Food price inflation: Cuthbert speaks out

Home » Food price inflation: Cuthbert speaks out

Rishi Sunak is under pressure to find a solution to Food Price Inflation. For years it bounced along at 4 – 5% p.a  but since 2021 and the war in Ukraine it has soared to nudge 20%. It’s of little comfort to Shoppers that the same applies in Europe.

There are other factors to consider. For several years the LADS (Limited Assortment Discount Stores e.g. Aldi and Lidl) with their own brand discounts have been biting big chunks out of the ‘Big Four’ Supermarkets. According to European Supermarket Magazine Tesco ranks no. 1 in the UK with 4,673 stores, turnover of Eu.58.13bn and 27.5% of the UK groceries and household goods sector. Sainsburys comes second with 1,400 outlets and Eu.33.79bn giving them 15.4% followed by Asda with 633 stores, Eu.23.66bn and 14.2%. Trailing in fourth place is Morrisons with 497 stores and Eu.20.47bn turnover and 9.1%.

But coming up fast is Aldi – 950 stores and Eu.15.87bn which ESM estimates at 9.2%. It’s not clear how ES does it’s calcs but a Surveyor would suggest it depends on which tape measure they’ve been using. But there is no doubt the LADS are well-established and increasing turnover at a faster rate than the Big Four. Aldi have confirmed their plans to open 1,200 stores in the UK.

‘The Grocer’ magazine has highlighted increasing efforts to block Aldi planning applications by planning objections and judicial reviews. There’s nothing new about that. For years the Big Four have (allegedly) bought and ‘landbanked’ supermarket sites to frustrate their competitors. In the absence of policy guidance from Whitehall a couple of Planning Committees have heard evidence from Cuthbert the Aldi Caterpillar (remember him?) and rejected the objections as a bloody cheek.

Nothing new to report here then apart from the startling conclusion that five retailers now sell 75% of the foodstuffs in the UK. The Competition and Markets Authority are well aware of that as part of their ongoing investigation into sky-high fuel prices. It has announced it has no current concern about unjustified food price increases but will investigate if supply chain problems are the reason.

Controlling food prices is a priority for any government and Rishi must be looking over his shoulder at the general election in 18 months time. The best solution he has offered so far is the old chestnut of price controls – voluntary if Supermarkets agree or compulsory if they don’t. By a remarkable coincidence Emanuel Macron has proposed the same in France which provoked a furious response from retailers. Threats have been made to cut off the supply of garlic eclairs to the Elysee.

A more measured response came from Lord Rose, Chairman of Asda and formerly of M&S and Ocado. He’s old enough to remember Edward Heath’s failed Price Commission of the 1970’s and told reporters: ‘If the Government wants to start doing relatively clumsy things they need to be careful about the unintended consequences. Let the shopkeepers do what they do well: shop keep.”

Bitter experience confirms price controls and price caps just don’t work, voluntary or otherwise. Restricting sale prices leads to products being withdrawn and gaps on the shelves. Retailers say leave well alone and let supply and demand deliver lower prices. Shoppers can take comfort from the effect of the LADs who are forcing down prices through the ‘Price match’ offers of the Big Four.

The impact of food price inflation is not lost on Councillors keen to ensure a low cost resource remains available to their community. Markets were heralded as ‘the saviour of the High Street’ by Mary Portas in her 2011 report to the Government but results have been deeply unimpressive. More support for local Markets is well overdue. Most are operated by local Councils so a solution is within their grasp.