Ever wondered why Tesco profits surge?

Group profit……Up 27.3% on Revenue of £28.3 Billion.

This return to profitability, only three years after the accounting scandal which cost it Billions to put right, is truly amazing.

However, if you take one single item, showing how Tesco actually manipulates their marketing so that they appear to be staying the same, on prices of course; but in reality, there is a vast difference.

tescoorangeThe photo shown speaks volumes about volume, as it were. Note the Tesco squeezed orange juice pack, holding a standard 1,75 litres of orange juice. It is sold at £1.99, which is fair value for a guaranteed freshly squeezed juice carton. Beside it stands a Tropicana pack of juice, marketed and sold as the standard 1.6 litre carton of fresh juice, normally sold at £3.50.

But the clever thing is that the Tropicana pack used to be sized at 1.75 litres, the same as the Tesco pack, and it was sold at £3.50 per pack.

So the Tropicana juice, which was 1.75 litres, is now sold as 1.6 litres, but for the same price as the former 1.75 litres pack. So just cast your minds over the quantity of premium Tropicana juice packs, and you may form just an estimate of, say 2,000,000 packs for the year. Then work out the actual saving from selling all that juice in a smaller container at the same price; which by my old style maths works out at £296,000.00.

Do that again for loads of items which everybody shops for, and you get 27.3% rise in profits.

Fair enough, no-one forces the shopper to buy the premium brand, but it is the market leader.

6 comments for “Ever wondered why Tesco profits surge?

  1. Woody
    October 6, 2017 at 2:52 pm

    Your calculation misses one critical component – the cost price to Tesco.

  2. John in cheshire
    October 6, 2017 at 7:15 pm

    Shrinkflation had been going on for a long time, by all the supermarkets, even by Aldi.

  3. Errol
    October 6, 2017 at 8:41 pm

    No idea what you’re getting at. Companies reduce the size of items continually to increase profits. Usually as a response to taxation and government policy – all of which do nothing but hike the cost of goods.

    I assume you’re suggesting that the higher profit margin on the good is the cause of the profit increase. Fair enough, but why then has every supermarket chain not made such % increased profits?

  4. Mudplugger
    October 7, 2017 at 9:41 am

    The key issue is choice: no-one’s forcing you to buy Tropicana Orange Juice, in fact no-one’s forcing you to buy any orange juice, whatever its brand origin – you don’t need processed orange juice to live, so it’s an entirely optional purchase.

    If you are not happy with the orange juice value-equation (price/volume/quality), then don’t buy it. If you are prepared to accept the deal of offer, stop whinging about it. Your choice.

  5. Stonyground
    October 7, 2017 at 6:01 pm

    I don’t think that Mike is complaining, I think that he is just making an observation. Personally I never buy branded products if there is a supermarket’s own brand available. It is usually about half the price and the quality is the same, or sometimes better. If Tesco can make a mint out of mugs who don’t know any better then good luck to them.

  6. auralay
    October 7, 2017 at 8:36 pm

    Sainsbury’s little scam (one of)

    Sainsbury’s Wild Pacific red salmon, 212g. £2.50
    Sainsbury’s Wild Pacific red salmon, NO ADDED SALT. 212g. £2.65.

    An extra 6% for not adding salt?

    I have a photo if anyone can tell me how to post it here.

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