#11: Supermarkets aren’t cheap

One of the biggest myths perpetuated by supermarkets is that they offer “everyday value” to the customer through their extensive promotions, multi-buy deals and discounts.

The myth isn’t that supermarkets don’t run these formidable promotions: researchers found that more than half the food sold in supermarkets during 2015 was “on special”. No, the myth is that these promotions offer great value to the customer. Take this conundrum, typical of the choice faced by supermarket shoppers:

Of the following options for buying 500g of lemons, which represents the best deal?

  1. One 500g pack of lemons costing £1.20.
  2. 500g of loose lemons at £2.50 per kilo.
  3. Buy two get the third free deal on 200g packs of lemons costing 70p each.
  4. Buy one get one half-price deal on 250g packs of lemons costing 70p each.

This is one question from a survey of over two thousand consumers run by the Money Advice Service.

You won’t be surprised to learn that, when faced with the bewildering array of special offers on supermarket shelves, 98% of us fail to calculate the best deals (that’s everyone lacking a degree in advanced mathematics, presumably).*

In 2015, the Competition and Markets Authority gave supermarkets a slap over the wrists for “misleading and confusing pricing tactics”. No surprise: their business models depends on consumer bafflement. Have you ever wondered why they move products around all the time, shuffling bananas or bread from aisle to aisle? It’s to stop you settling into your habitual routine, so you have to spend longer hunting for your usual shopping and might pick up something new that catches your eye.

Armed with my clipboard once again, I returned to my local supermarket and quickly confirmed that the most likely products to be discounted were prepared foods, which have higher profit margins than whole foods.

Two facing aisles starkly illustrated this point. In front of me were tinned whole foods: butter beans, peas, lentils, quinoa, sweetcorn and spinach. Behind me were frozen foods, predominantly prepared: fish fingers, breaded cod, vegetarian sausages, cheesecake and ice cream. The whole foods section did not have one single promotional offer. The frozen food section had offers on battered fish, apple tarts, croissants and seven different types of ice cream.

The message was clear: buy our ready meals, don’t cook at home. And this was in Waitrose, one of the premium supermarkets, who you might think above the lowest of promotional tricks. (It’s either ironic or malicious that Waitrose spend a lot of money on endorsements from celebrity chefs like Delia Smith, who otherwise make their money from encouraging people to cook at home.)

There is a good economic reason for this disparity between the promotion of whole foods and prepared foods: a home cooked meal almost always works out cheaper than a supermarket prepared meal. So if they can get us to buy their ready meals (or prepared ingredients like sliced carrots), the supermarket takes home higher profits.

One example that caught my eye was a 50g tub of Quaker Oat So Simple, retailing at 99p for 50g. One kilogram of Quaker oats, by contrast, was only £1.99. That’s enough for twenty 50g bowls of porridge. Even if you include the cost of 180ml of semi-skimmed milk to each breakfast, that’s still an average cost of only 23p a bowl. “Ready made” porridge (you still have to boil and add water) has a mark up of more than 400%. Supermarkets take home a fat dollop of that tasty margin; hence the rabid promotion of these products to you, the customer.

Every time you cook at home with whole foods, you are denying supermarkets an opportunity to maximise their profits. If you scale up your home cooking, you can even more than earn back the cost of your cooking and cleaning time.

Nancy Folbre, an economics professor at the University of Massachusetts, conducted a small experiment for the New York Times, in which she compared the costs of buying a fast food cheeseburger with the costs of making the same thing at home. She calculated that the thirty minutes it takes to make one home-made burger implied a wage of only $6 per hour, perhaps not to be sniffed at, but still below the federal minimum wage. However, Nancy also found that it takes only two additional minutes to make four cheeseburgers instead of just one. This leaves the chef with an implied hourly wage of $22.50.

Even when discounted, ready-made meals are not good value for the customer, they’re good value for the supermarket.

Furthermore, compared to home cooking, prepared foods are more likely to have higher levels of sugar, salt and preservatives. This is only to be expected: supermarkets care less about your health than they do about making sure that the product has a long shelf life and tastes good enough so that you buy it again and again.

