The end could be nigh for the £3 meal deal, as UK sandwich makers face a perfect storm of raw material price hikes and uncertainty over migrant workers coupled with soaring wage bills on the back of the new national living wage.
The British Sandwich & Food to Go Association says the sector will be staring in the face of raw material inflation of 10% or more come spring next year, as the impact of the weak sterling plays out on imported ingredients such as meat and fresh produce. On top of that, uncertainty around recruiting staff in the wake of the Brexit vote and higher wage bills following the introduction of the NLW are hitting sarnie makers - which are more reliant on manual labour than other manufacturers - hard.
Sandwiches are bound to become more expensive as a result, said Jim Winship, director of the BSA. “Retailers will absorb some of the increases, and suppliers will absorb some, but inevitably there will be a rise for consumers.”
If sandwich prices rise considerably, the £3 price point for the lunchtime meal deal - as currently offered by the likes of Tesco and Sainsbury’s - is likely to become unsustainable. “It’s inevitable that will be challenged,” said Winship. “It then depends on how retailers decide to play the game.”
Meal deals are a key footfall driver for retailers, so there is a strong incentive to keep to an attractive price point. Reducing the range of items in meal deals could be one strategy to counteract the impact of inflation, though retailers will be mindful of the #sandwichgate social media storm sparked by Sainsbury’s re-engineering its meal deal earlier this year.
John Want, marketing director at Adelie Foods, said retailers should focus on quality and choice more than a specific price point. The fact consumers saw the Boots meal deal (£3.29, or £3.79 in London) as the best in the market was a case in point, he suggested. “The past 12 months have been a sweet spot for upping specification and quality. Consumers will pay more for the right offer.”
Patrick Coveney, CEO of Greencore, would not be drawn on the future of the £3 meal deal, though he too said he expected some increases on sandwiches for consumers. However, there was no need for “apocalyptic” talk, he added.
“There is inflation in the market the industry hasn’t had to deal with in aggregate for about six years - and so there is a lot of talk about how that will be managed through and I do believe there will be modest increases for consumers,” he said. “But we’re not seeing the kind of impact we saw in 2008/9. I think a lot of the apocalyptic talk is about softening people up for price increases.”