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Shoppers prepared to pay more for premium food products

Shoppers face many choices when selecting grocery food items to refill pantries, refrigerators and freezers. For items on shopping lists, personal preferences, budget constraints and the number of people in the household influence shoppers’ choices (including which brand, variety and size).

For instance, those households that place a high importance on minimising the weekly supermarket spend may favour supermarket house brands, which tend to be cheaper, or select different brands, varieties and sizes each week to obtain the best value. Big households may favour larger sizes and by buying in bulk may obtain a lower price per unit. Those households that can afford to choose what they prefer to consume without worrying about price, might tend to be loyal to favourite brands and sizes, irrespective of what else might be on special at the time.

For many types of grocery food, there are basic or standard products at prices that might be attractive to budget-conscious shoppers, and there are premium products that some shoppers are prepared to pay more for. Some shoppers perceive these 'premium' products to be healthier, more nutritious, fresher, of better quality, or produced more ethically.

The items tracked in the food price index (FPI) basket include both standard and premium products.

Those households that chose the cheapest available brand of standard homogenised milk each time they shopped in the December 2008 quarter, would have paid an average of $3.34 for a two-litre container. Those shoppers who buy calcium-enriched milk and have a preferred brand and variety that they always choose from week to week, would have paid an average of $4.48, a 34 percent premium over that paid by standard milk buyers. Others may shun cows' milk and opt for soy milk. In doing so, they would have paid an average of $2.99 for a one-litre container of shelf-stable soy milk, which is one-third more than buyers of calcium-enriched cows' milk paid per litre.

Bread is available in many types and varieties, and at prices that range from more than $1.00 to well over $4.00 a loaf. Those shoppers who buy the cheapest available white sliced loaf each time they shop paid an average of $1.62 for a 700g loaf in the December 2008 quarter. However, those who favour a particular brand of wheatmeal or wholegrain bread would have paid an average of $2.78 or $3.51, respectively, giving premiums of 72 and 117 percent compared with the cheapest available white bread average price.

Shoppers buying beef mince would have paid an average $11.43 per kg in the December 2008 quarter. Those who chose blade stake would have paid $13.98 per kg, equating to a 22 percent premium. However, those who opted for porterhouse or sirloin steak would have paid $24.46 per kg, more than twice as much as that paid by mince buyers.

Shoppers buying the cheapest available standard caged eggs would have paid an average of $3.63 per dozen in the December 2008 quarter. However, those who plumped for free-range eggs would have paid $4.04 per half dozen, or more than twice as much for each egg.

While fruit juice has long been available in shelf-stable form, chilled fruit juice has recently grown in popularity and was added to the FPI basket in 2008. Shoppers opting for chilled fruit juice or smoothies were prepared to pay an average of $4.39 per litre in the December 2008 quarter, 145 percent more than the average of $1.79 paid by buyers quenching their thirsts with one-litre containers of cheapest available shelf-stable apple-based fruit juice.

These examples show that many shoppers are prepared to pay significantly more for premium food products they perceive to be superior.

Table 1

Food Price Index
Weighted average retail prices of selected food items
Item Unit December 2008 quarter
($)(1)
Meat, poultry and fish subgroup (supermarket & butcher)
    Beef – mince 1kg 11.43
    Beef steak – blade 1kg 13.98
    Beef steak – porterhouse/sirloin 1kg 24.46
Grocery food subgroup (supermarket & convenience store)
    Bread – white sliced loaf(2) 700g 1.62
    Bread – wheatmeal sliced loaf 700g 2.78
    Bread – wholegrain sliced loaf 700g 3.51
    Milk – standard homogenised(2) 2 litres 3.34
    Milk – calcium-enriched 2 litres 4.48
    Soy milk – unflavoured (supermarket only) 1 litre 2.99
    Eggs(2) dozen 3.63
    Eggs – free-range (supermarket only) pack of 6 4.04
Non-alcoholic beverages subgroup (supermarket & convenience store)
    Fruit juice – apple based (supermarket only)(2) 1 litre 1.79
    Fruit juice – orange (supermarket only)(2) 3 litres 4.14
    Fruit juice or smoothies – chilled (supermarket only) 1 litre 4.39

(1) The average prices for October, November and December 2008 were averaged to lessen the impact of any unusual patterns in the number of 'specials' in any one month.
(2) Based on the cheapest available brand or variety in each retail outlet at the time of price collection.

Back to Price Index News: April 2009

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