Suppliers ‘push up prices’ on branded groceries

Suppliers of branded grocery products have raised prices by more than their costs, according to the the UK’s competition watchdog.

The Competition and Markets Authority (CMA) has been examining competition across the supply chain for 10 product categories, including baby formula, baked beans, mayonnaise and pet food.

Its latest findings come as food price inflation remains at historically high levels, despite falling to 10.1% in October 2023.

High food price inflation has mainly been driven by rising input costs, such as energy and fertilizer, the regulator said. However, over the last two years around three-quarters of branded suppliers have contributed to higher price inflation by increasing unit profitability.

In all but one of the categories analysed by the CMA, consumers have switched to own-label alternatives or reduced their consumption as prices increased, and branded products have lost market share.

But in the case of baby formula there are fewer alternatives, and prices have risen by 25% over the past two years.

“We’re concerned that parents may not always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices,” said Sarah Cardell, chief executive of the CMA. “We will investigate this further and consider whether changes to regulations are necessary to ensure parents can get the best deal possible.”

The CMA also announced a review of loyalty scheme pricing — in which some supermarkets offer cheaper prices to loyalty card members — to look at how this is affecting consumers and competition.