Aggressive pricing on Milk, Eggs, and Bananas is something that many grocers have experienced, except for those retailers that operate in states with minimum markup laws. These three items are often used as loss leaders, and in many markets across the U.S., they are priced on a store-by-store basis, directly against the closest competitor(s).
Gallon Milk Leads in Localized Pricing
As a result of the panic buying in 2020 and the resulting supply chain issues, pricing pressure on these items seemed reduced at times. But 2021 is showing a renewed focus on the prices of these items, with gallon milk leading the charge. Engage3 observed whole gallon milk pricing that ranged from a high of $4.19 in Abington, PA, to a low of $0.99 in Bowling Green, KY in a recent review of gallon milk prices across the U.S. In large metropolitan areas like Dallas-Fort Worth (DFW), gallon milk is often priced at a local store level by many, but not all, competitors. This is demonstrated by the following wide range of observed price points:
- For far North Dallas, the lowest observed price was $1.58. In South Dallas, a market high price of $3.29 was observed.
- Over 160 different price points were observed across the DFW area, with pricing between $1.58 and $3.29, providing further evidence of high localization of milk pricing.
- For some food retailers in the DFW market, they were not localizing pricing on milk with only 4 unique price points observed.
In the chart below, localization scores for Walmart were calculated for the DFW market for the 4 different varieties of Great Value gallon milk. Localization scores were calculated by dividing the number of unique prices observed on an item by the number of stores where prices were observed: (number of unique prices divided by the number of store observations). The prices were then indexed against the Walmart national price average for the nine markets listed, to compare the extent of price investments being made.
Competitor Price Awareness is Key
Understanding what is happening with competitor pricing across any given market is the first step in building a plan of counter-attack. When prices are being localized (i.e. in the case of milk), competitor price awareness becomes very difficult to collect and process. Some retailers send store personnel to the nearest competitor for weekly collection of prices with pen and paper. This soon becomes cumbersome and error-prone. To overcome this, many Engage3 clients utilize targeted crawl methodology across every competitor in a market. They also couple this with our mobile app collection when online pricing is not available. Whatever the method utilized, it is important to keep the following in mind when collecting broad but localized pricing:
- Data should be collected, processed, and acted upon the same day.
- When collecting Private Label items (i.e. Milk), make sure you have built the correct links across your competitor’s Private Label. This will ensure that you are monitoring and reacting to the right items.
- Track and monitor competitor reaction. This will help build an understanding of who is leading who in a market, as well as understanding what your competitors’ reaction parameters are.
Because Milk, Eggs and Bananas have a high household penetration and purchase frequency, it should be expected that these items will remain at the forefront of localized competitor pricing activity. With the right processes and tools in place to collect and analyze this data quickly and efficiently, you’ll soon find yourself in a position to understand and project competitor reaction, even before they do it.
For insights into Milk, Eggs, and Banana pricing specific to your market, you can schedule a demo HERE.
