Plastic Bags, Social Change and Competition

Tesco and Morrisons have stopped providing plastic bags for 5p – instead, the cheapest bag you can buy costs 10p (and is slightly higher quality, intended for reuse). Asda has announced it intends to do so at the end of the year. Sainbury’s still offers 5p bags (though they are also higher quality and intended for reuse). M&S and Waitrose (which have a noticeably smaller market share than the big four) still offer 5p bags.

This is a fascinating development. No major supermarket charged for bags before the government introduced the compulsory levy, yet it has taken less than three years for roughly 70% of the groceries market to voluntarily increase the price to 10p. It’s unclear whether the profits from the more expensive bags will go to good causes (my understanding is that supermarkets may not keep profits from 5p bags, but may from more expensive ones), but Tesco at least is claiming that it will.

The calculation is clearly that the better reputation from being seen to reduce plastic use is worth the added cost to consumers (at least, those who forget to bring bags). Of course, a price-conscious shopper is hardly going to trade upwards to M&S or Waitrose, but they could move to Asda or Morrisons – and those stores, at least, clearly don’t think that’s happening. On the face of it, this is quite surprising, especially for an item where the cost is so visible, and it’s also surprising that it’s the more mainstream supermarkets, with more price-sensitive shoppers, leading the way. Had M&S and Waitrose adopted the 10p bag policy first, that would have been less surprising.

Do people really care about reducing plastic so much? Are they actually much less price-sensitive than we assume (it does, perhaps, seem a bit petty to switch supermarkets on this basis)? Or is it simply that competition is so intense that any extra money paid for bags is simply recycled into a slightly reduced price for the overall shop (though this theory doesn’t hold up if the money is given to good causes)?

The intriguing thing is that, whatever the explanation, there was nothing to stop supermarkets charging 10p for bags before 2015 – but none did. Either
supermarkets, with all their customer research, simply misread the market before that time or, alternatively, social norms have changed so much in three years that consumers are now actively happy to pay above the government minimum for bags when they previously weren’t. Either one would represent a rather surprising result.