Three in four companies that make branded grocery products have hiked their prices faster than their costs have gone up, a new review by the competition watchdog has found.
The Competition and Markets Authority examined 10 different product categories products including baked beans, baby formula and pet food and found that while certain price hikes were warranted to offset escalating costs like energy and ingredients, there was evidence of profiteering.
The CMA added it would kick off a review of supermarket loyalty schemes in January 2024, which will centre around only offering promotions to customers who sign up to their loyalty cards.
We’ve published our Autumn update in the ongoing review of #competition in the food and #groceries sector.https://t.co/2GeHq5PqAM
Thread on our latest findings and next steps ⬇️#costoflivingcrisis #costofliving #grocery #groceryindustry pic.twitter.com/81PNEE4qHG
— Competition & Markets Authority (@CMAgovUK) November 29, 2023
Subscribe to Retail Gazette for free
Sign up here to get the latest news straight into your inbox each morning
“The evidence collected by the CMA indicates that, over the last two years, around three-quarters of branded suppliers in products such as infant formula, baked beans, mayonnaise, and pet food – have increased their unit profitability and, in doing so, have contributed to higher food price inflation”, the statement said.
However, it clarified that these changes were probably counterproductive, as consumers had clearly opted for cheaper alternatives, such as supermarket own brands, in a bid to save money.
“This switching is positive for competition and allows those able to switch to lessen the impact of high food price inflation,” the CMA said.
But the one exception is infant formula, said the watchdog.
Just two suppliers account for 85% of infant formula sales, it said, and there is “very limited availability” of own brand alternatives.
This means that few parents have switched as prices have risen. The CMA said that infant formula prices were up 25% over two years.
It will launch a probe into the baby formula market.
CMA chief executive Sarah Cardell said: “We’re concerned that parents may not always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices.”
Click here to sign up to Retail Gazette‘s free daily email newsletter
