Instant coffee has been a popular pandemic item, with people working from home and budget-conscious households stocking up on the powdered or granular brew.
But even though the product is regularly featured in supermarket sales promotions, an analysis of Woolworths’ prices shows that shoppers might not necessarily be getting a cut-price deal.
One of the best-known products, Nescafé Gold, has regularly appeared in the supermarket giant’s “prices dropped” campaign, promoted as a way for customers to shop more affordably during a period of high living costs.
An 18-month pricing analysis shows Woolworths has more than once briefly offered the product at a high price before discounting it and advertising it as a promotional item.
“They are playing with people – it’s such a lack of respect,” said Rachel King, a Newcastle resident who started tracking the Nescafé product after noticing the sharp price swings.
“We all need supermarket products, so just don’t screw around with customers.”
King started documenting the pricing changes, which Guardian Australia has verified through supermarket catalogues, at the end of 2021, around the same time as inflation started to pick up.
During the next 18 months, the 180g Nescafé Gold could usually be bought for about $14 in the “prices dropped” promotion.
But every now and then the price was bumped up to $20 or even $22 for a very brief period, before being reduced and promoted as on sale.
In early 2023, in quick succession, the price went from $14 to $22 and then discounted to $15, with the latter advertised as a cost saving, even though it was above the price charged just weeks earlier.
A Woolworths spokesperson said the company tried to be transparent with product prices.
“We endeavour to be very clear in our pricing so that customers can see the benefit of the shelf price reductions in our seasonal ‘prices dropped’ program whether that’s through our catalogue, in store or online,” the spokesperson said.
Woolworths is Australia’s biggest supermarket chain, slightly ahead of rival Coles and controlling more than a third of the market, according to research house Morningstar.
Combined, the two big supermarket chains control about two-thirds of the market, although that rises to 90% in some locations where there is limited competition.
The dominance of the major chains has come under recent scrutiny amid evidence they have used the pandemic and subsequent cost-of-living crisis to not only sell more goods, but also increase their profit from sales. Critics say this is evidence of inflationary profiteering.
But Woolworths and Coles have argued that their promotional items show they are providing value to customers and protecting them from some price hikes.
A Woolworths spokesperson said the promotional program was significantly funded by suppliers.
“For each product, that funding is negotiated and agreed between Woolworths and the relevant supplier – and, if agreed, Woolworths then sells that product at a lower retail price, as part of the ‘prices dropped’ program,” the spokesperson said.
The spokesperson said the Nescafé product was removed from the “prices dropped” category after it received a cost price increase from the supplier, Nestlé.
“Subsequently, though, in each case, the supplier and Woolworths agreed new funding arrangements, to facilitate the product going back on to the ‘prices dropped’ program at a reduced price.”
A spokesperson for Nestlé, the owner of Nescafé, said while it had increased some supplier prices over the past 18 months, it didn’t control the price that supermarkets charge.
“Retailers set the price at which they resell our products to consumers, at their discretion,” the spokesperson said.
The ability of supermarkets to generate such high returns during a cost-of-living crisis has prompted calls to reform the sector and increase competition. A government-ordered inquiry could also be used to probe supermarket pricing.
Australian supermarkets have been strong stock market performers throughout the pandemic, buoyed initially by a surge in panic-buying and then an increase in profit margins during the inflationary period.
The cost of food is a major expense for households and contributor to inflation, accounting for 17% of the basket of goods and services that are typical expenses for a metropolitan household, as tracked by the Australian Bureau of Statistics.
Jana Bowden, a professor of marketing at Macquarie University, said consumers were particularly attracted to deals when their budgets were under pressure.
“Consumers are in fact more deal-prone and more reactive to promotional cues when their wallets are crunched regardless of whether they are genuine deals or not,” said Bowden.
She said promotions can trigger a “brief but irresistible chemical high via a dopamine hit” to the brain, in what is known as a “shopper’s high”.
