Countdown and Foodstuffs continue the tit-for-tat discount banter

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  • July 22, 2014
  • Damien Venuto
Countdown and Foodstuffs continue the tit-for-tat discount banter

Over the course of the last week, the nation’s major supermarket chains have been embroiled in a discount battle that the Herald has dubbed ‘bread wars’.

The first shots of this this retail skirmish were fired on 17 July, when Countdown dropped the price of its budget white bread from $1.48 to only $1, a discount that was immediately promoted via radio and television advertisements under the ‘Price Lockdown’ banner that has been giving Kiwis reduced prices since October last year. 

On the very day that Countdown dropped its bread prices, New World did the same and also complemented this move with an equally shouty TVC.  

“New World introduced 'Price Limits' as a pricing mechanic early last year,” says Foodstuffs’ group general manager of marketing Steve Bayliss. “The approach offered special deals on basic household staples for an extended period of time. The idea was to give consumers greater certainty on the value of these items week to week rather than constant catalogue and price hunting.”

Stickman then upped the ante by appearing in a new animated spot that points out that Pak ‘n Save has the cheapest bread in the nation. And at 89 cents a loaf, this statement isn’t inflated with hyperbole.

“We started to hear rumours swirling around the baking industry that our competitor was also exploring a bread deal,” says Bayliss. “The supermarket industry is hyper competitive and as a New Zealand-owned company we were determined we weren't going to give our offshore rivals an inch so we accelerated our launch plans to yesterday.”

Countdown accepted the challenge and immediately responded with a scene-by-scene reworking of the original ad, with the only difference being a script addition that proclaims the green supermarket as the first to lock down the price of bread.

A spokesperson from the supermarket chain also differentiates Countdown’s offer on account of it being locked down for an indefinite period rather than only for a limited time.

“We’re committed to delivering better value for our customers on a variety of groceries long term, bread included. Countdown customers have saved $16 million on more than 430 products since last October," says the spokesperson. "$1 bread is another example of our commitment to lower prices for longer.”

This back and forth between Countdown and Pak ‘n Save is nothing new, and it has in the past seen both companies releasing price comparison ads that try to convince consumers of which store is the cheapest.

This week, at a time when the bread wars are still ongoing, Pak ‘n Save released a spot called ‘Pak’nSaveOnomics 101’ that provides a comparative breakdown of how much more expensive Countdown is in certain regions.

And although this banter does at times step quite close to the line of petulance, Countdown says that discounts benefit the consumer. “It’s a fact that when prices are cut, competition increases," says the spokesperson. "It’s good for shoppers and highlights that we’re in a highly competitive environment and that this is an offer Kiwis want.”

These sentiments were mirrored by Bayliss, who said: “Ultimately, we think a bit of a price stoush is a good thing.  At the end of the day consumers end up the winners. And while there's a bit of red ink on the floor of our accountant’s office that's the nature of robust competitive tension in the true spirit of all great trans-Tasman competitions.”

In making this statement, Bayliss once again trumpets Foodstuffs’ New Zealand-owned heritage, a strategy that was initially introduced in February when then-Labour MP Shane Jones alleged that Progressive and its Australian-owned parent Woolworths had engaged in anti-competitive and corrupt behaviour.

Countdown responded to the scandal with some deep discounting through its various discounting platforms in an effort to win back market share. And given the tendency of Kiwis to shop where the discounts are, it comes as little surprise that Countdown would opt for this recovery approach.

“59 percent of sales come from products that are on promotion in New Zealand, although for some categories this is significantly higher.” says Vicki Riggans, Nielsen’s executive director of marketing effectiveness. “New Zealand has one of the highest promotional levels globally; as a comparison, North America sits at 31 percent.”

Riggans also says that the discounted product campaigns are starting to affect the way Kiwi consumers shop.

“Aggressive trade promotion strategies are driving an increased level of consumer promotional buying behaviours,” she says. “Shoppers simply wait for one of their repertoire of brands to be on promotion before purchasing a product.”

But, as Bayliss’ allusion to the accountant’s red ink reveals, dropping prices can become pricey. And although the Countdown spokesperson denied that the discount bread is a loss-leader designed to draw customers into stores, the marketing money thrown at the promotion seems to suggest otherwise.

In addition to releasing the pair of TVCs to promote the discount bread, Countdown also took over of the print edition of the Weekend Herald with a near full-page false cover. And campaigns like these don't come cheap.    


    

The costliness of discount-driven marketing strategies is also evident across the ditch where Coles and Woolworths are estimated to have spent $500 million on fuel discounts last year.

This intense discounting eventually caught the eye of the Australian Competition and Consumer Commission, leading to action against both supermarkets. But rather from being dissuaded from discount marketing, Coles diverted funds from fuel promotions to launch an in-store campaign called ‘Deeper Down Down,’ an aptly named follow-on from its ‘Down Down’ campaign.

Riggans explains that companies are willing to take the financial—and sometimes legal— risks that sometimes come with deep discounts, because it has become a necessary part of the business.     

“Price discounting is not an investment in this market but a cost of doing business,” she says. “Grocery suppliers need to ensure their trade promotions are constantly optimised. If product baseline shares (sales in absence of promotions) are less than their market share they are vulnerable to pricing pressure. Therefore baseline driving activities such as new product development  and product repositioning are needed to stimulate brand health.”

So, given that the tit-for-tat discount banter is unlikely to subside in the near future, we can only hope that the battle eventually descends to the extent that one of the chains adds a ‘neh, neh, neh, neh’ taunt into an advertisement. 

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