Will a new code bring a new deal for shoppers?

Two years ago the Office of Fair Trading (OFT) first voiced its concerns about misleading price promotional offers. It warned retailers including the supermarkets to stop advertising them or risk enforcement action.

However, 12 months later a Panorama programme found evidence of one misleading tactic known as Price establishing.

An example of this is where a retailer sells a product at a certain price for a long period of time but then suddenly raises it, shortly afterwards it drops it back down to the price it was before – then it can say it has slashed the prices.

According to the OFT’s most recent set of principles set out last week,

‘…prices should never be artificially manipulated….in order to advertise a later ‘discount….where that later ‘discount’ is in fact just the normal selling price of the product.’

But that’s just what some supermarkets have been doing.

In 2011, the Panorama programme picked up on a Tesco product of chicken which had a price cut from £5 to £4. Nonetheless from January 2011 all throughout to mid-July customers could buy the product for £4 but then Tesco raised the price to £5.

However in September it went back to being £4, what it had been for the majority of the year, but Tesco then labelled it a price drop.

The OFT also warned supermarkets about other tactics including ‘Bigger pack, better value’ claims.

On the truth of such claims, the OFT’s new principles couldn’t be clearer:

‘…where a retailer stocks items that carry best/better value claims on their packaging those claims should be objectively accurate…there should exist no cheaper way of buying the same volume of the identical goods in the same store.’

Yet since they were first warned about this two years ago we’ve caught the Big Four supermarkets doing it, time after time.

In April 2011 a Watchdog secret shop filming revealed that in Sainsbury’s a Crunchy Nut cereal product was being offered as a ‘Best Value’ pack where it worked out that the customer would be receiving £3.49 a kg, which was more expensive than the smaller ‘value’ pack which worked out as £2.49 a kg.

Asda were also caught out to be carrying out this tactic. Their Quaker Oats product ‘bigger pack, better value’ of 20 sachets worked out as 14pence a sachet which was more expensive than their smaller pack which gave the customer 12 sachets per box at 13pence per sachet.

In December 2011, the Panorama programme found 17 examples of bigger packs presented as better value when they weren’t.

  • 5 items in Tesco
  • 5 items in Sainsbury’s
  • 4 items in Asda
  • 3 items in Morrison’s

And just a few weeks ago Watchdog Daily found more examples of bigger packs being presented as better value when they weren’t.

Since the first OFT warning two years ago, it’s persuaded all the major supermarkets, apart from Asda to sign up to its set of pricing principles.

The press hailed it as a new deal for shoppers: an agreement that will ensure that, from now on, offers and promotional claims will be fair, accurate and consistent.

But in the last few days, Watchdog Daily’s mystery shoppers have visited the four major supermarkets and found multiple examples of bigger packs being presented as “better value” when they’re not.

  • 2 from Morrisons
  • 2 from Sainsbury’s
  • 3 from Tesco
  • We also found 3 examples at Asda.

Company Responses

 

Sainsbury's

Sainsbury’s is committed to fair and transparent pricing and we agree that promotional claims should be clear and accurate. We recognise that there is scope for confusion with ‘Bigger Pack, Better Value’ if smaller packs are temporarily on promotion, as was the case with Kit Kat and Jaffa cakes, and in order to address this we had already asked the companies that supply us with branded goods to remove their ‘better value’ promotional messages from all products delivered to our stores. As the OFT has acknowledged, there will be a transition period prior to the new packaging becoming fully available.

ASDA

Our intention, when we lower prices is to retain the correct “price hierarchy” that ensures bigger packs offer no worse value, despite the fact, as you point out, on branded items, we have no control over the marketing messages brands use on their packaging.

However, despite our best intentions, with over 35,000 individually priced products, honest mistakes can sometimes happen and on occasion a branded ‘bigger pack’ claim can fall out of line.

The specific examples you highlight are branded products. I trust the BBC is asking manufacturers to qualify their on-pack messaging directly? We have been doing so for some time and urging branded manufacturers to be clearer with our customers.

The claims of ‘best and family value’ on different pack sizes mean that however we price the boxes, the claims cannot always be justified.

This frustrates us as much as it does our customers. We have raised our concerns directly with our suppliers.

We continue to work closely with branded manufacturers to try to address this issue. For example Weetabix who, after consultation with our team, have agreed to stop claiming ‘bigger pack, better value’ and instead highlight that the bigger pack is ‘family size’, with no link to better value.

With regards to the OFT guidance, at Asda we are committed to giving our customers clear and accurate pricing information that fully complies with the law.

We were part of the discussions around the principles and are very much engaged with the OFT's work in this area, but whilst we are in favour of three of the approaches, there is one, regarding 1 to 1 promotions that we’d like a bit of time to consider.

Essentially, it says that you can only run a promotion for as long as you have established the price for. Whilst this is meant to discourage high/low pricing promotions – our concern is that it could actually encourage it.

If so, we're not sure that best helps customers in these challenging times so we are taking the time to consider its proposals in detail.

As an everyday low price retailer, we will always focus on offering our customers the lowest prices week in, week out.

Tesco

We work hard to ensure we offer competitive prices and fair, meaningful promotions to our customers. We always try to use simple and clear information, so we welcome the OFT's clarity on good practices and support their wish to see a consistent approach to promotions across the sector. The information displayed on branded packaging, including ‘Better Pack, Better Value’ labels, is decided by suppliers. We will be speaking to them about the issues raised in the OFT report.”

Morrisons

The ‘Bigger Pack Better Value’ principle is actually the toughest to implement in stores. Our main stores have more than 30,000 products, many of which have promotions. Often value messages are attached by the manufacturer but at the same time we run promotions on one line within the range. This can lead to products with ‘value’ messages being more expensive per unit than a promoted line even though that product is great value compared to the normal selling price of a smaller pack. We will be working with manufacturers, who design the packaging, to ensure that we converge with the OFT’s principle on ‘bigger pack better value’. In the cases found by Watchdog, the promotions were planned months ago and clearly it will take time to become consistent in all cases with this principle. To help the customer make decisions, we are developing much clearer unit pricing on our products so that customers make informed choices about which products represent the best value for money.