Brand / Price Equation
Approaching this study, PRODUCE BUSINESS theorized Wal-Mart might be less expensive overall, yet the supermarkets would rely on their reputation as food merchants in order to convince customers of their value proposition.
If so, one could expect conventional supermarkets to be priced competitively with Wal-Mart on branded items where consumers could make a direct price comparison. Then conventional supermarkets could have higher prices on non-branded items consumers might assume are of higher quality. The results of this pricing comparison proved otherwise.
When all four stores were carrying the same branded product, value judgments were taken out of the equation. Take Del Monte Gold pineapple: At the North Windham Wal-Mart Supercenter, the consumer could pick one up for $2.79. At Big Y, for the exact same pineapple, the price was $3.99 or 43 percent more. At the local Shaw’s, a Del Monte Gold rang up at $3.99 — that is if you remembered to hand over your loyalty card. Otherwise, it was $4.99. The bargain at Shaw’s was still 43 percent higher than Wal-Mart. Shopping the Super Stop & Shop down the street, Del Monte Gold pineapples were a luxury at $4.49, or 63 percent markup from Wal-Mart.
What’s interesting here is the supermarkets didn’t see to be concerned about the wide price differential on an item so recognizable as identical to its customers.
Wal-Mart and Super Stop & Shop carried the exact same 4.4-ounce Southern Sun brand blueberries. But Super Stop & Shop was charging $3.99, a 34 percent markup from Wal-Mart’s $2.97.
Wal-Mart paled in fresh branded organic choices, however. All three supermarkets in this study did circles around Wal-Mart in selection and quality of organic produce. A few bags of Veg-Land organic grapefruits and looms in a corner next to the soy products at Wal-Mart were rotten. Apparently, the North Windham, CT, Wal-Mart was not attracting enough consumers interested in organics. Without the demand, the items were not turning.
However, Wal-Mart’s branded tofu items in the refrigerated section were priced below the same ones at the supermarkets. Big Y did have a 2 for $3 sale on Nasoya tofu listed in its circular, but all the packages on display were signed and stickered at $2.29, 29 percent higher than Wal-Mart.
Stores faced off with the same brands of 7.5 ounce Caesar salad kits. Wal-Mart offered Dole for $2.68, while at Super Stop & Shop, the same Dole product was $2.99, a 12 percent increase. Shaw’s had Fresh Express for $3.29, but if you went to Big Y that day, you could get two of those identical Fresh Express packages for $5.00 with your loyalty card, or $2.99 separately.
All four stores had 1-pint packages of Garden Sweetest Santa variety grape tomatoes. Wal-Mart priced lowest again, albeit the signage above the display called them cherry tomatoes.
At Wal-Mart, Del Monte’s Orchard Select jarred fruit was a steal at $2.98. The other stores were selling the identical product that day at $3.99, or 34 percent higher than Wal-Mart. What a difference a few days can make in a high/low pricing strategy. This reporter later called Shaw’s back to verify an item detail and was encouraged by a produce employee to stock up on the Del Monte jarred fruit. “Normally it sells for $3.99, but today it went on sale. If you buy one, you get one free. This never happens,” he said.
In many fields — clothing for example — Wal-Mart can’t even buy the top brands. Those manufacturers won’t sell to the discount stores in order to protect their department store business. In the food business, this holds true in specialty foods, where a lot of companies won’t sell their brands in supermarkets to safeguard their up-market image and specialty food store markups. But national produce companies seem to be willing to sell their brands to anyone. Though a manufacturer may market a produce brand to stand for quality, none ultimately try to be exclusively up-market.
How influential is branding in the pricing of products? How important is branding to a consumer? In this store comparison, certain items had varying brand names but visually compared to quality and pack size.
Disjointed pricing in packaged romaine hearts was remarkable. At Wal-Mart, a Dole 18-ounce package was $1.98. Big Y was selling Mann’s Sunny Shore 18-ounce romaine for $3.99, 102 percent higher than Wal-Mart. At Shaw’s, Café New Star’s smaller 16-ounce package was $4.29, or 117 percent higher than Wal-Mart for 2-ounce less product. The Super Stop & Shop brand 18-ounce package was 42.79, a 41 percent lift. Is the brand association strong enough to sway consumers to pay such premiums?
Vine ripe tomatoes are harder to compare because of other specialty nature. Wal-Mart’s non-branded vine ripe tomatoes were featured in a fresh, overflowing and prominent display. Wal-Mart’s quality proposition on an item considered higher end was arguably more than comparable to its supermarket rivals on that particular day.
Brands differed among stores on. The produce department’s biggest seller, but by carrying top brands of bananas — typically Chiquita, but in this particular store, Dole — Wal-Mart avoids even the accusation of selling sub-standard products. From the consumer’s vantage point, the brand equity reassures that low price does not mean less quality. And Wal-Mart, as it dod inmost produce items that day, branded or not made sure if offered bananas at the lowest price in town.