UNIT PRICING

Unit pricing involves showing the price of goods per specified unit of measure e.g. per kg or litre

WHAT WE WANT

1. A compulsory, uniform, national, high quality unit pricing system for pre-packaged grocery items, particularly those sold in supermarkets.

2. A publicly funded education campaign to coincide with the introduction of the system.

3. Effective monitoring and enforcement of compliance

 

BACKGROUND

For several years, the Australian consumer movement has advocated unsuccessfully for the provision of unit price information for a wider range of goods. (Unit pricing involves showing the price per specified unit of measure, in addition to the total price.)

Currently, retailers are required to provide unit price information only for unpackaged goods (for example meat and fish) and for a very limited range of pre-packaged foods in non-rigid containers. As a result, the unit price is not provided for most pre-packaged foods (for example cartons of breakfast cereals) and all other pre-packaged grocery products (for example boxes of washing powder).

To date, most Australian retailers have been unwilling to provide more unit price information voluntarily and have opposed compulsory provision, for which governments have failed to enact legislation. (The supermarket chain Aldi has however voluntarily provided unit price information at its stores since November 2007.)

However, in other countries retailers and governments have recognised the benefits of unit pricing and facilitated its provision.  For example, in each of the 27 nations which make up the European Union all large stores must now provide unit price information for most of the goods they sell. Unit pricing is also compulsory in several states of the USA and provided voluntarily in all others.

CFA believes that the provision and use of more unit price information can deliver enormous benefits to Australian consumers and the economy at minimal additional cost. The potential benefits include:

• increased price transparency;
• easier comparison of the enormous and rapidly increasing variety of sizes of pre-packaged products;
• easier comparison of prices of similar or alternative products (which could also generate health benefits, if the information helped consumers to increase consumption of healthier products, and environmental benefits if consumption of less packaged products increased);
• reduced shopping time and stress for consumers;
• significant reductions in the cost of many goods for consumers prepared to change purchasing patterns;
• reduced difficulties for disadvantaged groups such as Indigenous, non-English speaking background and people with intellectual disabilities;
• more direct feedback of consumer preferences to manufacturers and retailers;
• increased competition between manufacturers and retailers; and
• reduced price inflation.

A compulsory scheme is required to ensure:

• maximation of benefits
• rapid adoption
• uniformity of units of measure used and presentation of information
• provision of appropriate consumer education programs
• appropriate monitoring and enforcement of compliance.

A national compulsory scheme can be provided via proposed new federal legislation to replace existing state and territory trade measurement legislation. The legislative requirements would be similar to those which now require the display of price/kg, as well as the total price and weight, of certain in-store unpackaged and pre-packaged foods in non-rigid containers. The provision of unit price information for other products/package types is a logical extension of this accepted principle and practice. A compulsory scheme could also be provided via the industry code of conduct provisions of the Trade Practices Act.

A well-organised and publicised education program for consumers should accompany the introduction of more unit pricing. This is required to facilitate awareness and use of the information provided. The need for such a program has been identified by UK research.

Surveys of consumers in the USA and Europe have shown that high proportions of consumers (50 to 70%) use unit price information frequently or occasionally.  Knowledge and use appear to be greatly influenced by many factors including the quality of the system provided, especially how well the information is displayed and the units of measurements used.  This often varies greatly between and even within jurisdictions.  Unit pricing can be the catalyst for major changes in consumer buying patterns, for example in Finland after its introduction 42 percent of consumers changed brand and 33 percent changed packet size.

In the UK, prior to the introduction of the mandatory provision of unit price information, a survey of 1000 consumers in stores providing this information showed that 61% had used it at some time and 51% used it regularly. The study also demonstrated that only 7% of consumers could accurately calculate the lowest unit price, when provided only with total price and the weight, for 6 different sizes of baked beans.  But when provided with unit price information 78% could identify the cheapest option. Providing unit price information also reduced greatly the average time needed to identify the cheapest option, from 58 seconds to only 18 seconds.

Of course, price per unit measure is only one of several considerations, albeit often a vitally important one, that consumers may take into account when selecting goods. However, the provision of such information is basic and vitally important for efficient and effective consumer decision-making.

Recent research at a Brisbane supermarket by the Queensland Consumers Association showed that for 25 pre-packed grocery items in the CHOICE shopping basket, using unit price information to buy the lowest unit priced brands/sizes lowered the cost of the same amount of goods from $94 to $49, a massive saving of $45 or 47 per cent.

Details of: the goods to be included in an expanded unit pricing system; the measures appropriate for various goods; labeling requirements, and the types and sizes of stores to be included, would be developed in consultation with interested parties. However, to maximise consumer use and benefits for consumers and the economy a unit pricing system should meet the following requirements:

1. Unit prices must be displayed prominently and clearly on all in store price signs and be located in close proximity to the product - fonts used must be which ever is the greatest of either a specified percentage of that used to show the selling price or a specified minimum size.

2. Measurements used to indicate unit price must be uniform and easily understood and useable by consumers (applies to products sold by weight, volume etc and those sold by count/number/item)

3. The same unit of measure must be used for all sizes of the same product

4. The unit price must be shown even if the unit price and the selling price are identical - i.e. when the package is the same size as the basic unit of measurement

5. Unit prices must be provided for the maximum possible number of grocery products, with minimum exemptions

6. Unit prices must be shown for products sold on “special” or other “promotions” as well as at regular prices

7. Unit prices must be shown clearly on printed advertisements showing the price of a product sold by measurement

8. Unit prices must be provided for groceries ordered on the internet as well as those purchased in-store

9. Minimum standards must be set and monitored re. accuracy, measurement units used, etc

10. Initial and on-going consumer education programs must be undertaken 

A report on unit pricing in the USA and Europe prepared by Ian Jarratt, a member of the Queensland Consumers Association, is available at www.churchilltrust.com.au under the business section.