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Food Fight: The Discount Boom transcript

Updated Thursday, 18th December 2008

Transcript of the BBC TWO Credit Crash Britain programme.

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Greg Wallace Copyrighted  image Icon Copyright: Production team

Greg Wallace

The global financial crisis has shaken our economy to its foundations, and all across Britain we’re feeling the impact. Bills are rising fast, jobs are disappearing and house prices are falling – so how did we get into this mess.

In the fourth part of our series on credit crash Britain with household bills going through the roof ….I’ll be looking at how we’ve all got less money to spend.

Food prices have risen dramatically over the last 12 months putting a strain on all our wallets.

So now millions of us are flocking to the Discount supermarkets.

Richard Perks

People think of them as small operation but that is not the case you are talking about a 48 billion euro animal.

Greg Wallace

But just who are the Discounters? And what’s behind their low prices?

Tonight they open their doors and reveal their trade secrets.

 

Paul Foley

I can absolutely guarantee you 20% savings if you do a full shop its more like 30%.

Greg Wallace

We go behind the scenes at Tesco as they fight back with a new discount range of their own.

Richard Brasher

You have to be a bit more chameleon like as the economy changes and customers needs change you have to change with them.

 

Greg Wallace

And can our group of tasters spot the difference between a budget Christmas dinner and one twice the price?

 

Christmas lunch taster

I’d be really impressed if this was the budget option.

 

Greg Wallace

I’m Greg Wallace and usually find me judging food or selling fresh fruit and veg. but tonight I’m leaving all that behind I’m entering the world of the discount supermarket I’m going to be tasting the food and finding out why people are turning to them. Is it possible to be good and very cheap?

Its 8am in Clowne, Derbyshire and hundreds of bleary eyed locals are getting ready for a new shopping experience.

Discount supermarket chain Aldi is defying the economic downturn and opening its three hundred and eighty second store directly opposite rival Tesco.

Paul Foley

This is part of our strategy to open up in every town across the country. One a week is our programme at the moment and this is the latest one in Clowne.

Greg Wallace

Customers are queuing for a bargain and have been enticed to the store with free gifts inside Willy Wonker style envelopes.

Aldi Customer

I've won some sweets.

Greg Wallace

Aldi claim its cheap prices combined with shoppers feeling the pinch is driving up sales.

Paul Foley

I was at a store opening in Edinburgh and St Andrews last week; it was absolutely the same a lot of people really looking forward to what we can bring to help them solve their problems of the credit crunch.

Greg Wallace

They’ve got ambitious plans to steal customers from their rivals during these hard times.

 

Paul Foley

There is a potential for 1500 stores throughout the UK and the Republic of Ireland, we’re working hard to achieve the one a week programme we’re on course. I’m expecting more like this is the foreseeable future.

Greg Wallace

Aldi is not the only discount store doing well in the UK. Lidl is another chain with 498 stores. In the last six months sales at the discounters have gone up by 20% piling pressure on mainstream supermarkets.

Richard Perks

There’s a definitely a battle going on between the major supermarkets and the discounters. And it’s going to continue, it’s a fact of life. And these conditions are absolutely ideal for Aldi and Lidl, because people are worried about how much they’re spending and they’re going to get more so in the future.

Greg Wallace

With the discounters aggressively competing on price I want to find out if they can compete on taste – is cheap food any good? And how does it compare to rival produce?

I’ve got easy to eat items like biscuits chocolate and cheese and I want people t taste the two and see if they can really tell the difference.

First up its Budget versus Marks and Spencer.

Sir would you try some salami for me?

Testers

Yes of course I would.

Greg Wallace

Which do you prefer?

Tester

Probably the first one.

Greg Wallace

The first one is half the price of the second one, seriously, seriously.

Well absolutely no contest the discounters have won this hands down, amazing.

 

Next it’s Waitrose vs. budget

 

What I’ve got is two types of Gouda from different companies so please try this one for me.

Which did you prefer?

Tester

This one – ok

Greg Wallace

People weren’t that keen on the cheap cheese.

