What price reputation?

13 February 2013
While the food market and its supply chain possess a number of unique aspects, it is also governed by many of the simple truths that apply to every industry and market, the biggest being the role of profit margins. The price an item is sold at must be higher than the cost to produce it. Findus beef lasagnes – to name but one product – were retailing at £1.60. That’s cheap for a product containing meat, which has seen prices rise in recent times. A whole host of retailers have had issues with their meat products. It seems that, at least in some cases, to preserve tight margins, processors and producers have been forced to pull a rabbit out of a hat, or a horse out of Poland… So it is perhaps no coincidence that equine and porcine DNA has been found in products towards the bottom end of the price scale rather than in pricier goods. The fallout from the scandal has been huge; causing severe reputational damage to retailers, food manufacturers and regulators. But more broadly, I wonder whether this might be the moment that leads people, be they company execs looking to eek out a slightly wider margin or shoppers hoping to cut down the cost of a weekly shop, to stop and think “Am I really better off going for the cheapest option?”
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