From the beginning of this year until November, butter has become more expensive in shops on average by 2% year-on-year. Prices have increased in supermarkets, cash & carry stores and convenience stores while they have decreased in hypermarkets and discount stores. However, recently, a strong and increasing growth can be observed. For example, in August the year-on-year increase was at 29.3%, in September at 30.1% and in October at 32.2%. In mid-November, it reached 31.8% year-on-year. Additionally, the number of promotions dropped by 13.8% for most of the year. The number of promotions fell into double digits in cash & carry networks, supermarkets, and hypermarkets, and into single digits in convenience stores. Only discount stores were on the plus side. It can also be noted that only in August, the total number of promotions on the analyzed market year-on-year decreased by 33.7%, in September by 25.2%, in October by 14.5%, and after two weeks in November, as much as 41.1% year-on-year.
According to a report by Hiper-Com Poland, UCE RESEARCH and the BLIX Group, from January to early November this year, the average prices of butter rose by only 2% year-on-year. “Such a small increase over so many months is due to the fact that butter is a key product in the shopping basket of Poles. Its prices are often compared by consumers and determine which store they choose for larger purchases. This is confirmed by the fact that butter is one of the most frequently searched for items in applications with promotional leaflets. Retail chains are well aware of this price sensitivity. Therefore, they have made this commodity a strategic element of competitive struggle,” explains Dr. Krzysztof Łuczak, co-author of the report from the BLIX Group.
During the above period, prices rose in three formats, i.e. in supermarkets (8.4% year-on-year), cash & carry networks (7.2% year-on-year), and convenience stores (5.5% year-on-year). Conversely, two segments experienced declines, namely hypermarkets (-7.7% year-on-year) and discount stores (-4.8% year-on-year).
“These are interesting data indicating market segmentation. Supermarkets, cash & carry networks, and convenience stores focus on customers with a higher price elasticity, which allows them to introduce higher prices. On the other hand, price decreases in discount stores and hypermarkets can be attributed to intense price competition, which forces them to take aggressive actions to retain customers. At the same time, the latter format benefits from the scale effect, reducing unit margins in exchange for a larger sales volume,” explains Julita Pryzmont, co-author of the report from Hiper-Com Poland.
However, in recent months the prices of butter have risen sharply. For instance, in August there was an increase at the level of 29.3% year-on-year (hypermarkets – 43.5%, cash & carry – 41.4%, discount stores 26.5%, supermarkets – 18.8%, convenience stores – 15%). Meanwhile, in September the average price increase was 30.1% year-on -year (cash & carry – 50.6%, hypermarkets – 41.4%, supermarkets – 29.3%, discount stores – 27.9%, convenience stores, on a slight minus, i.e., -1.1% year-on-year). In October this year, prices rose by 32.2% year-on -year (cash & carry – 54.3%, discounts – 32.7%, supermarkets – 27.8%, convenience – 24.7%, hypermarkets – 17.8%).
“Recently we have been dealing with reduced milk production, which translates into record prices of dairy products on the European EEX exchange. A smaller supply on the market becomes a strong impulse for the growth in butter prices, which we currently observe,” Dr. Krzysztof Łuczak explains.
In addition, analysts from UCE RESEARCH report that this trend continues to grow. According to a quick estimate from mid-November this year, year-on-year prices rose on average by 31.8%. “On the market, you can already encounter individual cases of blocks of butter for PLN 10. However, whether the value of a standard product in most stores will exceed this threshold will depend on the level of milk and energy price increases. Thus, given observed trends, the price of PLN 10 for a block of butter can be expected to be achieved in the first half of 2025,” predicts Dr Łuczak.
Prices are rising and there are fewer promotional actions than a year ago. From January to early November this year, there were 13.8% fewer butter promotions in shops year-on-year. Their number most dramatically “tightened” in cash & carry networks (-24.8%), supermarkets (-23.4%) and hypermarkets (-17.4%). Convenience stores also reduced their number but only to -0.4% year-on-year. As the only ones, discount stores increased the number of promotions – by 8.9% year-on-year.
“We are dealing with a significant increase in the price of an important psychological product, which means that promotions on it are becoming more expensive each month. Therefore, networks may carry out a similar number of promotions as last year to give a higher price or maintain promotional prices, while reducing their amount and frequency. A better trade effect is given by promoting butter less frequently, but more strongly in percentage terms. In this way, the discount is better remembered by customers,” convinces Piotr Biela from the BLIX Group.
The annual result for the number of promotions differs significantly from data from recent months. In August, -33.7% year-on -year was recorded. In September, it was -25.2%, and in October, -14.5%. However, in mid-November, the number of promotions fell by 41.1% year-on -year. “These differences suggest that retail chains are increasingly adapting their promotional policy to current market conditions. Changes in the above months could already have resulted from the chains’ preparations for the Christmas season, during which they focus on maximizing the margin,” comments Julita Pryzmont.
In addition, Piotr Biela adds that this year is difficult in the trade. There is a price and promotional war, margins are falling, and retail chains are forced to seek savings. In this situation, they optimize the number of promotions, taking seasonality into account. August and September are weak months in trade, except for actions such as “back to school”. Meanwhile, October is a strong time. Promotions are being organized before All Saints’ Day and Halloween. Therefore, if promotions need to be reduced, it is better in August and September than in October.
“At the end of the year, the prices of butter will remain high, especially in connection with the seasonal increase in demand before the holidays. The beginning of 2025 may bring some stabilization or small price drops resulting from a temporary slowdown in demand. In the long run, the price level will depend on global factors such as milk prices, energy, and inflation. This will force consumers to pay more attention to monitoring promotional offers,” predicts Julia Pryzmont.
As Piotr Biela emphasizes, butter promotion is number 1 this year and customers will certainly be ready to choose a store based on its price. “I expect that at key moments, networks will hit hard with promotions on butter and this will be visible from the beginning of December, with the greatest emphasis on the middle of the month. At the same time, the regular price of butter will increase to, at least partially, make up for the margin on promotions,” sums up the expert.
The data comes from the resources of the research and analytical agency Hiper-Com Poland and the analytical-research platform UCE RESEARCH as well as the BLIX Group. The analysis shows the average price value of butter, recorded month by month and year by year. In this specific installment, the results were compared from the beginning of January to mid-November 2024 and the corresponding period in 2023. For the purpose of the report, a total of more than 3.1 thousand promotions for the product were checked, as well as 4.6 thousand retail prices (regular and promotional). The study included all discount stores, hypermarkets, supermarkets, convenience store networks, and cash & carry stores on the market.
Source: https://managerplus.pl/ceny-masla-ostro-ida-w-gore-wzrosty-sa-ponad-30-proc-rdr-46893
