Retail price madness halted
Supermarket price promotions that last month saw medium free range eggs slashed to a £1a dozen have come to an end.
Following the recent activity that had caused such uproar, Tesco was the first retailer to make a move, restoring the cost of a dozen mediums to £1.48. Asda and Sainsbury’s soon followed its lead and all three retailers brought to an end a similar promotion on large free range.
BFREPA chairman Tom Vesey welcomed the move but said it was only the start of what needed to be a concerted effort by packers and retailers to get shelf prices increased further.
“Obviously we’re pleased to see this pricing madness come to an end but let’s not get carried away here. All they’ve done is restore prices to a level that previously was too low,” he said. “The very least they’ve got to do now is restore the 8p a dozen that was knocked off in January.”
Packers, who fully acknowledge that producers need a price increase, have made it clear that they need more from the retailers before it can be passed back down the line. And as reported in last month’s Ranger, BFREPA has spelled out to retailers that unless producers see better returns then future supply levels are being put at risk.
“I believe retailers have taken on board that warning and there is a desire to get shelf prices up but no one is brave enough to make the first move for fear of being out of step with the competition,” said Tom.
“The aspect I find most frustrating is that there is no need to treat free range eggs in this way. It’s a premium product that’s selling well on its own merits and has the potential to make a decent margin across the whole supply chain, so why discount it?”
And it is the fact that free range eggs are selling so well that leads many in the industry to firmly believe that a serious shortage is only around the corner.
Data from retail analysts TNS shows that the market grew by nearly 10 per cent last year and demand could be even stronger over the next twelve months. More prominent shelf positioning of free range along with a greater share of the egg fixture is helping to drive retail sales forward.
“That’s great if we can meet the demand but it will need around another million birds,” said Tom. “It is totally unrealistic to expect an industry that’s not making any money to invest over £20 million in new production facilities.”
There are also indications that the risk of avian influenza is curbing free range expansion. Even if producers are willing to borrow funds to finance new units, banks are decidedly nervy about lending money in the current climate. And planning applications for new free range houses are meeting increasing opposition as local residents use concerns over bird flu as a further reason to oppose development.
“What producers need right now is a confidence booster in the form of a decent price increase,” said Tom.
BFREPA estimates that 5 pence a dozen is required to fully restore producer margins.
