Somerfield is using up over a quarter of the proceeds from its charity scratchcards in administration costs – more than five times the level taken by Camelot for its National Lottery Instants.
The supermarket chain launched the scratchcards in 450 stores last week, and claims it makes no profit from them. For each 1 scratchcard sold, 46p is given in prizes, and 28p goes to the Somerfield Community Charity. Administration costs eat up 26p – just 2p less than the funds going to charity. Somerfield estimates it will make 3m a year from the scratchcards for charity.
A Somerfield spokeswoman says the high administration cost is to pay for the “start-up”, but admits that no money has been spent on marketing, as Somerfield has used PR to promote the scratchcards.
She says that of the 26p administration costs, Somerfield keeps 5p to pay for start-up costs, and 21p goes to Littlewoods as the operator. This means Littlewoods could take over 2m a year from the scratchcards.
One trade source says Somerfield is legally entitled to offer 55p in prizes, but offers only 46p. Keeping the prize payout at the lower level means more cash is handed to Littlewoods.
The source criticises what he calls Somerfield’s misleading promotional literature for the scratchcards, which makes no mention of how much goes to administration, prizes or charity.