Every now and then a situation comes along that puts the supermarket industry into a tight spot, even though the industry had nothing to do with its making.
Such a situation is forming in the shape of the flurry of coffee-price run-ups partially occasioned by the frosts in Brazil, which are expected to reduce the harvest. Since coffee is a fungible commodity that's in perpetual worldwide commerce, it requires little more than a hint that scarcity might be in the offing to drive up prices of all beans, no matter where they originated. So since June, there have been a number of substantial wholesale price increases driven by the frost and perhaps by increases that would have been taken in any event. Additionally, coffee deals have been trimmed.
These are circumstances no one in the retail industry can control and for which no retailer should get blame. But the other dimension to the situation has to do with the management of price increases as the costlier product arrives on gondolas. The question arises: Should every increase be immediately reflected for all like product in the store, no matter what the wholesale price of any given package might have been?
Generally followed practice calls for lifting the price points of all like goods to the most recent one, notwithstanding the cost of the older product. Supermarkets have sometimes been criticized for that practice. Now the constant price run-ups on coffee make that long-standing practice more noticeable, especially as all the publicity surrounding coffee prices fixes shoppers' attention on the situation.
In short, public relations troubles are brewing. But there's more: The whole coffee-price problem took on a strange aspect in Connecticut lately because of the confluence of a couple of requirements of law: · Connecticut has the dubious distinction of being the only state that actually makes it a criminal offense to change the price of a food product once it's put on a store's shelf. (The law is not much enforced.) · The state also requires item pricing. Interestingly, the only exception is for stores that have electronic shelf tags.
The two laws make it very difficult for stores to gracefully effectuate price changes, especially of the dramatic and sustained type suggested by the coffee situation. There's a news article about this by reporter Lisa Saxton on Page 31 of this issue, and as it shows, the state's consumer commissioner has warned the public to be on the lookout for "suspicious sticky spots" on the tops of coffee cans that could signal the removal of old price tags and the installation of new ones.
Indeed, the matter of repricing goods has always been a sticky one, and it's not only in Connecticut that the food industry -- manufacturing and retailing -- has taken a public relations hit on coffee prices.
So what's the right thing for retailers to do? One solution would be to simply let two prices exist on the shelf: older goods at a price lower than that marked on new goods. But that would establish a multitier pricing structure on identical stockkeeping units. That, in turn, would effectively undermine operating efficiencies scanning brings by making the scanned price a matter of negotiation with each shopper. And that might be the least of it: Such a solution would be unacceptable. Part of the solution might lie in pointing out a couple of facts to consumers: First, consumers benefit from every SKU that's on promotional price. In no instance does one portion of a promoted SKU sell for the promotional price while the other sells at regular list.
Secondly, it might be useful to point out that the timing of price increases seems to be an issue raised only in food retailing. As the article points out, gasoline dealers don't suffer a downside if they take price increases on old fuel in tanks, nor do appliance dealers if they change the price of a refrigerator that's been on the floor for a while. In all, it's clear that the best and most efficient method of operating a supermarket is to maintain a single price for each SKU. And, by extension, consumers benefit because more efficient operators can offer better prices. But there's no reason the needed uniformity of pricing must be pegged to the highest and most recent price increase posted by a manufacturer. Maybe another public relations benefit could be realized in instances of rapid price run-ups by telling shoppers that some kind of rolling price average is being maintained.
