Beware rising prices and shrinking sizes!

Supermarkets and well-known food brands are making huge profits but slyly offering their customers less value for money. Serena Cowdy investigates the cunning tricks they play on their customers...

UK food price inflation is almost four times higher than the rest of Europe, according to new research from the Organisation for Economic Co-operation and Development.

The figures (as reported in the Daily Mail) show that last year, UK food price inflation was 8.6%, compared with an average of just 2.2% for the EU as a whole. France saw prices rise by just 0.8%, while in Germany there was a 0.7% fall in the overall price of food.

Price comparison site MySupermarket reports that the cost of a basket of 24 staple grocery items increased by an average of 18% between December 2007 and December 2008.

So are these huge price hikes in line with wholesale price rises? Or are our supermarket giants taking an extra-large cut?

Rising prices = rising profits

Well, the wholesale price of many basic foodstuffs has actually come down in recent months. And there's evidence to suggest that the supermarkets are now cashing in at consumers' expense.

In April, Tesco announced better-than-expected annual profits of more than £3bn. Last year, Sainsbury's profits rose by a hefty 11.3% (to £543m), while Morrisons profits rose 7% (to £635m).

As many UK families struggle to make ends meet, it certainly doesn't sound like these giants are putting themselves out to help their customers.

Does value still give good value?

Perversely, the 'budget' end of supermarket groceries has seen particularly dramatic price rises. Several readers have reported huge hikes in the price of 'Value', 'Basics' and 'Smartprice' items targeted at poorer shoppers.

We recently investigated which was the cheapest supermarket Value range. Here is part of a comment posted by lovemoney.com reader grambax at the bottom of that article:

"We have regularly bought value/basics ranges, both out of necessity and because we were happy with them, but if many people have just recently switched they may not have noticed that in the last year or so there has been a HUGE increase in the price of these items, commonly by 50%, often by even more.

"It started around the time of the petrol price increases, which were given as the excuse, but while competition on brand names has brought those prices down, mostly the value ranges have remained the same, or are still increasing. One example - Asda Jaffa Cakes went from 22p to 50p for 12!

"In one case at least (Tesco shortbread) the rise has been so dramatic that the price is, or at least recently was, higher than that of brand names! I guess they figured people don't notice and assume Basic is cheaper..."

Worrying stuff. Have you seen huge price hikes on 'budget' items? Or perhaps you've found some that still offer excellent value for money? Please let us know by posting a comment at the bottom of this article.

Our food is shrinking!

If all that isn't bad enough, several brands have shrunk the size of their items in recent months - without shrinking the price you pay for them.

I thought certain chocolate bars were looking smaller recently, but I put it down to having grown up (remember how enormous things looked when you were a kid?).

Since I haven't been a kid for a good fifteen years, I should have known something was up. In fact, the maker of Mars and Snickers bars recently admitted that they have been shrunk - a 7.2% reduction from 62.5g to 58g.

Mars UK initially claimed that the shrinkage was designed to fight back against obesity. But in recent days, the company admitted the move was price-related.

As reported by the Daily Mail, it stated that 'by slightly reducing portion sizes on Mars and Snickers we were able to continue to responsibly meet consumer demands for healthier lifestyles whilst not increasing our prices'. How very generous of them!

The reduction of product sizes - known as the 'Grocery Shrink Ray' in America - is a tactic that's been used by many big brands in recent years.

The Consumerist is a US website with a whole section dedicated to flagging up products hit by the Grocery Shrink Ray. Perhaps it's time for something like that over here?

If you're looking for cheap chocolate to rival Mars, have a look at Rachel Robson's recent blog post, in which she conducts an own-brand taste test (all the name of research, you understand).

And if you come across food that's been zapped by the Grocery Shrink Ray, post a comment and let us know. Don't let them get away with it!

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