Pressure on supermarkets to explain their high prices

Supermarkets under pressure to explain high prices

MPs will question supermarkets executives on Tuesday regarding the reason why food prices continue to rise while some wholesale costs are decreasing.

A parliamentary committee that is looking into how much it costs to shop once a week will have to deal with the largest grocery stores in the UK—Tesco, Sainsbury’s, Asda, and Morrisons.

According to the most recent figures, the price of goods continues to rise, but not as rapidly as it has in recent months.

According to the British Retail Consortium, food inflation reached 14.6% in June.

Helen Dickinson, chief executive of the British Retail Consortium, stated, “That is down from 15.4%% in the year to May.” Food inflation should fall to single digits later this year if the current situation holds.

However, food prices are still a major factor in the stubbornly high rate of inflation in the UK as a whole.

Additionally, the supermarkets are under pressure to maintain their obstinately high prices because many financially strapped households are also struggling to pay their rent or mortgage.

MPs will question senior supermarket executives on Tuesday about inflation in fuel and food prices and whether prices will fall this year.
The Governor of the Bank of England, trade unionists, and politicians have all questioned why supermarket prices have not fallen as quickly as the cost of some ingredients like wheat.

They have suggested that retailers might be storing profits rather than passing on savings.

The matter is under investigation by the Competition and Markets Authority.

The supermarket industry denies making a profit from high prices and asserts that they are losing money.

According to the grocers, they are lowering prices wherever they can because it takes time for drops in commodity prices to reach customers.

Sainsbury’s was the most recent of the major retailers to announce significant price reductions for staples on Monday, investing £15 million to lower the cost of rice, pasta, and chicken.

Bread, milk, and butter have all seen price reductions in recent months at Tesco, Morrisons, M&S, Aldi, and Lidl.

However, compared to prices prior to COVID, some items like milk and eggs continue to be relatively expensive.

Rhian Bartlett, food commercial director at Sainsbury’s and one of the executives scheduled to appear before MPs on Tuesday, stated, “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.”

Ged Futter, a retail analyst and former senior buying manager at Asda, stated that in addition to pointing to recent price cuts, the executives are likely to inform the committee that not all commodities have been falling in price.

He stated, “Yes, prices have come down for some things, but sugar, potatoes, and chocolate have gone up.”

Due to the severe weather, there have been fewer British-grown potatoes, carrots, and onions available, necessitating the importation of additional crops.

Mr. Futter stated that food manufacturers will continue to purchase last year’s crop at last year’s prices, despite the fact that the price of wheat has decreased on global markets. The majority of UK growers supply the grain.

“Until they sign a new contract, they won’t get a new price. He stated, “Just because global prices have decreased does not mean that the price here will decrease immediately.”

Similarly, he stated, today’s cheese will not reflect recent price drops in milk because it was made with milk purchased up to a year ago.

According to the British Retail Consortium, price drops typically take three to nine months to show up in stores.

Mr. Futter is of the opinion that executives of supermarkets will point to additional costs that have an impact on food retail, such as rising wages and additional fees related to Brexit, such as veterinary certificates.

The London School of Economics conducted a study last month that found that Brexit was to blame for nearly a third of the rise in food prices since 2019.

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