Chicken Wars 2016
In January 2016 two of Australia’s major supermarket brands Woolworths and Coles (Wesfarmers) went to war over a chook. Within a week of each other both brands reduced the price of a roast chicken from approximately $11 to $8.
Apparently Coles had been clucking away with its suppliers for months to plan for the predicted spike in demand for it’s bargain chook. Meanwhile…. Woolworths were having a broody little moment of their own and managed to undercut Coles by 10¢ with its $7.90 roast chook.‘Woolworths is very happy to offer our customers fantastic value BBQ Chickens for just $7.90,’ a spokesman said.
‘We have plenty of stock. In fact we’ve increased the number of chickens we have by 25 per cent to cover demand.‘
However behind the chicken coupe at Woolworths, word has it… that they were battling to keep up with demand for the bargain hen….
(did anyone consider the animal ethics behind all of this?…sorry I’ve been brooding over this for a while).
Weber’s Law is not about BBQ Chicken
Drawing attention to competitive prices is a deliberate and considered part of the Coles/Woolworths (big chain) marketing strategy. They win back market share by crashing through the ‘just notable difference’ (JND) price point. The JND is based on ‘Weber’s Law’, the concept discovered by German physiologists (Britt, Nelson & Victoria,1976). It is the degree of stimulus required for a change to be noticed from the initial stimulus (Britt et al., 1976). Coles have significantly dropped the prices in some big profile categories – bread, milk and now chicken. It generates interest of the mass media, which delivers Coles a marketing value far in excess of its own investment. Consumers can also get involved through social media around the issue as below:
Why did the consumer cross the Road? Because the chooks were cheaper on the other side.…
Coles splashed out about 150 million on lowering food and liquor prices during the March quarter and the investment has driven its comparable food and liquor sales up by 4.9% or 7.52 million (Berry, 2016).
Citigroup analyst and head of research Craig Woolford said “long-running promotions such as the $8 roast chicken following on from $1 milk and $1 bread shifted the `consumer psyche’ around pricing”. He said the success of this strategy and Coles’ consistent messaging around price was illustrated by its strong sales growth in the past five years.
Due to this pricing trend used by large chains, research agrees that there is now higher consumer awareness around competitive pricing in supermarkets in Australia. Craig Woolford says “I think it’s entrenched in the consumer psyche now; it’s very rare to see retailers ween themselves off promotions successfully.”
Other large supermarket chains such Aldi and Costco are also ruffling feathers; apparently you can pick up a big Hen for $6.99 in Cosco ….”bigger than both Coles and Woolworths”.
But will the big Supermarkets end up cooking their own chooks?
Mr Poulter, the founder of the company ‘Lenard’s Chickens’ (a big rooster in the chicken industry) points out another consequence of the discount chicken war…. the issue of damaging farmer’s ….
“When you have Coles and Woolworths standing over suppliers telling them what they want them to sell their goods for and demanding they set their price accordingly, they will force those suppliers out of the market,” he said.
Ultimately will consumers be affected in the long run with a depleted supply chain of growers? There is only so much growers can concede before they enter a loss situation.
A spokesperson from the Australian Chicken Growers Council refutes this argument, telling The New Daily that “price drops from supermarkets or processors rarely, if ever, affected the price producers got for selling chickens to processors”.
SO…is everyone going to play chicken?
‘Lenard’s Chickens’ response to this price war is: “If you want a cheap offer, you can get that from a supermarket, whether it’s bread or chicken or milk; if you want a premium product there are premium offers out there like us,” said Chief Executive, Mr Caldwell.
If anyone is interested in finding out the chickens side of the story –
Lacobucci, D. (2014). Marketing Management (4th ed.). Mason: USA.