Sainsbury’s is under fire for a controversial price hike on olive oil last month, which some have branded an attempt to “cash in on Christmas”.
Sainsbury’s increased its own-label standard olive oil price by 30% to £3.90/litre in October, Assosia data shows.
As a result it’s now considerably more expensive than at big four rivals Tesco (£3), Asda (£2.75) and Morrisons (£2.99), none of whom raised prices in October, nor at any point in the past year. And though Aldi raised the price 9.1%, it rose to just £2.39. Sainsbury’s extra virgin olive oil also looks toppy up 24% to £4.20/litre.
These increases have left some questioning Sainsbury’s justification, given the forward contracts that are typically taken out, following the annual harvest. Even spot prices on extra virgin olive oil for example, have been largely stable since early May in both Italy and Spain, according to the Granaria di Milano pricing index.
“It looks like an attempt to cash in on the Christmas period,” said one industry source. “There’s no way retailers can justify the inflation from shipping and packaging costs. This equates to about 5% extra in costs so the Sainsbury’s rise is more than a little disproportionate.”
An expected shortfall in the current olive harvest has forced many suppliers to request price rises of their own in recent weeks, but these are not expected to become effective until January.
This price rise was therefore “a little premature,” said the source. “Sainsbury’s tactics are short term and will damage their business.”
Sainsbury’s CEO Simon Roberts said its pricing strategy “is to be competitive on the products that matter most,” on a results call this week.
He added the retailer is pleased with its Aldi Price Promise, where it has lowered prices by up to 30% on almost 300 lines.
A spokeswoman added that it sells thousands of products and prices went up and down “for lots of different reasons”. Sainsbury’s is “committed to working corroboratively with our suppliers and to paying them fairly,” she said.
“We buy many of our own brand products on a cost of production model which ensures suppliers are paid more if it costs more for them to produce. We will always do our best for our customers and where we can, we are absorbing cost price increases.”
Spain, Italy, and Greece all look set to produce lower olive oil yields this year due to a lack of autumn rain. Total EU production is predicted to fall by around 10% compared to last season, according to industry forecasts seen by the Grocer. Spain makes up around half of global production. However its yield is predicted to fall by around 15% on last year.
Rapeseed oil prices in Rotterdam hit a 50-year high in September as a result of poor European supplies and huge losses in Canada. Canada, the world’s top exporter of rapeseed, has seen its rapeseed production fall by 34% this year. A rise in demand for biodiesel in Europe is also having a significant effect.
Yet most supermarkets have so far shown no signs of passing these extra costs onto customers, with Tesco, Sainsbury’s, Asda, and Morrisons all keeping prices steady throughout the last year.
Lidl increased its own-label extra virgin rapeseed price by 7% in September, although this remains cheaper than its in-store competitors.