Fonterra launches smaller, more expensive butter

Wednesday, 20 December 2017

Valumetric butter is owned by Fonterra Brands and is more expensive in price per weight than any other standard butter on sale at Countdown.

Fonterra is using psychological pricing to trick shoppers into buying more expensive butter, which is already at record prices, an analyst says.

Valumetric 400g butter blocks recently went on sale at Countdown for $5.50 or $1.38 per 100g.

In comparison, a Fonterra-owned Anchor 500g block of butter is $6.20 or $1.24 per 100g, making the regular price of Anchor butter cheaper than Valumetric, even when it is on special.

It was the most expensive price for a standard block of butter per 100g at Countdown on Thursday.

* Prices fall sharply at latest global dairy auction, to lowest since October 2016**

Butter prices reached a record high in November. The average price of the cheapest 500g block of butter was $5.74, up from $5.67 in October 2017 and $3.88 in November 2016.

University of Auckland head of marketing Bodo Lang said: 'Research has shown consumers spend little time checking products in the supermarket, so many shoppers will buy the butter that is actually more expensive'.

'Having a multitude of pack sizes within each category in the supermarket makes it more difficult for consumers to make well informed decisions.

The brand name, cheaper packaging and unusual pack size made Valumetric look cheaper, he said.

University of Otago marketing expert Dr David Bishop said Fonterra were using psychological pricing to make the butter look like value for money.

'People have an idea in their mind – in marketing we call this a reference price – that a lump of butter costs $5.50 to $6.50. When they see a lump for $5, that appears to be quite a bargain, particularly if it has the word value on the pack somewhere.

'It would be interesting to see what the pack looks like; Is its front face the same size as a 500g pack?'

Bishop said shoppers should look at unit pricing to know the true price of a product.

'A product might be offered at $4.90 for 250g. With the best will in the world most people would not be able to work out whether a competing product for $4.25 weighing 220g was better or worse value.'

Fonterra Brands sales director Tim Carter said: 'We introduced this new Valumetric butter to give consumers more choice and compete with other 400g butter options already in the market'.

'The 400g Valumetric is clearly labelled and comes in smaller packaging.'

University of Otago marketing expert Dr Robert Hamlin said Fonterra could lose customers if they thought they were being ripped off.

'Generally, branded-food buying punters will tolerate being had by brands up to a point, after all, just exactly what is the difference between Anchor and Budget standardised milk bar a significant price gap?'

Paying more for a premium products such as Anchor was accepted by consumers because they thought they were buying a reliable product, he said.

'But exceeding that point can rapidly lead to serious problems that stem from a perceived breach of trust within the market.'

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