 

Is there a big difference?

Tester

I think that one is a bit more artificial and that one is nicer.

Taste more like plastic cheese

Greg Wallace

We’ve done many different tastings here and obviously there are varied taste buds but no one came out the absolute winner and the discount supermarkets certainly held their own.

It may be boom time for the discounters but the majority of retailers on the high street are suffering. Sales are falling and profits dwindling as more of us cut back our spending

For the first time in 25 years food sales in mainstream supermarkets have fallen.

And in the last six months profits at Marks and Spencer are down by 34%.

Jez Frampton

Theirs is a change in the way we feel about how rich we are there is a lot of pressure coming on us in terms of the pound in our pocket so our food is costing more, holidays are costing more everything seems to be costing more, that puts pressure on it forces you to make some decisions and some choices along the way.

Greg Wallace

So what’s been happening with food prices in the last twelve months?

An average shop at your local supermarket will now cost you much more.

Take bread, last year a white loaf would have costs 87p, now it’s £1.27 or take eggs, a dozen have leapt in price by 79p, a pack of butter is 30p more price, meat to is up to, chicken is a third more expensive..

Over the year the average shop is up by 12.7%.

As a result shoppers are trading down to value range foods.

Richard Perks

Last year you could say yes they’d be out there, they’d be buying Tesco finest, Sainsbury taste the difference, because they could afford that, they could have premium meals, they could have something really good quality.

But this year I think they’re beginning to feel the pinch, particularly in the middle mass market, those people with families and commitments there are feeling we have to trade down to the value and down to perhaps we should go out and look at the Aldi’s and Lidl’s of this world, because actually there is some good stuff there as well.

Greg Wallace

Back in Clowne Derbyshire the new Aldi store has opened to the public. Local Katie Hinchliffe wants to save money on her food bill. She lives with her husband and three children and their weekly shopping bill at Tesco is currently over one hundred pounds.

 

Katie Hinchliffe

Every time they seem to keep going up each week they go and I notice with the regular things that I buy have increased by 50% sometimes even more.

We shouldn’t be spending all that money a week on food we never used to it’s quite difficult we do have to try and cut back it’s hard.

Greg Wallace

But can the budget supermarkets save her money…I’ve challenged Katie to ditch Tesco for two weeks and switch to the new local Aldi store.

Katie Hinchliffe

I do spend a hundred pounds a week I never used to spend that much so if I could go back down to maybe 70 pound a week that would be brilliant if I could and buy the same things that I’m buying now that would be ideal.

I’d like to go to Aldi and get a full shop and save money but we will wait and see and try.

Greg Wallace

Before Katie tries shopping at Aldi I want to find out more about the business of the discounters. I’ve come to Atherstone in Warwickshire to meet the man in charge.

Can you give me some idea of how much cheaper you think you are across the board than your rivals?

Paul Foley

When you take price and quality when you spend 100 quid on your weekly shop on a family of four in a supermarket you will come in and do that same shop for 70 pounds in my store.

Greg Wallace

The Discount Supermarkets claim that they can charge less because of a number of factors in their business plan. Firstly they sell a Limited Range of products.

Aldi and Lidl only stock around 1000 lines compared to 30,000 at, say, Tesco.

Paul Foley

If you were to into a typical supermarket you would find maybe 7 or 8 different types of cornflakes, different brands, different pack sizes different levels of quality I just sell one that’s my offer there it is or 75 p if you want the choice of 7 or 8 you’ve got to be prepared pay for it take up that much space, you’ve got to clean it, you’ve got to build the store in the first place much bigger, you’ve got light it, heat it, maintain it etc and there is no way you can do that for the same price as I can do just one product

Greg Wallace

So we’re saying let’s take cornflakes for example, your saying if you stock six different types of cornflake, the consumer is still only going to buy one.

Paul Foley

But they are going to pay for the privilege of looking at all six.

Greg Wallace

Doesn’t it make you offer a bit dull?

