“Historically, price has been one of the fundamental sales drivers for grocers, and that still holds true today.” – McKinsey, 2021.
Supermarkets have a tremendous power over our society in the UK and Europe. They’re frequently the subject of Competition Commission enquiries and the target of shoppers’ and producers’ campaigns alike. Yet, they are a fundamental and largely necessary part of our lives. Only the privileged with both money and time can afford to visit the butcher, the farm shop, the whole food store etc, regularly for their provisions.
A huge volume of Scotch whisky is sold via UK supermarkets, with about 80% of UK off-sales occurring through the “large retail” outlets. Given the volume of sales via supermarkets, it’s clear that a lot of whisky buyers will have to take into account supermarket pricing strategies.
“The supermarket industry can draw on many price strategies to maximize profits. The obvious choice is to offer lower prices than every other store, but the equally obvious result is that this strategy keeps profits permanently low. For this reason, many supermarkets opt for more complex strategies to ensure profitability while still appealing to price-conscious consumers.” – Chron
Loss-leading or deep discounting is one of the most common supermarket strategies. This can occur with high-demand items such as coffee, which helps drive traffic. This can also be applied to higher value items supported by promotional marketing to increase footfall. Although there is a loss on the main product, other associated items may be priced higher during the promotion.
A more effective version of the deep discounting is known as high/low pricing. This has made for more frequent sales than the traditional approach of loss leading. This approach creates the impression of a significant price reduction on a product from the “high” price to the promotional offer. Creating a sense of limited and significant discount is more likely to prompt an unplanned purchase. How often have we replaced whisky before the one in the cabinet has been finished, because we spotted it was deeply discounted for a limited period?
Malt readers Simon and Heeksy recently highlighted in their comments on my Tomatin Legacy article that some of their preferred whiskies that can be snapped up deeply discounted by the keen eyed. Simon also pointed out that these whiskies are rarely value for money if you buy them at the peak of the price cycle. He went on to observe that savvy consumers can use a shopping app to set up alerts when prices drop on particular products such as whisky.
I looked on Trolley.co.uk, which provides a very useful price history of various listed products, including today’s featured bottle the Chivas Regal Extra 13 year old blended Scotch. The graph itself illustrates the high/low strategy, with prices above £25 pounds 70% of the time and 30% at £25 or below over the course of a rolling year. More importantly, you should not have to wait too long for a lower priced period to crop up, the longest time at the high price being seven weeks.
Graph on 02/03/2021 via Trolley
Fantastically, technology is helping the consumer who has begun to mistrust the offers that we see on the shelf. I personally was surprised that the Chivas Regal Extra had dropped to as low as £23 last summer, which takes a slight shine off my Tesco Clubcard price of £25 this week. Maybe it’s not such a special offer to a loyal customer as I initially thought.
What about those people who do not have a particular whisky in mind when shopping at the supermarket? It reminds me of standing back and watching some customers pick whisky before Christmas 2021 in my local store. A husband and wife were clearly selecting a bottle to take to a social occasion with a friend. The wife asks what sort of whisky he likes; the husband doesn’t know. They then proceed to narrow down the choices to those with the discounted prices, and then selected a single malt on the basis of a distillery whose name they recognised and presumably associated with quality. It got me wondering just how much whisky is actually purchased this way.
Supermarkets have long adopted psychology and technology to maximise profits. Research demonstrates that for high-frequency products, the purchasing decision occurs in fewer than eight seconds. For whisky and other higher value items perhaps the decision time is extended, but the conversation I described above probably took no more than 30 seconds. Retailers and scientist developed a planogram which helps describe where products should be placed on the shelf.
Planogram of retail shelves from Trax Retail
As to how much difference it can make: a study by a coffee manufacturer, using eye movement recognition, identified that a specific shelf at eye level would generate increased sales of 23% more than the shelf immediately below or above. Within the shelf placement strategy there are further sub-categories of placement types that help retailers maximise the shelf space.
Turning to the exact shelf set-up on the day that I purchased the Chivas Regal Extra we can see a few things going on:
The top-shelf here is atypical, in as much as it looks like Christmas gift products remain in store and are placed on the top shelf. The top shelf is often reserved for the premium products in a retail environment such as liquor stores; in the supermarket, the eye level shelf is for the premium products that maximise profit.
For those that take more than eight seconds to select a dram, the next two shelves down feature whisky that is promoted or unusual to tempt the customer; Tamnavulin Red Wine Cask and Crabbie 12 are two that stand out to me. More established premium brands which are not discounted, such as Ardbeg 10 and Highland Park, also sit here.
On the bottom shelves we see the deeply discounted whiskies that will be loss-leaders, and the mainstream blends which often have an established following who will seek them out no matter where they are positioned. Johnnie Walker and Monkey Shoulder stand out.
For the supermarket shopper it pays to arm yourself with the best technology to make sure you really are getting a good price. To set your sights low, at least in shelving terms. But, it’s also worth considering that for each great buy you make in the supermarket, there is likely to be an increased price on your premium bottle purchased in the liquor store as companies attempt to claw back profits lost from this high-volume low margin end of their business.
What can the savvy shopper expect from a whisky like Chivas Regal Extra?
Chivas Regal Extra Aged 13 Years – Review
Selectively matured in oloroso sherry casks. 40% ABV. £25.
Colour: Autumnal gold.
On the nose: Oloroso is immediate and prominent, seasoned American oak I would guess, a nice balance between the heavy boiled sugar and the bright fruitiness of the standard Chivas 12. Apples, pears, peaches, white grapes, a little dusty vanilla and pouring honey.
In the mouth: Smooth soft toffee at first, then fruity apples and pears, with time a little cheap chocolate and caramel, Rolos perhaps, some chopped dates, spice develops alongside a sharp dryness with a mellow spicy finish. The extra sherry maturation helps coat the mouth and extend the finish with some bitter chocolate.
A solid example of what a little extra effort can do to elevate a basic blend into something more complex. At £25 it is fairly priced, but at the ceiling price of £35 I’d be looking around for something more interesting. It’s also worth considering that the Berry Brothers and Rudd Sherry Blend is significantly better than this and is often less than £30, providing an extra 4.2% ABV and 100% malt whisky, whereas this Chivas Regal will have a large component of grain whisky. Rewards therefore can be had in this price bracket for those who venture beyond the supermarkets. But still, there is nothing inherently wrong with this whisky, so I give it a middling score.
I don’t feel you need to be privileged to visit the butcher. Their prices are not much different than our grocery stores, at least where I live.
Surfs, your location sounds fantastic. We’re about 3 – 4 times the price for some some cuts at the butcher than the supermarket here in the UK. My personal experience is butcher for special meals is fantastic and supermarkets for mid-week suppers. I guess the general comment was that to completely avoid the supermarkets would most likely cost both time and money and as such they are a necessity for most.
This is insightful——almost a chapter in Marketing 101. I work in the data space—-I would think there’s even data points to make an algorithm which can predict what brand will go on sale, which timeframe, and at which location.
PB, I’m sure there will be a strategy that can be deduced here and patterns discovered be people a lot smarter than me!