Financial Crisis ? Avoid dental floss !

The thieving gits ! The penny pinching, mealy mouthed, underhanded bunch of robbing swines!

An esteemed organ of our virtuous press has just discovered that our nation’s supermarkets are making up their ‘weakening ‘ margins by increasing the margins on items they don’t sell much of. Well, never having been a financial director (or even met or sat next to one, as far as I know) of a supermarket chain , I can see the amazing logic…’let’s look at the products we sell the least off and ramp up the profit margins . That will show them foreign discounters, what’s what!…’

Apparently, under inflationary pressure through  the comparative weakness of sterling, the nations storekeepers are seeking to improve their margins on items such as dental floss, water filters, cashew nuts and fresh trout.

I am no apologist for U.K grocery outlets. Over the years as a supplier I have been at the wrong  end of their very pointy sticks , as I am in no doubt many suppliers will, currently, be feeling a similar sharp end. However, to suggest they are using this tool to rebalance the books is way off kilter. 

Since last June 2016, it was inevitable that inflation had to creep back into the nation’s shopping basket. All multiples will have had forward currency contracts (I have read JD Sports had a contract on sterling/ dollars at $1.45 until the end of this 2017?) as would most prudent suppliers. However, most of these will be coming to their end and the new ones will be at rates around 10% lower. Supermarkets are not charities . They are commercial enterprises designed to create profits for their investors. If they don’t make profits and seem to be developing strategies for constantly increasing profits , they will no longer attract investors and seek to exist. There are alternative business models, such as Cooperatives, but within the U.K. their offer is not deemed especially attractive to the consumer (6.1% share of the U.K.market 2016).

So if they try to increase their margins by ‘profiteering ‘ on your fresh trout and cashnew nuts rather than fresh bread and milk (but pay their suppliers more!) than so be it. Just for once, this is not the greatest crime they have committed. They are guilty of others but I suspect the ‘fresh trout syndrome’ is purely a reflection of a cost increase that can be relatively easily passed on. The other purported crime is decreasing pack sizes. Well that ain’t nothing new. It has been a technique oft used when supplier and retailer want to maintain a retail price point and both are under cost pressures. Both are examples of the few occasions when suppliers and retailers get bad press trying to do the right thing.

Regrettably, we are all facing a period of inflation beyond our control. Consequently one of the few ways of minimising its effect is to avoid dental floss and fresh trout.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s