Coffee and ready meal price hikes cause UK food inflation to soar to new record high at supermarkets
While the British Retail Consortium-NielsenIQ figures showed a big rise in food prices, overall store inflation was kept in check by falling inflation at furniture and fashion shops
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Food price inflation continued to soar in April - although the overall rate of store price rises slowed slightly, new research has found.
According to the latest shop price inflation index from trade body the British Retail Consortium (BRC) and data analytics firm NielsenIQ, spring discounting at fashion and furniture retailers meant its headline figure fell to 8.8% in April compared to the same month last year - a 0.1 percentage point drop against the previous month.
But within these statistics, food prices once again posted a double-digit annual increase, with fresh food leading the way. The new data has come as the Liberal Democrats have called on the UK’s competition regulator to look into supermarket ‘profiteering’ - something retailers have insisted they are not doing.
His party pointed to the Office for National Statistics Consumer Prices Index (CPI), which found food inflation was running at 19.1% in March 2023 - a 45-year high. Meanwhile, a separate analysis by Kantar in the four weeks running up to mid-April found prices were up 17.3% on average - a marginal fall on its figure for March.
Inflation grew unexpectedly on the CPI - the UK’s official measure of price rises - for February 2023 after supermarket shortages hit the UK. Core inflation, which strips out volatile categories like food and energy costs, also remains stubbornly high. As a result, economists expect the Bank of England to raise interest rates later in May.
‘Ongoing cost pressures’ continue food inflation spike
The latest BRC-NielsenIQ shop price index findings published on Tuesday (2 May), show that overall food inflation soared to 15.7% for the period running between 1 to 7 April.
This 0.7 percentage point increase on the index’s March figure was largely driven by fresh food prices, which increased by 17.8% year-on-year - a new record high figure which was 0.8 percentage points above last month. Inflation on ambient products, like tinned goods and store-cupboard items, increased to 12.9%.
However, the headline rate of shop price rises sank from 8.9% to 8.8% month-on-month, as non-food stores posted a decline in inflation of 0.4 percentage points to 5.5%. It should be noted that falling inflation does not mean prices are going down, rather that they are increasing less rapidly than before.
Reacting to the latest findings, BRC CEO Helen Dickinson said: “Overall shop price inflation eased slightly in April due to heavy spring discounting in clothing, footwear, and furniture. However, food prices remained elevated given ongoing cost pressures throughout the supply chain.
“The knock-on effect from increased production and packaging costs meant that ready meals became more expensive and coffee prices were also up due to the high cost of coffee beans, as well as key producer nations exporting less. Meanwhile, the price of butter and vegetable oils started to come down as retailers passed on cost savings from further up the supply chain.”
She added that shoppers “should start to see food prices come down in the coming months’’, partly as a result of price reductions at wholesale level feeding through to shelf prices.
Mike Watkins, head of retailer and business insight at NielsenIQ, said that since the period covered by the latest index “more retailers have used loyalty schemes or money off promotions to help stimulate sales”. But he cautioned that inflation was “yet to peak” and that it was “difficult to second guess the strength of consumer confidence” at present.
His comments come as several retailer loyalty schemes are set to become less generous over the coming weeks. Boots Advantage and Tesco Clubcard are among the schemes set for big changes, while other supermarkets - like Sainsbury’s and Co-op - have altered theirs to become more generous.
Liberal Democrats call for supermarket ‘profiteering probe’
The latest BRC-NielsenIQ data comes as the Liberal Democrats have called for the UK competition watchdog to launch an inquiry into whether supermarkets have been “profiteering” during the cost of living crisis.
According to the party’s analysis of the ONS CPI for March 2023, a typical weekly food shop for a family has gone up by £12 over the past year - a figure which means households face an annual bill of more than £600. At the same time, the Lib Dems said supermarket chains have made billions of pounds in profit. For example, Tesco and Sainsbury’s - the UK’s top-two chains - had a combined profit of £1.5 billion in 2022, which amounts to a 50% year-on-year rise.
Now, party leader Sir Ed Davey wants the Competition and Markets Authority (CMA) to look into whether the country’s biggest retailers have put up shelf prices on goods by more than is necessary. Speaking as part of the ongoing local election campaign, Davey said the Lib Dems would reduce food prices and introduce tougher regulations if it was in government.
He said: “Under the Conservatives, the cost of the weekly shop is going through the roof while supermarkets are raking in eye-watering profits. Millions of families risk being overwhelmed by soaring food prices, coming on top of rising bills and housing costs. The Conservatives have no plan to deal with this cost-of-living crisis – instead they’re making it so much worse with all their chaos.
“British farmers will not see any extra income from these soaring food prices. These food prices benefit absolutely no one but the supermarket giants. We need to bring soaring food prices back under control and offer relief to families. That means cracking down on profiteering by food multinationals and the big supermarkets so customers get a fair deal.”
The BRC hit back at Davey’s comments, insisting that its members - including several leading UK supermarket chains - are “working hard to limit price rises for customers”. The trade body’s director of food and sustainability, Andrew Opie, said: “To help those impacted by the high cost of living, supermarkets have expanded their affordable food ranges, fixed the price of many essentials and offer support to vulnerable groups. When the cost pressures facing retailers do eventually ease, retail prices will follow fast as they fiercely compete for market share.”
Meanwhile, the Labour Party has said it would make several changes to help the country recover from “13 years of Tory economic failure”. Its shadow DEFRA Secretary Jim McMahon said: “By making our energy supply more secure, Labour would ease the pressure on families and businesses. By cutting business rates, strengthening supply chains and prioritising British food production, we can tackle these problems and build a better Britain."
The Conservatives have pledged to halve inflation this year in a bid to ease the cost of living crisis. During the food shortages in February 2023, Farming Minister Mark Spencer summoned supermarket chiefs to explain how they planned to “get shelves stocked again” and “avoid a repeat” of the crisis.
It comes after NationalWorld analysis of supermarket value ranges found their prices had soared by well above the rate of CPI food inflation over the last 12 months.