Beefy price cutting leads to an outbreak of ‘feel mad’ disease

Sainsbury’s cut the price of its beef products this week, and consumers were eerily keen to buy up supplies, says George Pitcher. George Pitcher is joint managing director of media consultancy Luther Pendragon.

I promised to address the subject of BSE when the dust had settled. But it will clearly be a good while until that stage is reached. Indeed, it appears that the dust has yet to rise. As I write, the spongy brains of British government are fighting out the terms of a deal that may or may not mean the extermination of anything between four and 12 million British cattle.

If the wind is in the right direction, the radio-active dust from Chernobyl that poisoned our lambs could be as nothing to the ghostly residue of millions of mad cows that rains down on continental Europe. Serve them right, some might say – that will be one import they can’t ban.

Over a lunch of lamb and dumplings last week with a senior Labour backbencher, I was told that actuarial projections from the opposition benches showed that we should expect the least bad turn-out from BSE to amount to several thousands, say 12,000, human beings contracting CJD in the UK over the next five years. The armageddon scenario is, according to my left-wing friend, some 12 million victims.

A column about a new Black Death will clearly have to wait. This week, some less apocalyptic and some rather more vulgarly commercial matters can be raised, irrespective of the short-term wranglings emerging from the European Commission. They relate to the retail marketing of meats in the UK during the past fortnight, and what it tells us about the way the meat market works.

Sainsbury’s led the way by slashing its prices on its beef ranges. We were subsequently treated to Sainsbury’s spokespeople gleefully telling broadcasters that they had had, as a consequence, a sales surge in beef that was more intense than the pre-Christmas rush. Sainsbury’s beef had, as it were, walked off the shelves.

This is curious at all sorts of levels. Firstly, consumer confidence is either shaken by BSE or it is not. It is surely not the sort of consumer confidence that is price sensitive. Or perhaps, like the economy as a whole, there is a sort of feel-good factor at play here – like interest rates and their effect on voters, there is a price point below which shoppers vote with their purses and wallets. Perhaps it is the feel mad factor.

I don’t know what the answer is to Sainsbury’s beef-sales boom. The current beef scare is not remotely comparable with the Fray Bentos corned beef or John West tinned salmon crises of previous years, but one can say with confidence that the halving of prices on those product lines would have had little effect on sales. Even if the governments of the time had countenanced such wilful endangering of public health, the public would not have bought it. The current Government may or may not have played poker with the nation’s health – the country seems oblivious as long as there’s a bargain to be had. Weird.

What I do know is that Sainsbury’s public pleasure at having shifted so much beef, unwittingly demonstrates how the price wars in which the supermarkets seasonally indulge are a sham. It is widely considered a matter of record that the marketing policy during such exercises is to cut prices at the margin, while maintaining or even raising prices of essentials. Whatever the multiples might claim for these price wars, they do not cause queues to form around the block.

In demonstrating that the cutting of the price of a core item, such as beef, does have the effect of causing a real sales rush, Sainsbury’s appears to have demonstrated just how feeble are the supposed price wars.

The other multiples have so far endeavoured to show that they are above such vulgarity in beef marketing – presumably hoping that Sainsbury’s is wrong-footed by Brussels, or even by the Government’s health advisers. It may simply be that Sainsbury’s stole a march on them and they don’t want to look like copycats. Alternatively, they may believe that the market will turn and Sainsbury’s will have eroded its margins – or made a loss – for no purpose.

What I do know is that the grocers of the nation have been making a killing, if you will, on other meats lines. I have a shed-load of anecdotal evidence of how the prices of meats other than beef, especially white meats, have rocketed since the BSE scare gathered pace. To single out a particular multiple would be unfair, as I’m sure they’re all at it, but that lamb I was eating last week with the Labour MP apparently cost 24 (for four). Similarly, I gather that frozen chickens that had appeared in the cabinet at around 4 are now retailing at nearly 10.

It may, of course, be a preposterous notion, but if multiples cut prices on beef to shift it, or hold it in stock until the scare is past if perishable limits allow, while at the same time raising prices on other meats in response to demand, then the whole BSE period, if not too protracted, will have been to their commercial advantage.

That’s business, and it would be too harsh to suggest that retailers will come out of the BSE crisis with little credit. Nevertheless, we should watch any high-minded positions they take with interest, whether for commercial or social reasons. In any event, they should know they are being watched.

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