Will the introduction of The Warehouse's $5 own-brand butter have an impact on prices?

The retailer, which moved into the grocery market in 2021, is expanding its own brand Market Kitchen range to include butter, for $5 a block.

Chief product officer Tania Benyon said it was a response to strong customer demand.

“We’re working with local Kiwi suppliers to grow our Market Kitchen range, and establish it as a high quality, great value offering for our customers for all the basics they need.”

The Warehouse previously sold a 500g block of Tararua butter for $4, which then rose to $4.90. But at Countdown, New World and Pak ‘n Save, the brand was often more than $7.

Supermarkets’ own home brand prices weren’t far off The Warehouse one.

According to Stuff’s grocery price tracker, a 500g block of Pam’s butter at a Pak ‘n Save in Auckland, Wellington and Christchurch this month was between $4.89 and $5.39, at New World it was between $5.39 and $5.89 and at Countdown its home brand block was between $5.30 and $5.90.

The $4.89 home brand butter at Pak’n Save Kilbirnie was the cheapest since the data started being collected last year.

Westpac agriculture economist Nathan Penny said The Warehouse had progressively been expanding its grocery offering over recent years.

“One way it can do this is to offer specials or even use loss-leaders on some staples such as butter.

“This is a common retail tactic to get shoppers in the door and then buying other more profitable products as well as the butter they came for in the first instance,” he said.

Penny expected the introduction of Market Kitchen would do little to ease prices.

Commodity prices for butter from the Global Dairy Trade auctions were at around their five-year average levels, sitting at US$5068 a metric tonne, up 2.2% since the last price index at the beginning of May.

“At this point, we expect them to lift by around 20% over the rest of the year as Chinese dairy demand gathers momentum and as global dairy supply remains soft,” Penny said.

“That would also imply a lift in the retail price although not to the same degree from late 2023 and into 2024.”

Stats NZ data shows in May 2013 the average price the cheapest 500g block of salted butter was just $3.77. This peaked at $5.79 in January 2019. It dropped under $5 in March 2021 before rising back up to the remainder of the year and 2022.

Market Kitchen launched in 2021 with pantry staples and has grown to offer more than 60 products. The Warehouse recently began offering fresh produce in selected stores.

The butter was the first time Market Kitchen had launched its own dairy product and will start landing in stores this week, with volumes increasing over the coming weeks.