Disparity between butter retail price rises

Published 23 August 17

Over the last year the retail price of private label* block butter has gone up by £0.70/kg (20%), while the average brand price has only risen by half that amount, up £0.34/kg (7%).  Butter prices for the 52 weeks ending 16 July 2017 stood at £4.22/kg for private label and £5.19/kg for branded, according to Kantar Worldpanel data.

2017.08.24 Butter retail prices

 

These price rises have happened in a year where the bulk butter price has risen dramatically. Both private label and branded butter prices were behind bulk prices in July 2017, where the average price was £5,420/tonne (£5.42/kg). Theoretically, a butter maker could currently make more money selling butter as bulk product on the open market, rather than packing it into retail packs, regardless of the packing costs.

Why has the average private label price risen so much more than branded? One consideration is that it can grow more from its lower base. Even at the currently high price, private label is £0.53/kg (Kantar Worldpanel) cheaper than branded butter was at its cheapest point in the last 2 years (£4.75/kg in the 52 w/e 6 November). It is currently £0.97/kg (Kantar Worldpanel) cheaper than branded butter, so can still appeal to consumers who are looking for a lower price. It is also possible that the high bulk prices are having more of an impact on private label packed butter than branded. Much will depend on the agreements in place between processor and retailer, and the ability of either side to negotiate price changes off the back of bulk market movements.

The full extent of bulk price rises in both branded and own-label packed prices is yet to be seen. The latest AHDB bulk butter prices will be available by the end of the month, which will give us a further indication of how the bulk market is developing compared with retail prices.

 

* Private label products are typically those manufactured by one company for offer under another company's brand, here including supermarket own-brand products.