Paul Foley

I don’t think it makes it dull because I’m claiming that’s the best cornflake on the market, I’m claiming it’s the best price and therefore it’s the best value deal.

Greg Wallace

But some experts think the discounters have a business plan that appeals to shoppers.

Jez Frampton

It’s very clever because what they’ve done is recognise that within a big superstore which might carry 20,000-40,000 different lines of products the average consumer shops for the same products each week.

This is the basis of the Aldi structure, you only really buy 500 or 600 different products and what we’re going to do is make sure that we have the best pickled onion, the best cheddar cheese according to what we know are the broad taste requirements are and we’ll give you that.

Greg Wallace

The second reason the Discounters give for keeping prices down is their basic store layout.

Cheap signs, no frills and the food isn't neatly stocked on shelves; instead, it goes straight from the warehouse onto the shop floor.

Over at Lidl they explain how this all saves money.

You got stuff here I but its just on a pallet

Martin Bailie

The reason on a pallets is naturally as you would expect we want to pass on savings from supplier to our customers and that what they want in the current climate.

So bringing that in what we class as a pallet line is that we can sell it in a pallet line, transport it in a pallet line, and pass the final savings on to our consumers. We want to pass on savings, pass the final savings onto consumers...

Greg Wallace

Finally the discount stores keep prices down by mainly stocking their own products.

To compete with well known brands, they’ve made all the packaging similar to market favorites and instantly recognizable.

If you look at some of the boxes here, they bare a striking resemblance to other well known brands.

Paul Foley

The consumer expects that that kind of product comes in that kind of pack of course I’m trying to attract the consumer to it.

It’s the product inside that will win the day or not either the family like it at the breakfast table or they don’t.

Joanna Blythman

In the German chains there is hardly anything Aldi or Lidl branded. There are all these brands which look like familiar household names but aren’t quite.

There is a Eurovision song contest feel about them, they are different and not all the same which is just a great relief. It suggests there are more differences, which people are quite into again after the monotony and homogeneity of the familiar supermarket own label.

Greg Wallace

The discounters also sell a collection of non –food items to keep the customers interested. They change every ten days and the range is bizarre to say the least.

But this business model is not new and has been tried and tested for a long time.

It all started when Brothers Karl and Theo Albrecht opened their first Aldi store in Essen Germany in 1953, the concept was simple, no advertising, no fresh produce, and small scale.

This efficient model worked and during the 1960’s their budget supermarkets expanded all over Germany. Today there are just over 4000 stores.

Lidl copied the idea and set up shop in 1973, they now also have over 4000 stores in Germany.

Then the discounters set their sights on global expansion, moving to 23 different countries. This included the UK and they opened their doors in Birmingham, in the early 90’s.

Mike Dawson

People think of them as very small operations and very peripheral in the UK…But that’s not the case. You are talking about a 48 billion euro animal so it’s really a 100lb gorilla in the marketing world, your talking about a very major retailer.

Greg Wallace

But how does the quality of the German arrivals compare to high end produce from our home grown supermarkets?

I’ve come to the Landau Hotel in London to put it to the test. We’ve taken a range of budget produce and we will make a direct comparison with a more expensive alternative.

With Christmas just around the corner I want to find out if the discounters can actually match the quality of the higher end premium range products of the other supermarkets.

I’m going to get a professional chef an old friend of mine Andrew Turner to cook up two identical lunches.

There’s a huge difference in price from the discounters, all of these ingredients comes to just about 23 pound and over here the best of the rest was 52 pound.

Is there a 30 pound difference here in these Christmas lunches?

Welcome good evening we’ve got Christmas lunch prepared

I’ve asked five teachers who don’t shop at the discounters to join me in my tasting challenge. But will they spot the difference, will it taste cheap?

Do you shop or have you shopped in any of the discount supermarkets?

Christmas lunch taster

No, I haven’t, never.

Greg Wallace

You say that quite firmly as if there is something wrong with the discounters?

Christmas lunch taster

No I suppose I’m a little bit of a food snob if I’m honest.

Greg Wallace

So is it possible to have a lunch discounted by that amount of money and still have a decent one?

