Danni Hewson, AJ Bell head of financial analysis, comments on the Competition and Markets Authority’s (CMA) review of competition in the groceries sector:
“Shoppers are unlikely to be surprised by the competition watchdog’s findings. Anyone who has wheeled a trolley around a supermarket over the past couple of years will have noticed the growing gulf between the prices of branded goods and own label alternatives.
“Whilst food manufacturers have consistently argued that they have not been profiteering and in fact have absorbed some of the price increases that would otherwise have hit their shoppers even harder, the CMA hasn’t been convinced.
“It’s found evidence that ‘unit profitability’ has increased on goods from mayonnaise to baked beans, a strategy it says has contributed to the food inflation that has hurt so many households.
“Unsurprisingly it found that shoppers have made the switch in their droves, trading down from brands they would normally pull from shelves without a second thought and forming new habits that could cost producers dearly in the long run.
“Have price hikes gone too far? Certainly many brands have reported volumes falling and have dialled back price hikes in recent months. Some brands will have managed to walk the tightrope and kept cash coming in without alienating their core buyers. Others will have overplayed their hand and may have to ultimately consider cutting core prices permanently rather than relying on promotions to tempt shoppers to stick them back in their baskets.
“Supermarkets had been seen as public enemy number one as they’re the point of sale – the place where people get a rude wakeup call when they reach the checkout. They’ve already been cleared of so called ‘greedflation’, but the watchdog is concerned about how loyalty schemes work and whether they really operate in the best interest of shoppers.
“Shoppers can and have voted with their feet, but the complexity of offers, promotions and loyalty prices creates something of a minefield that many people simply don’t have the time or the headspace to deal with.
“People should feel confident that they’re getting what they pay for and that they are not paying more than they should for the privilege. They shouldn’t have to visit several different stores using several different loyalty cards just to make sure they’re getting as much for their money as they can, especially when for some families it’s the difference between making sure no one goes hungry.”
