The Competition and Markets Authority (CMA) has found that branded suppliers have “raised prices more than their own cost increases” in its updated review of competition in the grocery sector.
The new review looked at competition across the supply chain with a particular focus on branded and own-label food suppliers.
Evidence collected by the CMA suggests that around 75% of branded suppliers in products such as baby formula, baked beans, mayonnaise and pet food have increased their unit profitability over the last two years, contributing to higher price food inflation.
Food inflation remains high despite falling to 10.1% in October.
The CMA found that many consumers have swapped from brands to cheaper own-label products. These suppliers earn lower profit margins, which is “positive for competition” and “lessens the impact of high food inflation.”
The CMA also heard from leading brands which said they are planning to use any future reductions in input costs to offer customers promotions, instead of cutting prices.
CMA chief executive Sarah Cardell said: “Food price inflation has put a huge strain on household budgets, so it is vital competition issues aren’t adding to the problem.
“While in most cases the leading brands have raised prices more than their own cost increases, own-label products are generally providing cheaper alternatives.
“The picture is different when it comes to baby formula, with little evidence that people are switching to cheaper products and limited own-label alternatives.
“We will investigate this further and consider whether changes to regulations are necessary to ensure parents can get the best deal possible.”
She added: “We have also seen an increase in the use of loyalty scheme pricing by supermarkets, which means that price promotions are only available to people who sign up for loyalty cards.
“This raises a number of questions about the impact of loyalty scheme pricing on consumers and competition, and the CMA will launch a review in January 2024.”
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