Credit: Geograph/Thomas Nugent

Waitrose profits hit as shoppers lap up free tea

The supermarket may be pouring away profits with every free cup of tea and coffee, but its giveaway strategy is bringing in the sales.

by Adam Gale
Last Updated: 06 Nov 2014

There may be no such thing as a free lunch, but for British shoppers the same cannot be said of tea and coffee. Waitrose gives away a million cups of the nation’s favourite hot beverages every week, and it looks like it’s finally starting to hit its bottom line.

‘We are in a period of unprecedented investment and this will have an impact on the profit we report next month,’ said the supermarket’s managing director Mark Price in a statement alongside its weekly sales figures.

The investment in question is in brand loyalty, and it’s an odd one. Rarely has a business pursued such an aggressively generous strategy to win over customers. Waitrose, which is owned by John Lewis (which is in turn owned by a trust on behalf of its employees), not only gives away free daily drinks to myWaitrose loyalty card holders, even if they don’t make a purchase, but also throws in free newspapers if they spend more than £5.

As if that wasn’t ruthlessly altruistic enough, the supermarket has also cut milk and butter prices without reducing the amount it pays to its ‘dedicated group of British dairy farmers’.

All this extreme loss-leading isn’t for nothing, of course. It’s a strategy to keep Waitrose sitting pretty at the top-end of the supermarket pile, as the dreaded discounters Aldi (which is about to overtake Waitrose as the UK's sixth-largest supermarket) and Lidl steal away value conscious customers from Tesco and Morrisons.

And while giving products away for nothing might seem like taking one-upmanship a little too far, the supermarket believes it serves a bigger purpose. According to Price, sales increased by roughly 4.5% in the first half of this year.

Whether this will be enough to help Waitrose resist the rapid expansion of the discounters and the fightback of the bigger supermarkets remains to be seen, but for now at least it’s a win-win for caffeine-loving consumers.

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