Wednesday, April 19, 2006
These Nescafes are in similarly coloured (although different-shaped) jars to Blend 43 and they taste much the same, if not better. They're available at Aldi and at small supermarkets in Chinatown.
The only disconcerting thing, as you unscrew the lid, are the words on the jar reading: "For sale in Indonesia only." At Aldi there is also an extra sign saying: "Whilst the blend is different to the locally sourced product we believe that the quality of the product is as good."
The company that makes Nescafe in Australia is upset. It has cut off supplies of products such as Milo to Aldi in retaliation. Which is odd because it is also the company that makes the product that it doesn't want Aldi putting on its shelves...
Nestle Australia and Nestle Indonesia (and also Nestle Brazil, from whom some of the coffee is sourced) are all subsidiaries of Nestle SA in Switzerland.
Nestle's official line is that it doesn't object to Aldi selling coffee from its Indonesian subsidiary, as such. (This sits oddly with the injunction it has printed on its jars of Indonesian coffee.)
It says what it does object to is the "confusion among consumers" that will result from an extra two varieties of Nescafe being on display on the supermarket shelves. This from a company that, when it can, displays about a dozen varieties of Nescafe on supermarket shelves.
In seeking approval from the Australian Competition and Consumer Commission to maintain its ban on supplying to Aldi, Nestle Australia says it has received a number of consumer complaints about the imported Nestle coffee.
It is reasonable to ask, what could possibly be wrong with imported Nestle coffee? Nestle Australia's answer - delivered, deadpan, in its letter to Aldi - is that the imported Nestle coffee "has not been blended specifically for Australian tastes".
It's the sort of explanation we are used to hearing from multinationals that want to stop the movement of their product between nations. Remember the fuss made by the record companies that managed for years to ban imports of records they had made for sale overseas? They said it was about piracy and copyright, nothing to do with price.
DVDs and computer games are region-coded, making it difficult to play those bought in the US in Australian machines. According to the film companies, it is done to ensure a money-saving staged release of films to cinemas. They say if the films are shown in the US first, the same copies can later be flown to projectors in other parts of the world.
But this doesn't explain why they also region-code classic and direct-to-DVD movies. Nor does it explain the ferocity with which software companies have used the courts in an attempt to stop Australians modifying their games machines so they can play games purchased overseas.
An economist would guess the surprising xenophobia of multinational corporations such as Nestle, Universal Music and Sony is really all about price - in particular, a practice known as "price discrimination".
In business it rarely makes sense to charge all of your customers the same price. If you set that price high and charge the most that an eager customer will bear, you will miss out on sales to a larger number of not-so-keen, or poor, customers.
If you set the price low in order to maximise your sales, you'll be giving away your product to the keen customers for much less than they would be prepared to pay for it.
Companies such as Nestle and Arnott's get around this by making two sets of products: one for people who are prepared to pay a lot, and the other for buyers who are canny or short of funds. They make the cheaper product less attractive in order to encourage buyers who can afford it to buy the higher-priced product and not the cheap one.
It is no accident that the packaging on International Roast coffee and Sunshine Biscuits is particularly ugly. International Roast is Nestle's second, cheaper brand (nothing on the packet tells you that - even the manufacturer's address is different). Arnott's makes Sunshine Biscuits, although it tries to keep that fact to itself.
The more you think about it, the more examples of price discrimination you find. Banks do it by offering discounted loans to new customers but not to the ones they've already got: new customers are looking for a good price; existing customers usually can't be bothered.
Cinemas do it by offering special prices to students - not because they have a love of education, but so they can move tickets they would not have been able to sell to these regular customers at a higher price.
Price discrimination works best when the people who are prepared to pay more don't get to find out about the cheaper price being offered to others.
In his book Retail Pricing Strategies and Market Power, Gordon Mills notes that in April 2000 a Sydney supermarket was selling special three-kilogram "budget bags" of apples for less than $3. The packaging made it hard to see what was inside. The apples were as good as those that were selling, loose, for up to $6 a kilogram. For the strategy to work, it was essential that the customers who were prepared to pay the high price could not find out.
That might be the real reason Nestle is so keen to discourage chains such as Aldi from displaying jars of its products at something approaching Indonesian prices: we might think we're being overcharged.