Consumers' perception of profits in the food & grocery industry
In May 2001 IGD conducted research aiming to uncover what consumers think about profits made by the UK food and grocery industry.
This research was part of IGD’s programme to track consumers’ attitudes to the food industry and built upon earlier IGD research from 1999.
How much profit do consumers think is made in the food and grocery industry?
The consumers participating in the research in 2001 found it very difficult to estimate profits in the food industry and tended to consider the level of profits to be far higher than reality.
For every £1 spent on food they considered 84p to be profit. The distribution of profits is shown below.
The opinions of consumers seem to have remained fairly constant over the last two years as the chart below highlights.
In 1999 and 2001 consumers perceived profits to be far higher than the level actually attained in the food industry.
This suggests that consumers have an inaccurate picture of the real situation. For example, the average operating profit for three leading UK retailers (Tesco, Sainsbury’s and Safeway) was 4.8% in 2000 (4.8p in £1) and the average profit for the top 150 leading food manufacturers was 6.7% in 2000. Figures for farmers are far harder to gauge, but certainly do not achieve a sector average of 14% profit.
Consumers do not understand how profits are made and used
Despite the lack of understanding, discussions within focus groups revealed some very strong and generally negative emotions about profits.
Many consumers had difficulty in understanding how profits made in the food industry could actually benefit them as the end-consumer, for example through reinvestment in new product ranges or store refurbishment.
The inaccurate perceptions of profits can affect not only consumers’ judgements about how profits were used, but also more general evaluations about the price and value of food in the UK.
i The research in 2001 and 1999 was based on a representative sample of 1,000 UK adults, aged 15 years and over.
ii Average operating profit for UK food and drink manufacturers as calculated by OC&C Strategy Consultants for the 2001 Corporate Index.
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