The wholesale price of butter has fallen by more than a third while retail prices have risen more than 20%, leaving analysts concerned retailers are profiteering. The wholesale spot price of UK butter fell to £2,150/tonne last month, down 34.8% year-on-year, DairyCo Datum figures show. EU wholesale prices fell even further to £1,875/tonne due to some countries selling stockpiled butter, according to Mintec. But brand and own-label retail prices have risen sharply.
Country Life and Anchor packs rose 20.4% and 24.5% in the same period, to £1.06 and £1.22 per 250g pack, equating to £4,240 to £4,880/tonne. The Grocer 33 shows the average pack of own-label butter at the big four has risen 22.2% to 89p per 250g (£3,560/tonne).
Wholesale butter prices peaked in September 2007, but then fell sharply and reached current levels by December. Retailers delayed passing on the increases to consumers until December, said a Datum analyst. However, nine months later, falling wholesale prices have still not been reflected at retail level, she added.
“You could reasonably expect prices to go down after a similar lag to when they increased, but this hasn’t happened,” she said. “If anyone has market power in dairy, it’s the retailers and there’s a grey area as to what’s happening with their supplier contracts. The retail price is not necessarily linked to the commodity price. There’s a possibility of market power being exercised.”
A discrepancy between retail and wholesale prices has also been identified for Cheddar cheese. The Grocer 33 shows the typical retail price of supermarkets’ 250g packs of cheapest own-label Cheddar rose 29.7% to £6.32/kg (£6,320/tonne) year-on-year while the wholesale price of mild Cheddar fell 11.2% to £2,750. A PTF report said some processors had sourced Cheddar from Ireland for just £2,550.
“Retail margins for all these products had increased over the past decade, even before last year’s commodity price rises,” added NFU dairy adviser Hayley Campbell-Gibbons. “Supermarkets did resist increasing prices at first as commodity prices rose, but there’s nothing to suggest that once they did pass on price rises, they didn’t put extra on, either to recoup costs or to increase profits.”
A Sainsbury’s spokesman said it was “misleading” to compare its prices to wholesale. “We negotiate the price we pay butter suppliers on a long-term basis, which is why we don’t see the retail price fluctuate. Any rise in retail price has been significantly behind cost price.”
An Asda spokeswoman said: “Asda has recently increased the price paid to dairy farmers by a further penny per litre, and we have also increased the price we pay on cheese.”
Tesco and Morrisons declined to comment.
Country Life and Anchor packs rose 20.4% and 24.5% in the same period, to £1.06 and £1.22 per 250g pack, equating to £4,240 to £4,880/tonne. The Grocer 33 shows the average pack of own-label butter at the big four has risen 22.2% to 89p per 250g (£3,560/tonne).
Wholesale butter prices peaked in September 2007, but then fell sharply and reached current levels by December. Retailers delayed passing on the increases to consumers until December, said a Datum analyst. However, nine months later, falling wholesale prices have still not been reflected at retail level, she added.
“You could reasonably expect prices to go down after a similar lag to when they increased, but this hasn’t happened,” she said. “If anyone has market power in dairy, it’s the retailers and there’s a grey area as to what’s happening with their supplier contracts. The retail price is not necessarily linked to the commodity price. There’s a possibility of market power being exercised.”
A discrepancy between retail and wholesale prices has also been identified for Cheddar cheese. The Grocer 33 shows the typical retail price of supermarkets’ 250g packs of cheapest own-label Cheddar rose 29.7% to £6.32/kg (£6,320/tonne) year-on-year while the wholesale price of mild Cheddar fell 11.2% to £2,750. A PTF report said some processors had sourced Cheddar from Ireland for just £2,550.
“Retail margins for all these products had increased over the past decade, even before last year’s commodity price rises,” added NFU dairy adviser Hayley Campbell-Gibbons. “Supermarkets did resist increasing prices at first as commodity prices rose, but there’s nothing to suggest that once they did pass on price rises, they didn’t put extra on, either to recoup costs or to increase profits.”
A Sainsbury’s spokesman said it was “misleading” to compare its prices to wholesale. “We negotiate the price we pay butter suppliers on a long-term basis, which is why we don’t see the retail price fluctuate. Any rise in retail price has been significantly behind cost price.”
An Asda spokeswoman said: “Asda has recently increased the price paid to dairy farmers by a further penny per litre, and we have also increased the price we pay on cheese.”
Tesco and Morrisons declined to comment.
No comments yet