Quaker Oat So Simple, for example, contains added refined sugar. Their bagged oats are 100% oats: the decision to add a little sweetness, whether a banana, raisins, honey, or sugar, is yours.

In 2015, the three categories most likely to be on permanent special offer in supermarkets are non-alcoholic drinks (83% of coke was sold on promotion), personal care items like deodorant and conditioner, and confectionery. Although retail prices dropped, volume sales of fresh food on promotion fell in 2015.

In a country where about a third of children are obese or overweight, this tendency for supermarkets to discount unhealthy products is a genuine cause for concern.

This unhealthy discounting feeds back into the immersive supermarket mega marketing experience.

“The familiar media celebrity gnome had a stronger effect on children’s purchase request for chocolate over fruit versus an unknown gnome.”

This delightful sentence is plucked from a systematic review of eleven studies on the influence of cartoon characters on children’s diet and health and, if I may interpret, leads to the conclusion that marketing tactics are more likely to have you reaching for cookies than for carrots.

Another study found that the most unhealthy breakfast cereals, those with higher-than-average levels of sugar, refined grains and trans-fats, were more likely to feature child-oriented marketing in the form of cartoon characters and child incentives on the packaging.

It’s not that you can’t buy marketed or discounted products in other shops, but supermarkets exploit every psychological trick in the book to get you to spend more money, ideally on higher margin products like expensive branded breakfast cereal, instead of carrots.

The conclusions are inescapable: supermarket marketing departments do their utmost to sell us crap.

I now visit my local estate greengrocer almost every day. One dependence, you could say, has replaced another. But this one simply doesn’t sell unhealthy products. Any retailer worth his salt knows you should stock the checkout with impulse buys. Next to the till at my greengrocer’s is a box of whatever’s in season, whether that’s strawberries, chestnuts or turnips.

Shopping here, it is almost impossible for me to stock my cupboard with crap. He sells fruit instead of chocolate, there are no special promotions (except discounts on fruit past its best and occasional loyalty bonuses when he’s in a good mood, or perhaps when I am), and he simply doesn’t have the time or inclination to make sure he’s putting cereal at the correct height to maximise brand loyalty with children.


* The answer to the lemon question is technically d) which values lemons at £2.10 per kilo. However, most people would go for c) because for the same spend, £1.40, you get an extra 100g of lemons. What you’d do with that extra lemon, I don’t know – probably chuck it out… I look more at waste in my experiment with No Money.

Further Reading

Tim Eales Price and Promotion in Western Europe: Encouraging signs of recovery IRI Worldwide (October 2015)

Money Advice Service survey of more than 2,000 consumers reported in ‘Shoppers “Fail to Spot Cheapest Deals” – BBC News’.

‘Supermarket Pricing: CMA Finds “Misleading Tactics” – BBC News’.

Folbre, Nancy. ‘Fast Food Versus Slow Food’. Economix Blog, New York Times.

Celnik, D., Gillespie, L., and Lean, M.E.J. (2012) Time-scarcity, ready-meals, ill-health and the obesity epidemic. Trends in Food Science & Technology, 27 (1). pp. 4-11. Including this summary, on p11:

“Of the four ready-meals ranges from Tesco, the ‘healthy’ options contained least sugars, fats, saturated fats and salt, justifying the label only in comparison with the standard range. However there is clearly more work to be done by manufacturers in reducing fat, saturated fat and salt contents to bring them in line with nutritional recommendations.”

But also beware celebrity chefs! See: Howard Simon, Adams Jean, White Martin. Nutritional content of supermarket ready meals and recipes by television chefs in the United Kingdom: cross sectional study BMJ 2012; 345 :e7607

‘Child Obesity’ Public Health England Obesity Knowledge and Intelligence Team.

Kraak VI, Story M. Influence of food companies’ brand mascots and entertainment companies’ cartoon media characters on children’s diet and health: a systematic review and research needs. Obesity Reviews. 2015;16(2):107-126. doi:10.1111/obr.12237.

Berry, B. & McMullen, T. Visual communication to children in the supermarket context: Health protective or exploitive? Agriculture and Human Values (2008) 25: 333. doi:10.1007/s10460-007-9110-0

What do you think?