The UK Competition and Markets Authority (CMA) has reiterated concerns about persistently high food price inflation, which remained at 10.1% in October. Sarah Cardell, CMA representative, highlighted emphasized that this persistent inflation is largely due to the skyrocketing costs of energy and fertilizers, which are essential for agricultural production.
The CMA has been keeping a close eye on the grocery sector following an analysis that began in July, focusing on retail competition and the pricing strategies of different products, including staples such as milk, baked beans and baby formula. Research has revealed that, despite financial pressures, brands have significantly increased their profit margins. However, this has led to a consumer shift towards more affordable private label products, a trend evident across most categories except the infant formula sector, where Consumers have fewer alternatives.
Additionally, the CMA identified a significant increase in unit profits among branded suppliers, which has contributed to high food prices. Brand market share and profits have seen a decline due to a combination of rising costs and a shift in consumer buying habits towards cheaper options. This trend has been exacerbated by a decline in sales volumes for branded manufacturers, which has been ongoing since last year.
Going forward, the CMA is focusing on the use of supermarkets' loyalty cards for exclusive price promotions, a practice that will be reviewed in January next year. This strategy can influence consumer behavior and potentially disrupt fair market competition, as branded suppliers experience shifting market shares while their profits increase.