Christmas lunch taster

I think so, I imagining that we will still be able to tell the difference in quality but I reckon it will still be good food.

Greg Wallace

Is there going to be a major difference or does it not matter?

Christmas lunch taster

I’m hoping for my bank balance that there isn’t that much of a difference and that cheap wins through.

Greg Wallace

Both of the meals will be prepared in exactly the same way. Our tasters won’t know which one is 30 cheaper, we’ll find out later how they get on.

 

Back in Clowne, Derbyshire the new Aldi is open for business. We’ve asked local Katie Hinchliffe to swap her regular supermarket Tesco for Aldi for two weeks.

Can she make savings and how will the discount experience compare to her regular shop?

Katie Hinchliffe

This is a bit strange getting them out of the boxes isn’t it?

They look the same don’t they shall we try them?

Greg Wallace

The non food stuff is an entertaining distraction.

Katie Hinchliffe

What do you reckon Chris coming to a supermarket and buying generators?

It’s certainly different buying power tools in supermarket but It’s interested Chris so if you can get him in that’s fine by me.

Greg Wallace

So, has Katie saved some money?

Katie Hinchliffe

If I’d bought it at Tesco it would have come to a hundred pounds, so I think I have paid less.

 

Greg Wallace

Her bill came to just over £80, saving the money she wanted. But will that be good enough to keep her shopping here? We’ll find out later…

For the last few years’ food sales in the UK have been dominated by Tesco, they have a massive 31.4 share, followed by Asda 17.1%, Sainsbury’s at 15% and Morrisons at 11.2%.

But Aldi and Lidl are snapping at their heals with a combined share of just under 6%. It’s a critical time.

Mike Dawson

Once hard discounters get in, you’ve got to kill them right from the beginning in terms of the price to stop them dead in their tracks; you must never let them get more than 5% of the market. It’s very difficult to stop them when they have a certain amount of size.

George MacDonald

If they carry on putting on the growth, their really serious player.

But even if they don’t, even if it moderates a bit, I think their here to stay. They’ve shown their colours, they’ve waved their flag, people know about them much more feel more familiar with them and feel more confident in them. I think they are certainly here to stay I don’t see their market share declining at all.

Greg Wallace

With the discounters growing, the big supermarkets are desperate to hang on to their customer base, and in the last few months they’ve launched huge advertising campaigns to try and keep customer numbers up, by bringing prices down.

Richard Perks

The promotions that we’ve seen from Tesco and Asda in particular over the last two to three weeks are really dramatically big ones, Tesco claiming to be Britain’s biggest discounter for instance, they are worried.

Greg Wallace

The discounters are now taking customers from every social group. Fifty-five percent of now us have visited a budget supermarket and we’re not just shopping for basics, you can now get posh or premium lines at cheap prices.

You can buy luxuries such as, quails, pheasant and you can even snap up a cut price lobster for £4.99.

Surely you shouldn’t be able to buy two lobsters claws for £4.99 how can you sell a whole lobster for £4.99 what is that big?

Aldi have also invested millions to help promote their luxury range, including teaming up with TV chef Phil Vickory

 

TV Advert

So what would you pay for that then £15 or £16 maybe?

Serves four people for less than a tenner from Aldi

I went to Aldi’s Head office to meet the man behind their push for premium foods.

What is happening to Aldi at the moment its going a bit posh isn’t it?

Tony Baines

We’re increasing our ranges of premium products increasing our offering in fresh foods; we have an upper tier range called specially selected.

We’re finding our customers like the more premium products and in the past it’s been known that Aldi are low price but what we’re managing to get the message over that we are high quality and that value for money proposition is striking a chord.

Greg Wallace

These new more up market products, are they aimed at existing shoppers or possible new shoppers?

Tony Bains

A bit of both I think, over half our shoppers are ABC 1, that’s the Waitrose, Sainsbury’s, Marks and Spencer shopper.

Greg Wallace

So how does the new line compare? I joined Tony to taste Aldi’s Christmas premium special.

