There have been calls for the CMA to investigate supermarkets as food price inflation hits new highs. So why are supermarket bills still soaring?
Supermarkets should be investigated for profiteering, off the back of incredible price rises.
That’s according to the Liberal Democrats, which have urged the Competition and Markets Authority (CMA) to look into whether our big supermarkets are using their power to push food costs ever higher.
Ed Davey, leader of the party, pointed to the significant increase in profits enjoyed by some of the big supermarkets over the last year.
He gave the examples of Tesco and Sainsbury’s, who between them saw profits rise to £1.5 billion in 2022, a jump of 50% on the year before.
He added: “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.”
Tears at the till
Anyone who does their household's supermarket shop will have seen first-hand just how sharply the cost of our food has increased.
Indeed, it’s impossible to ignore the fact that the cost of our regular shopping is now far higher than it was just a year ago.
This is borne out by data from the Office for National Statistics (ONS).
It found that the average price of our food and non-alcoholic drinks has increased by 19.2% in the 12 months to March, the highest level seen in 45 years.
Of course, that’s just the average ‒ the hikes seen on individual products can be even more eye-wateringly painful.
A previous study by Which? found that the price of some items has rocketed by as much as 80%.
Why have prices risen so sharply?
The obvious question to ask here is why prices are rising so significantly.
Unfortunately, there’s no simple answer to that.
Certainly, the war in Ukraine has contributed, since it has had an impact on energy costs and the transporting of food.
Essentially, as the cost of making and moving our food has increased, so too have prices.
The conflict has also made it harder to access certain foodstuffs, which has driven up their price.
Russia and Ukraine are big exporters of products like wheat, barley, maize, rapeseed oil, sunflower seed and sunflower oil, while Russia is also a big producer of fertiliser.
The war has clearly had a big impact on the flow of those products, and the inevitable shortage has driven up prices.
There have been poor harvests for certain products, particularly fruit and vegetables.
With less stock available, supermarkets have had to battle to fill their shelves, while the additional cost of stocking up on these sought-after tomatoes, peppers and the like have then been passed onto shoppers.
Then there is the state of the pound. It’s fair to say that the value of our currency has dropped in recent years, and that has made it more costly to import food.
Tied in with all of this is Brexit, as well, which has thrown in certain additional costs and issues with getting food into the UK.
Throw all of those factors together and there is something of a perfect storm driving up the cost of our groceries.
However, it’s worth pointing out that wholesale food costs are actually falling now, according to market analysts.
What next for food prices?
It doesn’t look like there will be any resolution to the Ukraine war in the foreseeable future, which won’t help the cost of our supermarket shop drop.
Despite this, there is some optimism that food price inflation may have peaked.
Helen Dickinson, OBE, chief executive of the British Retail Consortium, has suggested that food prices will likely come down in the coming months as reduced wholesale prices start to filter through.
In the meantime, it’s crucial that we all find savings wherever possible on our supermarket spending.
It’s no coincidence that supermarkets are falling over themselves to launch new promotions at the moment, particularly focusing on lower prices for members of their loyalty schemes.
Similarly, plenty of shoppers are choosing to switch to a cheaper outlet in order to make a more meaningful saving on the cost of their food, with the likes of Aldi and Lidl seeing increases to their market share over the last few months, while the big names have dropped.