of the independent consumer website Retail Price Watch checked the CE’s presentation of the results to find out why.

“Clover clearly pushed prices beyond the limits of consumers’ pockets – and their patience with what had previously been a known and trusted brand,” she said.

“Clover admitted to making a fundamental sales and marketing error – instead of decreasing prices to combat declining sales volumes, it increased them – by nearly 7% according to their presentation.

“Analysts have defended Clover saying that other milk producers are following suit – but the facts as laid out in the table below show that while the price of milk has indeed climbed over three years, inflation for all brands is between 11 and 13.5%.

“Clover’s prices have consistently been 17-20% higher than another large producer Douglasdale and around 10% higher than Fair Cape, which might legitimately claim a “prolonged drought” as it is based in the Western Cape.

“Such aggressive pricing tactics which tread roughshod over hard pressed consumers – at one stage in 2016 Clover 2l milk was selling at over R30 in some stores around the country – will result in a backlash, which is clearly evident in their results.

“South Africa desperately needs companies and shareholders in the food sector that are interested in sustainability, and not just short term profits.”

As the CEO of Unilever International Paul Polman says: “The power is in the hands of the consumers and they will not give us a sense of legitimacy if they believe the system is unfair or unjust. Some companies that miss the standards of acceptable behaviour to consumers will be selected out. ”

Ends

 

Viccy Baker

0823851071

www.retailpricewatch.co.za

redgekko@retailpricewatch.co.za

 

 

Competition Commissioner’s warning about food prices is timely

Speaking at a conference in Cape Town on Wednesday Competition Commissioner Tembinkosi Bonakele said the Commission is concerned businesses in the food sector are going to abuse drought-related rising prices. He hopes that such prices will go down when the drought fully abates.

Viccy Baker of the consumer price comparison website Retail Price Watch believes that certain prices are in fact being manipulated by retailers and producers as the Commissioner fears, and warns that consumers should shop with caution.

“The average price of 12.5kg White Star Super maize meal has increased by 86.6% since October last year, from R67 to R125,” she says. “The average price of 2.5kg White Star has increased by 33%, from R22.40 to R29.80.

“One would have expected bulk prices to be better per kg but this is clearly not the case.”

 

Exceptionally high price rises – are they justified?

 

The average price of Lipton 160g Rooibos Tea has increased by 108% in a year, from R25.75 to R53.49, in line with rooibos price increases countrywide.

“Yet rooibos is a wholly local product, with the South African market taking up about one third of the local crop in a non-drought year.

“The producer price of rooibos was R17.50/kg in 2015, according to the Department of Agriculture, Forestries and Fisheries. The producer price was expected to increase by 90% in 2016 according to the Rooibos Council.  Even if it increased by 100% as estimated in the table above beneficiation would still amount to about R300 a kilo as opposed to R143 a kilo in 2015.

“In contrast, South Africa is a net importer of ordinary black tea. Yet the average price of Five Roses 62.5g has increased by 16% from R11.04 to R12.88.

“We can all halve our tea consumption by sharing teabags but it’s not so easy with other staple products.

“Lentils have also shown steeply rising prices. A packet of Imbo brown lentils 500g has increased in price from an average R11.84 to an average of R21.52, an 82% increase. The packet says that Imbo lentils are imported from “Canada, Turkey and Australia.”  Yet the rand in September 2016 was almost on a par with its dollar price in October 2015.”

In addition says Baker individual stores are hugely increasing the prices of many personal items (Vaseline petroleum jelly doubling over the last month in some stores).  She urges consumers where possible to vote with their feet and their purses.

“Don’t take these price increases lying down” she says. “Complain to the store manager and write to the producer.

“Ordinary South Africans have managed to influence the price of university fees and toll fees – why not food prices?”

ends

 

 

 

