Rising input costs responsible for high UK food inflation - CMA

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Rising input costs responsible for high UK food inflation - CMA

UK - The United Kingdom's Competition and Markets Authority (CMA) has reiterated concerns about the sustained high levels of food price inflation, which remained at 10.1% in October. Sarah Cardell, a representative from the CMA, emphasized that this persistent inflation is largely attributable to the soaring costs of energy and fertiliser, which are essential for agricultural production.

The CMA has been closely monitoring the grocery sector following an analysis that began in July, focusing on retail competition and the pricing strategies of various products, including essentials like milk, baked beans, and baby formula. The study has revealed that, despite the financial pressures, brands have significantly increased their profit margins. However, this has led to a consumer shift towards more affordable own-label products, a trend that is evident across most categories except for the infant formula sector, where consumers have fewer alternatives.

Additionally, the CMA has identified a marked increase in unit profitability among branded suppliers, which has contributed to high food prices. Brand market shares and profits have seen a downturn due to a combination of increased costs and a shift in consumer buying habits towards cheaper options. This trend is further exacerbated by a decrease in sale volumes for branded manufacturers, which has been ongoing since last year.

Looking ahead, the CMA is focusing on the use of loyalty cards by supermarkets for exclusive price promotions, a practice that will be reviewed in January next year. This strategy could influence consumer behavior and potentially disrupt fair market competition, as branded suppliers experience variable market shares while their profitability grows.

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