Britain’s competition regulator, the Competition and Markets Authority (CMA), has cleared the country’s largest supermarkets of profiteering from high food costs. However, the CMA has stated that some retailers are not doing enough to allow customers to compare product prices. The CMA’s investigation found that operating profits in the grocery sector fell by 41.5% in the past year, while average operating margins narrowed from 3.2% to 1.8% as retailers’ costs rose faster than revenues. This indicates that costs have not been fully passed on to consumers. The CMA also highlighted that some retailers do not display prices as clearly as they could, making it difficult for shoppers to determine value. For example, some tea bags are priced per 100 grams for some products but per tea bag for others. The CMA has warned these retailers to make the necessary changes or face enforcement action.
The CMA’s investigation comes after food prices soared and supermarkets faced accusations of profiteering. However, the grocers have stated that they are passing on any easing of price pressures to consumers wherever possible. Recent price cuts have included pasta, cooking oils, toilet paper, and dairy products. Representatives for Tesco, Sainsbury, Asda, and Morrisons have highlighted that their profits have declined in the past year as they have tried to minimize price increases. Tesco’s chief executive, Ken Murphy, warned last month that grocery prices are unlikely to return to pre-Ukraine invasion levels.
The CMA’s investigation also found missing or incorrectly calculated unit price information in stores and online. For example, a 250ml hand wash was priced at £1.19 but unit priced at £476 per 100ml. The CMA also highlighted that unit price information was difficult to read, with text on labels being too small. Some retailers also do not display any unit prices for products on promotion. Sarah Cardell, the chief executive of the CMA, emphasized the importance of ensuring that people find the best prices easily, particularly as many are struggling to feed their families. The CMA will be conducting further work to examine competition and prices in 10 specific categories, including baby formula, milk, bread, pet food, poultry, mayonnaise, baked beans, chilled desserts, ready meals, and lemonade.
Recent data from Kantar showed that British grocery inflation eased for a fourth consecutive month in the four weeks to July 9, falling 1.6 percentage points to 14.9%. Helen Dickinson, the chief executive of the British Retail Consortium, stated that the CMA’s report confirms the efficiency of the UK grocery market. She highlighted that fierce competition between British supermarkets has been a key reason why the UK continues to deliver among the cheapest groceries in Europe.
Meanwhile, Bank of America analysts have stated that Britain’s inflation problem has eased but remains entrenched. Official figures showed that the UK rate of inflation eased to below 8% in June but remained significantly above the 5.5% rate in the eurozone. The bank forecasts core inflation to remain at 6% at year-end, which it considers a highly problematic outlook.