From the Daily Telegraph
Supermarket
sandwich prices to jump
Sainsbury's and M&S supplier
warns bigger wage bill will drive up costs
Supermarket sandwiches are to become more
expensive as a looming rise in minimum wage puts up the cost of making
them.
Greencore, the UK’s biggest sandwich maker, said on
Thursday it would need to increase its prices when the National Living Wage
increases by £1 an hour in April.
The company produces 779 million sandwiches a year
and supplies most of the major supermarkets, including Sainsbury’s, Marks &
Spencer and Co-op.
Greencore chief executive Dalton Philips said:
“We’re hugely supportive [of wages rising], because if you can get wages moving
again, that’s going to ultimately put more money in people’s pockets. But the
reality is, on our wage bill,
it is a material increase.”
The National Living Wage will rise to £11.44 from
April in the biggest cash increase since the minimum wage was created in 1998.
Mr Philips said the increase will add around £30m to Greencore’s costs.
He said: “Obviously you do everything you can to
mitigate it by operational efficiencies and all the good work that all
companies try. But at the end of the day, it’s £30m, and you can’t mitigate it
all. And some of that does seep into price rises.”
Greencore employs around 13,600 people across 16
factories in the UK. As well as making hundreds of millions of sandwiches, it
makes around 25 million packs of sushi and 132 million chilled ready meals
every year.
Supermarkets ultimately set the price of the goods
they sell. However, a rise in what Greencore charges may well be passed on to
shoppers.
The likely increase threatens to reverse the
recent slide in food inflation. Grocery inflation dropped from 7.7pc to 6.7pc
last month, according to the British Retail Consortium.
Industry bosses have warned that they face
significant increases in costs in the months ahead that threaten to push up
prices. As well as the rise in minimum wage, business rates are also set to
climb and new border checks will add to costs.
Helen Dickinson, chief executive of the BRC, said
earlier this month: “Government should think twice before imposing new costs on
retail businesses that would not only hold back vital investment in local
communities, but also push up prices for struggling households.”
Mr Philips said despite the cost-of-living crisis,
shoppers were increasingly opting for pricier, premium sandwiches.
This article appeared in the Daily Telegraph in January 2024. I printed the text above out and asked my class to read
it. I wanted them to decide what they
wanted to explore, and to highlight anything that might be helpful to them.
We then decided we were interested in the following:
2) How many sandwiches does a worker make each hour?
3) How much will the cost of a sandwich rise by because of the increase in minimum wage?
We deleted the irrelevant information and ended up with
this:
Supermarket
sandwich prices to jump
Sainsbury's and M&S supplier
warns bigger wage bill will drive up costs
The National Living Wage increases by £1 an hour in
April and will rise to £11.44. Mr Philips said the increase will add around
£30m to Greencore’s costs.
Greencore employs around 13,600 people across 16 factories in the UK. As well as making 779 million sandwiches, it makes around 25 million packs of sushi and 132 million chilled ready meals every year
1) Is it really an increase in costs of £30 million?
The students and I used a number of different assumptions/methods
to work this out.
I did this: Assume 37.5 hours per week (max working time), over 48 weeks in the year (not bank holidays, and then some other holiday given too), which gives 1800 hours per employee per year.
Then multiply that by 13,600 employees to give 24,480,000. This is about 24.5 million hours worked per
year, so the increase in salaries would be about £24.5 million.
Some students took 9 to 5 as workday and got 40 hours per
week. They assumed a 50 week year, and
got 2000 hours, giving £27 million.
We talked briefly about on-costs, where employers also pay some national insurance. We decided that the £30 million figure in the article was OK.
2) How many sandwiches does a worker make each hour?
Maybe a “chilled ready meal” is bigger than a sandwich, so
perhaps we should count that as being equivalent to 2 sandwiches in terms of
making-time? 779m sandwiches + 25 sushi + 132 x 2
ready-meals = 1 billion products. Divide
1 bn by 13600 workers and then by 1800 hours per week to get 40 products per
hour.
If you don’t double up for the ready meals you get 936 million meals and the results are similar.
3) How much will the cost of a sandwich rise by because of the increase in minimum wage?
An extra £1 of salary per hour means that each one will need
to rise in price by … 100 pence divided by 40 = 2½ pence !
Alternatively, some students divided the increase of £30
million by 936 million to get 3.2 pence.
We have therefore worked out that the price should rise by
about 3 pence per sandwich. Given that
they cost several quid, that’s about a 1% rise in price. Hardly the ‘jump’ that the headline suggests!
What is the rest of the price of a sandwich made up of? They had ideas like:
- The ingredients
- Equipment, maintenance, factory cleanliness, safety/hygiene certificates
- Staff training (eg hygiene)
- Transporting the sandwiches to shops
- The shop has to pay its staff, to advertise, to pay rent, to heat/light/clean the shop
- Profits (for the sandwich company and the shop)
- Etc…