Beware ‘Rogue Pricing’ in Supermarkets

Pricing of household goods in supermarkets needs to be subject to closer scrutiny, both by the consumer and management says Viccy Baker from the independent consumer price comparison website Retail Price Watch.
Baker believes that consumers are being conditioned in advance to accept higher prices because of the drought, transport costs and electricity prices for example.
“While price increases are inevitable, certain stores are taking advantage of consumers by pricing goods at over 50% more than they were a few months ago, pricing which surely cannot be justified under any conditions.
“Individual store managers under pressure to deliver profits may be partly responsible for this, or it may be that the competitive pressure on prices of certain items leads the stores to compensate by marking up other goods to previously unheard of levels.”
The practice is not confined to one chain but can be found across the chains, across the country, and in varying products.
“Cambridge Food, which says it offers “unbeatable value for our savings-focused customers” has increased the price of 50kg of Lion maize meal by 58% since 1 January, when the price was R268.99. On 1 June it was R424.99. The price of 5kg of Lion maize meal has increased by 20.7%, from R28.99 to R34.99.
“One Pick n Pay in Sandton is selling a 180g pack of 7 Pedigree Dentastix dog treats for R63.99, when all the other Pick n Pays in the area are selling at an average price of R42 – 52% higher. In May the price in this particular store was R37.99 – so in less than a month the price has
increased by 68%.
“A Spar in East London is selling a 100g box of Doom Rattex for R25.99. Ten of these boxes can be purchased from Makro at R110.95 (R11 each), while other stores are selling the product for an average of R15.
“Shoprite is now selling 1.75kg of Dogmor dry dogfood for R64.99. In April you could buy Dogmor from most Shoprites for 42.99. This represents a 51% increase in just a month.
“These prices are not mistakes – they have all been confirmed by our data and by conversations with the staff concerned.
“We believe as consumers that we are entitled to “specials” – discounted prices – but the stores have to find their profits elsewhere.
“There are three ways to control this practice – compare prices with other stores in your area and choose the least expensive, complain to the management, and vote with your purse or wallet by not buying.”
ends
Viccy Baker
Red Gekko (Pty) Ltd
www.retailpricewatch.co.za
redgekko@retailpricewatch.co.za
0823851071 (16 June 2016)

Will Mr Gordhan’s sugar tax go far enough?

Sugary Drinks

A lowering of obesity rates in Mexico has been attributed to the introduction of a 10% tax on sugary drinks in 2014.

However, simultaneously Mexico introduced a sales tax of approximately 8% on a wide range of non-essential foods high in sodium, added sugars, or solid fats: “junk food”.

Minister of Finance Pravin Gordhan proposed a tax for 2017 on sugary drinks in South Africa. He did not state the proposed tax rate, although a 20% tax has been estimated to bring in R7 billion annually to the national coffers.  http://mg.co.za/article/2016-02-04-tax-on-soft-drinks-could-benefit-obese-sa

Such a tax, ironically named a pigouvian tax is reasonably common among governments which perceive that the standard taxes on a market activity (in this case sales of sugary drinks) is not enough to outweigh the negative effects (high rates of obesity). Our current ‘sin’ taxes on alcohol and cigarettes, and taxes on polluting industries in other countries, are examples of this.

The consumer website Retail Price Watch which has data on household foods going back to 2012,  looked at the inflation rate on the cost of sugary drinks over the period 2012 – 2015, as well as inflation on three common local confectionery products ( Graph above). It appears that the rate of inflation has been kept artificially low on sugary drinks by the massive influence of Coca Cola. Because Coca Cola has kept its prices low, presumably to maintain its 60% market share, competing products have had to price themselves in the same range.  In the case of Oros and Cooee, a sugary drink popular in KZN, the price has actually decreased since 2012.

It could be argued that a 10% tax will in effect make very little difference to a price that is already artificially low in order to tempt unwary consumers to suck in a bottle a day. This low price extends to diet colas as they are generally priced similarly to their more sugary counterparts.  A sugar tax will at least have the benefit of making diet colas less expensive which is in line with the aims of a pigouvian tax.

While Mr Gordhan is clearly aware that we all need a 2l Coke to watch the soccer on a Saturday afternoon, he has perhaps forgotten that this must be accompanied by a packet of chips, no matter how poor the household.

A further point to ponder is that “local is lekker” when it comes to sugary drinks but South Africans have an unabated desire for imported confectionery. Brands such as Lindt, Toblerone and Royal Dansk continue to grace our supermarket shelves despite their high costs.

If The Treasury were to introduce a tax on junk foods simultaneously with the one on sugary drinks, there could be a real and measurable benefit to the population in terms of lower levels of obesity as there was in Mexico, pigouvian tax revenue would soar, imported confectionery might be taxed out of the picture, which would improve our balance of payments and benefit the local confectionery industry. In addition, the sugar industry would not be the only one to bear the brunt of the tax.

Incidentally, Mexico is using the tax revenue for specific social purposes, a great public relations stunt which has made it more palatable for consumers and sours industry counter-attacks. South Africa could consider putting the money to fund early childhood development, for example, or broadband for country areas.

While nobody wants to pay extra taxes, there is at least some point to a pigouvian tax. Each individual can decide on a case by case basis if he or she wants to pay it.   Not paying it has a benefit in reduced obesity. A win-win situation?