Grocery price inflation hits a record 17.5%

Grocery price inflation hits a record 17.5% sending annual household shopping bills soaring to £837 – and prices are rising fastest on eggs, milk and cheese

  • Kantar says supermarket inflation hit 17.5% in March 19, up from 17.1% in February
  • Separately, BRC-NielsenIQ index reveals shop prices are up 8.9% on a year ago

Grocery price inflation has hit another record high to add a potential £837 to annual household bills as shoppers increasingly turn to multiple supermarkets for bargains.

Supermarket inflation hit 17.5 per cent in the month to March 19, up from 17.1 per cent in February as consumers ‘take action’ by shopping around for the best value.

Analysts Kantar said footfall was up at every grocer and people went to the shops just over four times a week in March – the highest frequency since the start of the pandemic apart from Christmas. Prices are rising fastest in eggs, milk and cheese.

And last month’s vegetable shortages appear to have had little effect on consumers, with the number of baskets containing tomatoes, cucumbers or peppers across the ten major grocers remaining at 17 per cent – the same as in February.

Independent grocers stepped in to make up any shortfall, seeing sales of tomatoes, peppers and cucumbers up by 32 per cent, 26 per cent and 21 per cent respectively.

GROCERY MARKET SHARE: Lidl was the fastest-growing supermarket with sales rising to achieve 7.4 per cent market share, while Aldi achieved a record market share of 9.9 per cent

Fraser McKevitt, head of retail and consumer insight at Kantar, said: ‘Unfortunately, it’s more bad news for the British public, who are experiencing the ninth month of double-digit grocery price inflation.

Food shortages could add to price pressure 

Britons already reeling from the biggest rise in food prices since 1977 may have to get used to shortages of fresh vegetables as soaring costs and unpredictable weather hit domestic production.

UK shoppers have faced a shortage of tomatoes, cucumbers and peppers in recent weeks after disrupted harvests in North Africa reduced supply, while inflation forced industry buyers to spend more on less from key markets such as Spain.

Government data showed Britain imported 266,273 tonnes of vegetables in January 2023 – the smallest amount for any January since 2010, when the population was around 7 per cent smaller than it is now.

Compounding matters, UK production of salad ingredients is expected to hit a record low this year as costly energy deters British producers from planting crops in greenhouses.

Many of Britain’s food retailers are buying less, knowing their customers cannot afford to spend so much, taking a hit to their profits in the process.

Jack Ward, chief executive of the British Growers Association, said there was now a question mark over the future of Britain’s fresh food producers. 

‘There’s a limit to how long growers can carry on producing stuff at a loss,’ he said.

‘However, shoppers are taking action and clearly hunting around for the best value. Footfall was up in every single grocer this month, with households going to the shops just over four times per week in March. 

‘Apart from Christmas, that’s the highest frequency we’ve seen since the start of the pandemic.

‘The supermarkets are also tackling grocery price inflation, battling it out to demonstrate value and get customers through their doors. 

‘This is a fiercely competitive sector and if people don’t like the prices in one store they will go elsewhere, with consumers visiting three or more of the top ten retailers in any given month on average.’

Retailers are also using loyalty card schemes to attract and retain shoppers, and more than nine in ten consumers use at least one of the schemes, Kantar found.

Mr McKevitt said: ‘Store cards have emerged as an important way to provide value amid the high cost of living with the grocers offering cheaper prices, coupons and points for people who scan them at the till.’

Shoppers are also trying to offset rising prices by choosing more own-label lines, with sales up again by 15.8 per cent during the latest four weeks compared with last year.

However, branded goods still make up 52 per cent of the market and sales grew by 7.2 per cent over the past month, the fastest rate seen since February 2021.

Again, consumers seem unwilling to let the cost-of-living crisis interrupt celebrations, with sales of chocolate Easter eggs up 6 per cent on last year and sales of hot cross buns up by 5 per cent.

Lidl was the fastest-growing supermarket with sales rising by 25.8 per cent to achieve 7.4 per cent market share, while Aldi achieved a record market share of 9.9 per cent.

Morrisons saw a return to growth with sales rising by 0.1 per cent, and Waitrose increased its sales by 2.1 per cent to deliver the fastest rate of growth for the John Lewis Partnership-owned supermarket since September 2021.

Take-home grocery sales grew by 8.6 per cent over the 12 week period. 

READ MORE – Birds Eye Potato Waffles rise 48% to £1.90 and Heinz Spaghetti Hoops up 43% to 93p over a year

Also today, the British Retail Consortium (BRC)-NielsenIQ index revealed shop price inflation reached a new high in March amid warnings that soaring food costs are yet to peak.

The index found that shop prices are now 8.9 per cent higher than they were a year ago, up from February’s 8.4 per cent increase.

It said that overall food inflation accelerated to 15 per cent, up from 14.5 per cent last month, while the price of fresh food is now 17 per cent higher than last March – the highest rate on record.

The increasing cost of sugar coupled with high manufacturing costs contributed to price rises for chocolate, sweets and fizzy drinks, while fruit and vegetable prices also rose as poor harvests in Europe and North Africa limited availability.

Inflation on items other than food also reached a new record of 5.9 per cent, up from 5.3 per cent in February.

BRC chief executive Helen Dickinson said: ‘Shop price inflation has yet to peak. As Easter approaches, the rising cost of sugar coupled with high manufacturing costs left some customers with a sour taste, as price rises for chocolate, sweets and fizzy drinks increased in March. 

‘Fruit and vegetable prices also rose as poor harvests in Europe and North Africa worsened availability, and imports became more expensive due to the weakening pound. 

Ocado sticks by earnings outlook as retail sales rise 

Online grocer Ocado said today that its retail business remains on track to return to profit as it posted a rise in first-quarter sales despite ongoing ‘challenging’ trading.

The group’s retail arm, which is run as a joint venture with high street giant Marks & Spencer, delivered a 3.4 per cent rise in revenues to £583.7million over the 13 weeks to February 26.

But with price inflation stripped out, sales by volume are still falling, with customers also buying less per shop as they return to pre-Covid shopping habits.

It said average basket sizes fell 7.5 per cent to 45 items, offset by an 8.3 per cent surge in average selling prices amid surging food inflation, leaving the overall basket value flat.

The group added that order frequency has returned to levels seen before the pandemic struck. Average orders per week at lifted 3.6 per cent to 381,000.

‘Some sweeter deals were available in non-food, as retailers offered discounts on home entertainment goods and electrical appliances.’

She continued: ‘Food price rises will likely ease in the coming months, particularly as we enter the UK growing season, but wider inflation is expected to remain high. 

‘Retailers continue to work hard to keep prices, particularly of essentials, as low as possible by expanding value ranges and offering discounts for vulnerable groups.

‘Government must also minimise oncoming regulatory burdens, as these will serve as a drag on investment and will ultimately contribute to higher prices for UK consumers.’

Mike Watkins, head of retailer and business insight at NielsenIQ, said: ‘Inflation continues to have an impact on the spending power of shoppers and increased energy bills from April will add more pressure.

‘Since food prices have risen retailers have seen more visits but less basket spend, as shoppers manage their weekly food bills by shopping little and more often and seeking out the lowest prices.

‘And as Easter approaches some high street retailers will also be offering discounts and promotions to encourage customers to spend.’

Last week the Office for National Statistics reported that UK inflation rose unexpectedly to 10.4 per cent in February.

It came as vegetable shortages pushed food prices to their highest rate in more than 45 years.

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