The traditional big four grocers are preparing to point to dwindling profits as a result of increased costs to head off accusations of profiteering at tomorrow’s crunch price summit.
Representatives from Tesco, Sainsbury’s, Asda and Morrisons are all due to appear in front of the Commons business select committee to face questions over areas such as gross profits, how they break UK businesses out from their groups and how they report fuel margins versus groceries.
Ahead of what sources believe could be a fractious and forensic examination by MPs, the supermarkets are all planning on pointing to dwindling profits, ongoing investment into own-brand and value lines, thin margins and falling food inflation as evidence that their work to support customers is working.
“Everyone’s profits are down and this is statistically the most competitive grocery market in Europe, if not the world,” said a source from one of the grocers. “It’s uber- and ultra-competitive. It’s one of the only markets where two relative newcomers are competing exclusively on price.
“That’s where we hope the argument will be focused tomorrow: we will all be arguing that we’re really doing our best work and that we’ve been investing heavily in expanding our value lines that we make little to no money on.”
Morrisons boss David Potts is the only chief executive set to attend to the event. Food commercial director Rhian Bartlett will represent Sainsbury’s, chief commercial officer Kris Comerford will represent Asda, and commercial director Gordon Gafa will be there for Tesco.
A select committees spokesman said: “There’s no sense that the session has been undermined as long as those sent are able to answer the questions that the Committee has for them,” adding they are “happy that one CEO has decided to face the Committee”.
The fact that Potts will be the only CEO to face the grilling from MPs has raised eyebrows in the sector too. “It’ll be interesting to see if Dave [Potts] gets the most attention from the committee, being the only chief executive there, or if Tesco maybe gets called out for not sending someone the committee feels is senior enough,” said another supermarket source.
Grocers unveil further price cuts ahead of hearing
Both Sainsbury’s and Aldi have unveiled further price investments on the eve of the Commons business select committee hearing.
Sainsbury’s unveiled a further £15m investment on household staples including pasta, rice and chicekn breast fillets. Discounter rival Aldi announced it had cut the price of loo roll to £3.25, down from £3.49.
Sainsbury’s director Rhian Bartlett said: “As the cost-of-living challenges continue, we remain relentlessly focused on lowering prices on the essential products that make the biggest difference to our customers.”
“In the last two years we’ve invested £560 million in keeping prices low and more recently we’ve reduced the price of high-volume essentials including bread and butter, milk, tuna and toilet roll. These latest price cuts will help reassure customers that we will continue to pass on savings as soon as we see the wholesale price of food fall. Customers will find great deals when they shop with us and do not need to go anywhere else to get the best prices on their everyday food essentials.”
An Aldi spokesperson said: “Customers know that, on a typical basket of everyday items, we are the lowest-priced supermarket in the UK and our promise to them is that we always will be”.
Retail Week understands the committee, chaired by Labour MP Darren Jones, did not invite the discounters Aldi or Lidl because neither of them sells fuel.
“That gives you an idea of where we think the committee is going to be looking fairly closely,” said a third source.
While the grocers appear united in their messaging, there is the expectation that the committee will look to put the their feet to the fire. “There will definitely be some point scoring” from committee MPs, said the third source – pointing to some Labour MPs’ ties to the union Unite, while speculating that Conservative MPs may be more likely to focus on fuel prices to appeal to “the white van man”.
“When it comes to something like a select committee, the point is never to win. It’s more about trying to get out of there without having been seen to lose,” they added.
The hearing is scheduled to begin at 9.45am on June 27 with evidence from the four grocery representatives due to begin at 10.10am.
Groceries Code adjudicator Mark White will then give evidence at 11.15am.
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