Tony Bains

This is a three bird roast, an idea we picked up few years ago. Premium retailers like Marks and Spender and Waitrose were selling this product from a chill cabinet at a price we felt we could offer an equivalent at a lower price.

Greg Wallace

For those of you who don’t know a three bird roast is a chicken inside a duck inside a turkey.

It’s not the most flavoursome bird I’ve ever tasted, and I do like the stuffing. If that was put in front of me I would eat it all, I have to be fair I would eat It, I may not write notes about how wonderful it was, but I would eat it.

Industry commentators think it’s a clever move.

Joanna Blythman

They aren’t just like the downmarket British, your poor, you’ve got no money, and you’ve got to shop in a dump like this. They actually have things that are quite aspirational, so all that gives this feeling that it’s quite sophisticated.

I thought it was just a crummy shop for poor people.

Greg Wallace

Back at the Landau Hotel our panel of teachers are blind testing two Christmas meals, all the ingredients have been prepared in exactly the same way but the budget meal is 30 quid cheaper, almost half price.

Remember none of us know which one we’re tasting.

First up it’s the budget lunch

All looks good anyone got any real issues with the flavour of anything anyone really dislike anything?

Christmas Taster

Texture of the turkey meat I like it a bit tenderer than that little bit juicier than that it’s a bit dry for me.

Greg Wallace

So everyone was Ok, now you mention the turkey everyone has a problem with the turkey is that right?

Christmas Taster

I quite like the Turkey and the stuffing

Christmas Taster

The stuffing is lovely very nice really nice flavours

Greg Wallace

Did you have much of a problem tucking into that?

Christmas Taster

No it’s really delicious; I’d be really impressed if this was the budget option because everything on the plate is really tasty.

Greg Wallace

Now the more expensive- first impressions are that this is better

 

Christmas Taster

The sausage is tastier

Greg Wallace

Is there a massive difference in the two plates?

Christmas Taster

No to be honest there isn’t but I’m trying very hard to try and find the difference.

Christmas Taster

It’s going up and down at the moment, the sausages have swung it for me, but then the sprouts seem a bit harder.

Greg Wallace

If I remember you quite liked the last one

Christmas Taster

Both meals taste really nice to me, the sausages seem to have more herbs. I don’t know if that means it’s more expensive or cheaper.

Greg Wallace

Chefs in and he knows which is which, which one do you prefer A or B?

Christmas Taster

Quite close but I still think B is the better one.

Christmas Taster

Very close, just edging into B.

Christmas Taster

I’m finding it really difficult to decide. I’d say they are almost exactly the same but for me I actually preferred A

Greg Wallace

Toby – you ate more than anyone else…

Christmas Taster

A, after having the second one I prefer A.

 

Greg Wallace

Alexa my friend…

Christmas Taster

There are elements of both plates that I like, but I think its B because of the potatoes.

Greg Wallace

3 B’s 2A I’m going for B as well.

Andrew

B is the most expensive meal.

 

Greg Wallace

Ms ‘I would never shop at a discounter, I’m a food snob’ you actually picked the discounters.

 

Christmas Taster

I’m shocked; I’m shocked it’s incredible how much of a difference there is in price.

Greg Wallace

Do you think it’s safe to say the discounters put up a pretty good show here?

Christmas Taster

I thought there would be bigger difference particularly in the Turkey but I would definitely go to a discount supermarket now.

Greg Wallace

Its opinions like this that have got the big supermarkets worried and fighting back.

Now there is a store where you can discover discount store products at unbelievably low prices.

Tesco have invested millions in launching a new range of products which look quite similar to those found in an Aldi or Lidl.

I went to meet Tesco’s commercial director to find out more.

Are you launching this range because you’re a little bit concerned about the discounters?

Richard Brasher

No we’re launching this range because we’re concerned about shoppers and the truth is that shoppers in the current climate need to spend less.

Customers say they like shopping with brands, but they want some brands at slightly lower prices. We’ve developed this range of 400 products which is cheaper than the leading brands, still excellent quality and provides people with a choice we didn’t have before.

