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20/04/2006
Free range retail price hits all-time low
Free range eggs are now being offered in supermarkets for less than the price of cage eggs.
This bizarre situation follows a further spate of price-slashing by major retailers. Asda led the way last month when, as part of its ongoing 'rollback' campaign, it reduced the cost of a dozen own-label medium free range from £1.48 to £1.
Asda's price cut on eggs came on the back of similar reductions on milk and bananas, and led to the retailer's food trading director, Darren Blackhurst, to claim: "Whether it's milk, bananas or free range eggs, customers are in no doubt which supermarket gives them more for less every day of the week." The free range offer was heavily advertised in national papers.
BFREPA chairman Tom Vesey described the move as "absolute madness" and one that seriously threatened future supplies of free range eggs.
But within days Sainsbury's had followed Asda and matched the £1 a dozen offer, while Tesco, which sells eggs in a 10-pack, cut the price for ten medium free range to 83 pence. And while Tesco customers choosing the 10-pack were being charged 83p, so strange was the retailer's pricing policy that shoppers picking up a 6-pack of the same size were still paying 84p. That meant it was cheaper to buy a box of ten and throw four eggs away rather than purchase half a dozen. Tesco has since reduced the price of a 6-pack of medium free range to 82p.
Meanwhile, a 6-pack of mixed weight cage eggs in all three retailers was still selling for 54p, representing an 8 per cent premium over free range on a per-dozen basis.
BFREPA immediately fired off a letter to the retailers warning them that producers were already being squeezed financially and this latest round of price-slashing would ultimately lead to supermarket shelves being empty of free range eggs.
"Free range egg producers have over the past twelve months seen a steady reduction in returns in the face of ever increasing production costs," wrote Tom Vesey. "The net result is that current margins are verging on little more than break-even for the bigger, more efficient producers and below cost for those running smaller traditional-type operations."
The letter went on to spell out that with the average free range unit now costing in excess of £250,000 there was little enthusiasm for expansion by producers in the face of low returns.
"We are presently in discussion with the packers regarding producer returns but it is clear that any prospect of an improvement is dependent on the packers achieving an increase in their selling price. This, they inform us, is unlikely against a background of aggressive retail pricing," wrote Tom, urging retailers to review pricing strategies in order to avoid a future shortage as demand for free range eggs continued to increase.
Robb Farr, buyer for Sainsbury's, responded by saying he had taken on board BFREPA's concerns "and indeed shares them".
"We have not actively sought to deflate the market," wrote Mr Farr, "but we do have a responsibility to our customers to offer products at fair prices. With an increasingly competitive retail environment this means we may decide when and where necessary to review our prices."
Sainsbury's says it continues to work very closely with suppliers to ensure there is a fair return for all involved with the production and supply of eggs.
"We are fully committed to growing and supporting the free range egg industry, as we believe this is where the future of the market lies," said Mr Farr.
For more information visit http://www.bfrepa.co.uk
 |
This bizarre situation follows a further spate of price-slashing by major retailers. Asda led the way last month when, as part of its ongoing 'rollback' campaign, it reduced the cost of a dozen own-label medium free range from £1.48 to £1.
Asda's price cut on eggs came on the back of similar reductions on milk and bananas, and led to the retailer's food trading director, Darren Blackhurst, to claim: "Whether it's milk, bananas or free range eggs, customers are in no doubt which supermarket gives them more for less every day of the week." The free range offer was heavily advertised in national papers.
BFREPA chairman Tom Vesey described the move as "absolute madness" and one that seriously threatened future supplies of free range eggs.
But within days Sainsbury's had followed Asda and matched the £1 a dozen offer, while Tesco, which sells eggs in a 10-pack, cut the price for ten medium free range to 83 pence. And while Tesco customers choosing the 10-pack were being charged 83p, so strange was the retailer's pricing policy that shoppers picking up a 6-pack of the same size were still paying 84p. That meant it was cheaper to buy a box of ten and throw four eggs away rather than purchase half a dozen. Tesco has since reduced the price of a 6-pack of medium free range to 82p.
Meanwhile, a 6-pack of mixed weight cage eggs in all three retailers was still selling for 54p, representing an 8 per cent premium over free range on a per-dozen basis.
BFREPA immediately fired off a letter to the retailers warning them that producers were already being squeezed financially and this latest round of price-slashing would ultimately lead to supermarket shelves being empty of free range eggs.
"Free range egg producers have over the past twelve months seen a steady reduction in returns in the face of ever increasing production costs," wrote Tom Vesey. "The net result is that current margins are verging on little more than break-even for the bigger, more efficient producers and below cost for those running smaller traditional-type operations."
The letter went on to spell out that with the average free range unit now costing in excess of £250,000 there was little enthusiasm for expansion by producers in the face of low returns.
"We are presently in discussion with the packers regarding producer returns but it is clear that any prospect of an improvement is dependent on the packers achieving an increase in their selling price. This, they inform us, is unlikely against a background of aggressive retail pricing," wrote Tom, urging retailers to review pricing strategies in order to avoid a future shortage as demand for free range eggs continued to increase.
Robb Farr, buyer for Sainsbury's, responded by saying he had taken on board BFREPA's concerns "and indeed shares them".
"We have not actively sought to deflate the market," wrote Mr Farr, "but we do have a responsibility to our customers to offer products at fair prices. With an increasingly competitive retail environment this means we may decide when and where necessary to review our prices."
Sainsbury's says it continues to work very closely with suppliers to ensure there is a fair return for all involved with the production and supply of eggs.
"We are fully committed to growing and supporting the free range egg industry, as we believe this is where the future of the market lies," said Mr Farr.
For more information visit http://www.bfrepa.co.uk
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