Bread & Milk: Vital Lines

When it comes to KVIs (known value items), milk and bread probably top most shoppers’ lists. So as farmers fight with dairy distributors over milk prices, independent retailers are fighting the grocery mults with theirs. And it’s easy to see why this is happening, when HIM’s Chilled Dairy Category Focus 2013 found that ‘cheapest price’ was rated as being very important for consumers when buying milk, and 70% of shoppers would like to see more half-price promotions on milk.

Four months ago, Londis retailer Sunder Sandher from Leamington Spa was selling 2ltr milk for £1.29. But then he read an industry report that said consumers were not using c-stores for milk because it was not being sold at £1. What followed for Sunder was some hard negotiating with his independent supplier, Freshways, to get his milk down to the magic £1 mark.

He says: “It was a tough negotiation but they agreed - only if I doubled my sales. I said I was willing to give it a go for three or four weeks, and it worked. I sell more I have no wastage and I’m still making a margin.”

However, Sunder says it’s no use selling milk for £1 if you’re not going to shout about it to customers. “We highlight our prices on a blackboard outside - you’ve got to let people know about it.”

Adds Sunder: “You’ve got to have smart pricing on KVI lines, otherwise it can make your whole store look expensive.”

And it’s not a new strategy for him. “Thirty years ago when I first started out, I was selling milk and losing 5p on every pint. Other local retailers queried my prices, saying they could not buy it in at the price I was selling it at, but I stuck to my guns as it brought people in.”

So today in Sunder’s 1m milk display you’ll find Freshways 2ltr - semi and whole - for £1. There is also Freshways 1ltr skimmed for 99p, and single pints of whole, semi and skimmed for 55p. Also available is Country Life-branded milk at 99p for a litre.

“Some customers prefer to take the 1ltr of Country Life as they think 2ltr is too much for them,” he explains.

It’s the same ‘2ltr for £1’ story at Broadway Premier in Edinburgh, where they sell so much that it has to be delivered by a milkman every day. Retailer Linda Williams explains: “We get two cages of milk a day, mostly 2ltr jugs (about 120), then 1ltr and half-litre sizes.

“We’re a local destination shop, which is why we sell so much. We’ve always made sure that we are cheaper than our competitors.”

But not every independent is selling milk at £1. David Cox, who has a Spar store at his Saintfield Road Service Station in Lisburn, Co Antrim, says: “I know customers are looking for value, but I have resisted dropping the price to £1, even though I try to give a value message throughout the store. Our sales are 95% of 2ltr jugs. The cost price is about 87p and the retail is £1.36. The problem is that a lot of the shops are selling at £1 or 99p. I keep to £1.36 each or ‘2 for £2.20’. The sales mix of singles at £1.36 and ‘2 for £2.20’ works out at £1.17 per jug on average.”

About 70% of his sales come from semi-skimmed. “Full fat takes up the rest. We sell very little of anything else. We keep a few pints, but it is really all 2ltr jugs.”

David’s milk comes through Spar. “We are always in stock of milk. It is the golden rule to never, ever be out of milk or bread. People will come to you if they know they will get what they need.”

Staying in stock isn’t a problem for David as he gets deliveries six days a week. “We place the order at lunchtime the day before, for the next day,” he says.

When it comes to bread pricing, David says the story’s much the same as with milk. “We try to be as competitive as possible. White loaves are the big sellers and we have no choice but to be keen on price. My customers would like to see a price point of £1 for bread, but I just won’t go that low. About £1.19 or £1.15 is my price. I should really be pricing them at £1.29-plus to be making a decent margin.”

In Leamington Spa, Sunder sells Kingsmill at just £1. “Londis brought the price down to a round pound, which was great,” he says. “We also sell Warburtons and Allinson. Warburtons wholemeal, for example, is priced at £1.75. Some people will only ever buy Warburtons whatever the price, while other customers will always buy the cheapest bread.”

Alkesh Gadher, who has a Best-One in Isleworth, London, has 1.5m devoted to bread, where Warburtons is the best-seller, sold at rrp. He says: “In the past couple of months, Warburtons’ smaller loaves have been available pricemarked, and they sell really well. We also sell Kingsmill and Hovis. All our bread is branded. We have tried own label, but it doesn’t sell.”

There has been plenty of activity in the bakery category of late. Alkesh thinks it’s fantastic that new products are added regularly as it creates interest in the category, but he believes some lines are just too niche for him. “I look at some of the products and think I’ve not got a chance of selling them. If we see the rep, they’ll say try it for four weeks and you can have it on sale or return. But some of the varieties are so obscure I know we won’t need a month to see if they sell!”

Sunder, too, is keen to try new lines as he says his customers like them. “We’ll try new lines for a while - two to three weeks - but if they don’t sell we’ll knock them on the head. We get them on sale or return, so it’s not a big problem.”

Of the latest Warburtons’ lines, Sunder says Warburtons’ pitta breads for £1 are going well.

Warburtons category controller Martin Baptie says his company is committed to developing products which respond to the key consumer trends of health, convenience and variety, which in turn enable retailers to grow their bakery sales. “Retailers should always give more space to products in these growth areas in order to capitalise on the increased demand they generate,” he adds.

Getting your range right is paramount for bread and milk in their standing as key footfall drivers and frequent top-up purchases. And their value to you is undisputed, as IGD research in the ACS Local Shop Report 2013 revealed that bread and bakery still contributes 4.5% of sales to a typical store, and milk 3.3%.