Greg Wallace

But the in store advertising directly targets Aldi as competition and like the discounters all the products have made up names.

Joanna Blythman

It’s a bit of a panic reaction, we’ve got to create the idea that we are cheap let’s put out some lines with obscure sounding brands that people will identify as cheap. The thing about Aldi and Lidl, absolutely everything every line in there stores are at substantially lower level prices than the conventional chains.

Greg Wallace

Why not just lower all the prices across the whole range?

Richard Brasher

We’ve lowered the prices in value lines, Tesco brands and we’ve introduced this new range. We have reduced many hundreds of prices in the store, what you have to know is that customers like buying these brands, they also like buying value, they also like buying finest and they also like buying standard.

Mike Dawson

Probably publically they are saying oh not a problem at all Aldi and Lidl are a peripheral phenomenon…but they very fact that they’ve bought their price fighting own labels into their own stores is absolute evidence that they feel they’ve got to sharpen up their prices at least for a specific consumer segment and they don’t want those customers to continue to run into Aldi’s and Lidl’s.

Greg Wallace

What the future here…More and more discount ranges?

Richard Brasher

No I think there a balance for customers they still like the premium brand they still like Kellogg’s cornflakes and they still like the Tesco brand and they still like value.

I think what you have to be is a bit more chameleon like you know as the economy changes as customers needs change you have to make sure that you evolve with them.

Greg Wallace

Back in Derbyshire how was the discount experience for Katie and her family?

Katie Hinchliffe

The first couple of weeks shopping at Aldi I found were great I loved it I didn’t really miss things and then after two weeks I stared to miss a few things and my husband started to miss a few things so you can’t get everything that you need.

Greg Wallace

So what did she finally decide was best for her…?

 

Katie Hinchliffe

I’ve decided to shop at Tesco in the end I think I can get a lot more value for money at Tesco. Tesco opened this new discount range so I went back there so I realised then I prefer this I can get everything I can take my time I’m not rushed about I think Tesco is better for me.

Greg Wallace

But some experts think that many shoppers will stick with the discounters.

Jez Frampton

Some of the shifts that people will make in their habits of what they are buying now because of economic times might translate into longer term habits certainly if you look at some of these guys they are predicting significant large numbers of stores that they are going to build over the next few years so I think you will see some quite big structural changes.

Greg Wallace

Back at the tastings, it’s time for the next course and final judgment. Will the quality of the discounter’s food win the approval of our entire panel?

 

Now there is a 50% difference in the price of these puddings

Can you tell a 50 per cent difference?

Christmas Taster

Yes you can I think so

Greg Wallace

Which one do you prefer sally

Christmas Taster

B definitely– I can’ eat A

Christmas Taster

I can’t eat A – no

Christmas Taster

B, more fruit.

Christmas Taster

B, definitely.

Greg Wallace

You’re going with the crowd this time…

Christmas Taster

A is poison, definitely B.

Christmas Taster

It’s the first time I’ve eaten Christmas pudding, I would say definitely B.

Greg Wallace

Andrew, to a man we all preferred B…

Andrew

Well the proof is in the pudding this time at ten pounds B was the most expensive against A which was 4.99

Greg Wallace

Have the discounters held their own in the Christmas stakes?

Christmas Taster

For the main course, the Turkey, they definitely did. But I wouldn’t, definitely wouldn’t buy the pudding.

Greg Wallace

If we do have tighten our belts this Christmas are the discounters a decent alternative

Christmas Taster

If its your turn to be doing the Christmas dinner one year and that’s what you get for 30 pound less for a meal then absolutely

Christmas Taster

Its quite reassuring that if your cooking for a big group at Christmas time you can go to the discount supermarkets and you won’t be losing out on the quality for the meal really

Greg Wallace

So is it thumbs up or thumbs down to the discounters?

Christmas Tasters

Thumbs up, thumbs up definitely.

 

This programme was first broadcast on Thursday 20th November 2008 on BBC TWO.

 

 

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